Principles of Economics

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National Institute of Business Management

Chennai - 020

FIRST SEMESTER EMBA/ MBA

Subject : Principles of Economics

Q.1.Describe the basic assumptions of Economics.

Ans:- Economics:- Economics is the social science that studies economic activity to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an exchange economy. ['Political economy' was the earlier name for the subject, but economists in the late 19th century suggested "economics" as a shorter term for "economic science" to establish itself as a separate discipline outside of political science and other social sciences.

Economics focuses on the behavior and interactions of economic agents and how economies work. Consistent with this focus, primary

Q.2 Discuss the vital functions of an economy.

Q.3 Write an essay on the features of capitalist economy.

Q.4.Explain the various assumptions on which all demand schedules are prepared.

Ans: - Although the concepts of supply and demand are useful for explaining what’s happening in the marketplace, we are not yet ready to summarize the countless transactions that occur daily in both factor and product markets. Recall that every market transaction involves an exchange and thus some element of both supply and demand. Then just consider how many exchanges you alone undertake in a single week, not to mention the transactions of the other 310 million or so consumers among us. To keep track of so much action, we need to summarize the activities of many individuals.

Individual Demand

Q.5.Write an essay on Localization of Industries.

Ans:- Localisation means the concentration of a certain industry in a particular area, locality or region. Localisation is related to the territorial division of labour, that is, specialisation by areas or regions. A certain town or region tends to specialise in the production of a particular commodity.

Switzerland specialises in watches, Brazil in coffee and India in tea. In India, iron and steel industry is concentrated in Bihar, tea industry in Assam, cotton textile industry in Maharashtra and Gujarat, sugar industry in UP and Bihar, jute industry in Bengal,

Q.6 .Describe the kinds of price elasticity of demand.

Ans: - Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (ceteris paribus, i.e. holding constant all the other determinants of demand, such as income).

Price elasticities are almost always negative, although analysts tend to ignore the sign even though this can lead to ambiguity. Only goods which do not

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