ESI (Economic and Social Issue)

Question 1

Who is known as the father of the modern economics and why?

Answer 1

Ans:
Adam Smith is known as the father of the modern economics because of his theories on Capitalism, Free Market economy and Supply & Demand

Question 2

What is Micro and Macro economics?

Answer 2

Ans:
Microeconomics studies the decisions taken by individuals, firms or a sector while Macroeconomics studies the decision taken by a region, nation or government as a whole. Microeconomics uses a bottom-up approach and studies the economy in detail while Macroeconomics takes a top-down approach and studies the economy as a whole. Both Macro and Microeconomics are interrelated to some extent for example- the rise in Inflation is a “Macro effect” but due to the rise in inflation it increases the price of raw materials and affects individuals’ decision making which is a “Micro effect”.

Microeconomics studies the Demand and Supply equation in the individual markets while Macroeconomics studies GDP, Inflation, National income, unemployment, price indices, output, consumption, International trade etc.

Question 2

What is an Economy?

Answer 2

Ans:
An economy is an area where the production, distribution and consumption of goods and services take place. It can be a firm, state, region, country or a particular area of a country. So basically “Economics” is the study of an Economy

Question 3

Which Sector of the Economy is also called Knowledge Sector?

Answer 3

Ans:
Quaternary Sector

Quaternary Sector: It is a sub-sector of the Tertiary sector. It is also called the ‘Knowledge’ sector because knowledge or information-based services are provided in this sector like education, consultation, legal services, research & development, media, IT(Information Technology) etc. It plays the most important role in determining the quality of human resources an economy has

Question 4

Which sector of the economy has top level decision makers that ultimately affects the growth of the economy?

Answer 4

Ans:
Quinary Sector

Quaternary Sector: It is a sub-sector of the Tertiary sector. It is also called the ‘Knowledge’ sector because knowledge or information-based services are provided in this sector like education, consultation, legal services, research & development, media, IT(Information Technology) etc. It plays the most important role in determining the quality of human resources an economy has

Question 5

Describe Primary, Secondary and Tertiary Sectors of the economy?

Answer 5

Ans:

1. Primary Sector: Primary sector is that sector that involves the extraction of Natural resources directly from the earth for the end use of exploitation. It includes Mining, Agriculture, Fishing, Forestry, Hunting etc. When the agriculture sector contributes to a minimum of half of the National Income then it is called an “Agrarian economy”
2. Secondary Sector: Secondary sector is that sector in which the extracted raw materials from the primary sector are processed into finished goods. It is also called the industry sector. When the secondary sector contributes to a minimum of half of the National Income then it is called an “Industrial Economy”
3. Tertiary Sector: Tertiary sector is also called the service sector where the provision of services takes place like Healthcare, Tourism, Education, Information Technology (IT), Real-estate, Banking, Transportation, Telecommunication, Franchising, Legal services, Consultation etc. When the service sector contributes to a minimum of half of the National income it is called a Service economy.

Question 6

What are the key differences between a Market Economy and a Non -Market or Planned economy?

Answer 6

Ans:
1) Ownership:
Market Economy- The factors of production in a Market economy is owned by private individuals, firms and corporations
Non-Market Economy- In a Non-market Economy factors of production is majorly owned by the government

2) Competition:
Market Economy- The market economy has competition because of a large number of private individuals and firms operating in the market
Non-Market Economy- Due to the absence of a Market in a Non-Market economy, there is no competition

3) Production & Distribution:
Market Economy- In a market economy, production and distribution is controlled by the demand and supply factors of the market
Non-Market Economy- In a Non-Market or planned economy, the Production and Distribution of goods and services are decided by the government

4) Property Rights:
Market Economy- There are property rights given to individuals
Non-Market Economy- No property rights are given to the individuals in a planned economy because of the belief that it causes exploitation of labours

5) Wealth & Capital:
Market Economy- Market Economy focuses on the creation of wealth & Capital
Non-Market Economy- There is no idea of creating capital or wealth in a planned economy

Question 7

What are the Factors of Production?

Answer 7

Ans:
Factors of production are the resources or inputs that are used in the production process to produce goods and services. The 4 primary factors of production are Land, Labour, Capital and Entrepreneur.

The primary factors of production are those factors that do not transform by the production process like land, labour, capital while secondary factors of production are transformed into finished goods like raw materials and energy.