11

CBSE

ECONOMICS

PART – A : STATISTICS FOR ECONOMICS (As per the latest CBSE Syllabus)

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New Delhi-110002

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Note from the Publishers We are immensely grateful to our dear students and honourable teachers who appreciated our previous two editions. Here we are filled with enthusiasm about our latest edition of Economics Part-A: Statistics for Economics, Part-B: Introductory Microeconomics and Part-C: Project in Economics for class XI. We are touched by the love and appreciation showered by the students and teachers alike that prompted us to bring out a much better and helpful edition to ease the students’ learning. This book has been specifically designed to cover the latest syllabus of Economics prescribed by the CBSE. It has been prepared with utmost care to provide rich and delightful learning experience to the students. The distinguished features of the book are as follows:  An elaborate description of concepts pertaining to the syllabus covered in each chapter.  The language used is quite easy and students friendly.  Diagrams drawn and explained in a flawless manner.  Step by step solutions of numericals for the students’ ease.  Application Based Questions, Multiple Choice Questions, High Order Thinking Skills Questions and Value Based Questions in abundance.  All NCERT questions have been solved with relevant diagrams and examples. The book, as a whole, is a comprehensive study-cum-reference book making the subject easy. It is a complete, up-to-date and dependable resource material for students. The support website www.fullmarks.org is an added benefit for the users where one can get much more and also an opportunity to share one’s academic complexities. Hope this book may help you realise your goals!

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SYLLABUS Theory : 80 Marks

Project : 20 Marks



3 Hours UNITS Part-A

MARKS Statistics for Economics 1. Introduction 2. Collection, Organisation and Presentation of Data 3. Statistical Tools and Interpretation

07 27 66

40

100

Introduction

4

8

Consumer’s Equilibrium and Demand

13

32

Producer Behaviour and Supply

13

32

Forms of Market and Price Determination under perfect competition with simple applications

10

28

40

100

20

20

Introductory Microeconomics

Total Part-C

13 27

Total Part-B

PERIODS

Project Work

PART-A: STATISTICS FOR ECONOMICS In this course, the learners are expected to acquire skills in collection, organisation and presentation of quantitative and qualitative information pertaining to various simple economic aspects systematically. It also intends to provide some basic statistical tools to analyse, and interpret any economic information and draw appropriate inferences. In this process, the learners are also expected to understand the behaviour of various economic data. Unit 1: Introduction

07 Periods

What is Economics? Meaning, scope, functions and importance of statistics in Economics (iv)

Unit 2: Collection, Organisation and Presentation of data

27 Periods

Collection of Data - sources of data - primary and secondary; how basic data is collected, with concepts of Sampling; methods of collecting data; some important sources of secondary data: Census of India and National Sample Survey Organisation. Organisation of Data: Meaning and types of variables; Frequency Distribution. Presentation of Data: Tabular Presentation and Diagrammatic Presentation of Data: (i) Geometric forms (bar diagrams and pie diagrams), (ii) Frequency diagrams (histogram, polygon and ogive) and (iii) Arithmetic line graphs (time series graph). Unit 3: Statistical Tools and Interpretation

66 Periods

(For all the numerical problems and solutions, the appropriate economic interpretation may be attempted. This means, the students need to solve the problems and provide interpretation for the results derived.) Measures of Central Tendency - Arithmetic mean, median and mode Measures of Dispersion - absolute dispersion (range, quartile deviation, mean deviation and standard deviation); relative dispersion (co-efficient of range, co-efficient of quartile-deviation, co-efficient of mean deviation, co-efficient of variation). Correlation – meaning and properties, scatter diagram; Measures of correlation - Karl Pearson’s method (two variables ungrouped data) Spearman’s rank correlation. Introduction to Index Numbers - meaning, types - wholesale price index, consumer price index and index of industrial production, uses of index numbers; Inflation and index numbers.

