Subject : Principles of Economics
Attend any 4 questions. Each question carries 25 marks
(Each answer should be of minimum 2 pages / of 300 words)
1. Write an essay on the main purposes of how economics work, and the relations between the main economic players and institutions.
2. Describe developed, undeveloped and developing Economies.
Answer: The main difference between developed developing and underdeveloped countries is their economic status and quality of life. Developed countries have a high quality of life, developed economy, and technological infrastructure. Meanwhile, developing countries have a less developed economy and a comparatively lower quality of life. Underdeveloped countries, on the other hand, have the lowest indicators of socioeconomic development and the lowest quality of life.
Although we use the terms developed, developing, and underdeveloped to describe countries in the world, it’s quite difficult to quantify between these criteria. Even experts have not yet agreed on a single definition and criteria. However, GDP (gross domestic product) or (GNI) gross national income per capita are
3. All economies face three fundamental or basic central economic problems. What are they. Explain.
Answer: Production, Distribution, and Exchange of goods and services are among the basic economic activities of life. During the period of these economic activities, every society has to suffer from scarcity of resources and it is the scarcity of resources that arises the problem of choice. The scarce resource of an economy has several usages. In other words, every society decides how to use scarce resources optimally?
Three Central Problems of an Economy?
The three Central Problems of an Economy are?
1. What to Produce and in What Quantity?
2. How to Produce?
3. For Whom to Produce?
4. Define price elasticity of demand and explain the formula for calculating price elasticity?
5. Describe the advantages of a Socialist Economy.
Answer: Socialist Economy
In a socialist economy, the setup is exactly opposite to that of a capitalist economy. In such an economy the factors of production are all state-owned. So all the factories, machinery, plants, capital, etc. is owned by a community in control of the State.
All citizens get the benefits from the production of goods and services on the basis of equal rights. Hence this type of economy is also known as the Command Economy.
6. Explain the defects of Capitalism.
Answer: Capitalism is an economic system based on free markets and limited government intervention. Proponents argue that capitalism is the most efficient economic system, enabling improved living standards. However, despite its ubiquity, many economists criticise aspects of capitalism and point out is many flaws and problems. In short, capitalism can cause – inequality, market failure, damage to the environment, short-termism, excess materialism and boom and bust economic cycles.