PART-B: INTRODUCTORY MICROECONOMICS Unit 4: Introduction

8 Periods

Meaning of microeconomics and macroeconomics; positive and normative economics. What is an economy? Central problems of an economy: what, how and for whom to produce; concepts of production possibility frontier and opportunity cost. Unit 5: Consumer’s Equilibrium and Demand

32 Periods

Consumer’s equilibrium - meaning of utility, marginal utility, law of diminishing marginal utility, conditions of consumer’s equilibrium using marginal utility analysis. Indifference curve analysis of consumer’s equilibrium-the consumer’s budget (budget set and budget line), preferences of the consumer (indifference curve, indifference map) and conditions of consumer’s equilibrium. Demand, market demand, determinants of demand, demand schedule, demand curve and its slope, movement along and shifts in the demand curve; price elasticity of demand - factors affecting price elasticity of demand; measurement of price elasticity of demand – percentagechange method. (v)

Unit 6: Producer Behaviour and Supply 32 Periods Meaning of Production Function – Short-Run and Long-Run. Total Product, Average Product and Marginal Product. Returns to a Factor Cost: Short run costs - total cost, total fixed cost, total variable cost; Average cost; Average fixed cost, average variable cost and marginal cost-meaning and their relationships. Revenue - total, average and marginal revenue - meaning and their relationship. Producer’s equilibrium-meaning and its conditions in terms of marginal revenue-marginal cost. Supply, market supply, determinants of supply, supply schedule, supply curve and its slope, movements along and shifts in supply curve, price elasticity of supply; measurement of price elasticity of supply - percentage-change method. Unit 7: Forms of Market and Price Determination under Perfect Competition with simple applications. 28 Periods Perfect competition - Features; Determination of market equilibrium and effects of shifts in demand and supply. Other Market Forms - monopoly, monopolistic competition, oligopoly - their meaning and features. Simple Applications of Demand and Supply: Price ceiling, price floor.

PART-C: PROJECT IN ECONOMICS

20 Periods

(vi)

CONTENTS PART – A : Statistics for Economics Unit – I : Introduction 1. What is Economics ............................................................................................

9

2. Meaning, Scope and Importance of Statistics ................................................. 16

Unit – II : Collection, Organisation and Presentation of Data 3. Collection of Data .............................................................................................. 30 4. Organisation of Data ......................................................................................... 63 5. Tabular Presentation of Data . ......................................................................... 94 6. Diagrammatic Presentation . ............................................................................ 104 7. Graphic Presentation ........................................................................................ 122

Unit – III : Statistical Tools and Interpretation 8. Measures of Central Tendency-Arithmetic Mean ........................................... 155 9. Measures of Central Tendency-Median and Mode........................................... 194 10. Measures of Dispersion...................................................................................... 240 11. Correlation........................................................................................................... 292 12. Index Numbers.................................................................................................... 324 13. Use of Statistical Tools....................................................................................... 365 H Case Studies .................................................................................................... 373

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QUESTION PAPER DESIGN Marks: 80

Duration: 3 Hrs

S. No.

Typology of Questions

Marks

Percentage

1.

Remembering and Understanding: Exhibit memory of previously learned material by recalling facts, terms, basic concepts, and answers. Demonstrate understanding of facts and ideas by organizing, comparing, translating, interpreting, giving descriptions, and stating main ideas

44

55%

2.

Applying: Solve problems to new situations by applying acquired knowledge, facts, techniques and rules in a different way.

18

22.5%

3.

Analysing, Evaluating and Creating: Examine and break information into parts by identifying motives or causes. Make inferences and find evidence to support generalizations. Present and defend opinions by making judgments about information, validity of ideas, or quality of work based on a set of criteria. Compile information together in a different way by combining elements in a new pattern or proposing alternative solutions

18

22.5%

80

100%

TOTAL

(viii)

1

UNIT – I : INTRODUCTION

What is Economics?

FACTS THAT MATTER • Before the publication of Adam Smith’s book “An enquiry into the Nature and the Causes of Nations” in 1776, Economics was studies as part of politics and was called Political Economy. Now there is no field where principles of economics are not used. Before we look at definitions of Economics, we need to understand some basic terms used in Economics. • Consumer: A consumer is a person who consumes goods and services for the satisfaction of his wants. • Producer: A producer is one who is involved in the process of production i.e. generation of income. • Service Holder: A service holder is one who is working for some other person and is compensated for it in the form of wages or salary. • Service Provider: A person who arranges his own resources to give his services to others for a payment is called service provider.

Meaning of Economics • Since 1776, many definitions of economics have been given. (i) Wealth Definition- Adam Smith (ii) Welfare Definition- Marshall (iii) Scarcity Definition-Robbins (iv) Growth Definition- Samuelson • Some facts on which Economic analysis is based are: 1. Unlimited Wants: Human wants are unlimited. The moment one wants is satisfied other one creeps up. It is a never ending phenomenon both in quantitative and qualitative terms. An important thing to note is that however, wants are unlimited but they vary in their intensity. It is because of this variation in intensity that people are able to allocate the resources to satisfy their some wants. 2. Scarce Means: Means to satisfy human wants are scarce. Had means been unlimited, there would have been no economic problem at all. Resources being limited, all wants can not be satisfied; then the problem of prioritizing the wants arises. 3. Means have alternative uses: Economic resources can be put to various uses. Like a piece of land can be used for agriculture, school, hospital or residential building. It is because of alternative uses of resources that we have to decide about best allocation of resources.

Nature of Economics:

• Positive Economics: In a positive science the analysis is confined to cause and effect relationships. In other words, it deals only with ‘what is’ and not ‘what ought to be’. • Normative Economics: If economics is a normative science it would work for finding ‘what ought to be’. The focus will be on the idealistic aspect of the situation or phenomena.

9

Economic and Non-Economic activities • Economic activities: Those activities which are performed by people to earn a livelihood are

called economic activities. These involve using scarce use for satisfaction of unlimited human wants which can be prioritized. There are three vital activities which take place in an economy. Economic Activities



Production

Capital Formation

Consumtption

Exchange

Distribution

• Non-Economic Activities: Activities which are not concerned with money or wealth and done for non monetary objectives are called non economic activities. Non Economic Activities

Religious

Social

Charitable

Political

Parental

ADDITIONAL QUESTIONS SOLVED I. MULTIPLE CHOICE QUESTIONS

Q1. Which definition was given by Adam Smith? (a) Welfare Definition (b) Scarcity Definition (c) Wealth Definition (d) Growth Oriented Definition Q2. What implication(s) does resource scarcity has for the satisfaction of wants? (a) Not all wants can be satisfied. (b) The discovery of new natural resources is necessary to increase our ability to satisfy wants. (c) We will never be faced with the need to make choices. (d) We must develop ways to decrease our individual wants. Q3. What is the root cause of all economic problems? (a) Scarcity (b) Excess Demand (c) Excess Supply (d) Deficient Demand Q4. Who is known as father of economics? (a) Marshall (b) Adam Smith (c) J B Say (d) Robbins Q5. The law of scarcity: (a) does not apply to rich, developed countries.

10 n Economics (Statistics) – XI

(b) implies that consumer’s wants will never be completely satisfied. (c) applies only to the less developed countries (d) implies that consumer’s wants will be satisfied in a socialistic system. Q6. Which economic activity deals with the use of goods and services for the satisfaction of human wants? (a) Consumption (b) Exchange (c) Distribution (d) Production Q7. Which economist shifted the emphasis of economics from wealth to welfare? (a) Marshall (b) Adam Smith (c) J B Say (d) Robbins

1. (c) 6. (a)

ANSWERS

2. (a) 7. (a)

3. (a)

4. (b)

5. (b)

II. SHORT ANSWER TYPE QUESTIONS Q1. ‘Economics is a study of wealth.’ Discuss. Ans. Pioneers of the science of economics defined it as a science of wealth. Adam Smith who is known as father of economics in his famous book on economics “An Enquiry into the Nature and Causes of Wealth of Nations”, defined economics as.

“Economics enquires into the causes that determine the wealth of a country and its growth.” According to J B Say “Economics is a science which deals with wealth.” According to F A Walker, “Economics is the name of that part of knowledge which relates to wealth.” Critical Evaluation of the wealth definition: (a) It ignored immaterial things such as education, health etc outside the definition of wealth and therefore beyond the bounds of economic wealth. (b) It ignored many aspects of economics like welfare and social justification. (c) They also showed a biased attitude by regarding rights to private property or wealth as natural and moral rights. Q2. Critically analyze welfare definition of economics. Ans. Marshall pointed out that wealth is not an end in itself; but it is only a means to an end; end being promotion of human welfare. Thus, according to Marshall, wealth is only a secondary thing; it is man and his ordinary business of life which is the primary object of economic study. According to Alfred Marshall, Economics is the study of mankind in the ordinary business of life. It examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being. Thus, it is one side of the study of wealth and more important side is a part of study of the man. According to A. C. Pigou “The range of our enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money.” According to Cannan, “The aim of political Economy is the explanation of the general causes on which the material welfare of the human being depends.” Critical Evaluation of the Welfare Definition: Economics studies not only material



things but also non material things. 1. Welfare is a subjective thing and varies from person to person. 2. Goods like liquor, opium and cigarettes etc are harmful to health but are studied in economics as they are scarce in relation to demand for them. Q3. Problem of choice is unavoidable in the ordinary business of life. How? Ans. Problems of choice is unavoidable in the ordinary business of life because of following reasons. 1. Unlimited Wants: Human wants are unlimited. The moment one want is satisfied other one creeps up. It is a never ending phenomenon both in quantitative and qualitative terms. An important thing to note is that however, wants are unlimited but they vary in their intensity. It is because of this variation in intensity that people are able to allocate the resources to satisfy their some wants. 2. Scarce Means: Means to satisfy human wants are scarce. Had means been unlimited, there would have been no economic problem at all. Resources being limited, all wants can not be satisfied; then the problem of prioritizing the wants arises. 3. Means have alternative uses: Economic resources can be put to various uses. Like a piece of land can be used for agriculture, school, hospital or residential building. It is because of alternative uses of resources that we have to decide about best allocation of resources. Q4. Why do we need to study Economics? Ans. Economics is required in all spheres of life. (a) As a Consumer: All of us have a limited income and we wish to satisfy our unlimited wants from it. Economics helps us to take optimum decisions regarding consumption and allocation of income to different goods and services. (b) As a Producer: A producer wants to produce his goods and services in such a way that his cost is least and

What is Economics?  n

11

profits are most. Economics gives such principles which help him to attain such a combination. (c) As an Investor: As an investor, we need to invest our funds in such a venture which give us maximum returns with minimum risk. Once again Economics gives such principles which help him to attain such a combination. (d) As a Citizen: As a citizen, Economics helps us to understand the impact of Government policies on our society and economy. Accordingly, we can say if government is working efficiently or not. (e) As a human being: When we apply the principle of scarcity on our life, we realize that time is our scarce most resource and is non renewable. We can’t increase our life by one second by spending our entire wealth. Therefore, we must make best possible use of our time. It teaches us efficiency, optimum utilization, no wastage, rationality and decision making by cost-benefit analysis. What are vital economic activities? Q5. Is economics an Art or Science? Give reasons. Ans. Economics is a science but it is different from physical sciences. It is a social science i.e. it is a science dealing with human beings. Unlike physical sciences, Economics is based on assumptions. Since our subject matter is human being whose behaviour is very unpredictable, economics assumes man to behave rationally. However, many a times, a man is not rational but emotional and in such cases economics laws do not operate. Similarly, there are many factors which affect a phenomenon simultaneously. But for simplicity sake, we assume other things to remain same which they may not. Q6. Name the definition which has got maximum acceptability. Give this definition. Critically evaluate it. Ans. Scarcity Definition was given by Robbins. According to him, “Economics is the

12 n Economics (Statistics) – XI

science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” Critical Evaluation of Scarcity Definition: Robbins defined economics as neutral between ends and declaring economists to be least bothered about values and welfare. Robbins’ definition of economics does not cover the aspects of economic growth and economic development. Problem of unemployment is not a problem of scarcity but a problem of abundance of manpower. It has reduced the scope of economics only to allocation of resources. Q7. Is Economics a positive science or a normative science? Explain. Ans. Positive Economics: Economics is a science, however in exact . As regards the nature of science there is a school of thought which says that economics should confine itself to pure science so that it may not indulge in value judgment. In case of pure and positive science the analysis is confined to cause and effect relationships. In other words, it deals only with ‘what is” and not what ought to be. It is said economics is not to suggest but simply state in terms of cause and effect relation and leave the matter of choice to the individual concerned. According to Robbins ‘Economics is neutral between ends’. Neutrality between ends denotes lack of concern about objectives or goals, which may be noble or otherwise. It is not for economists to pass value judgments. Economics only studies facts and makes generalizations from them. An Economist, being a scientist, tries to study economic phenomena in a dispassionate and unbiased manner. Complete neutrality between ends is, however, neither feasible nor desirable. Normative Economics: If economics is a normative science it would work for finding what ought to be. The focus will

be on the idealistic aspect of the situation or phenomena. Professor A C Pigou has put the i mpor ta nce of n orm a t i ve a s p ect of Economics very beautifully, “our impulse is not the philosopher’s impulse, knowledge for the sake of knowledge but rather the psychologist’s knowledge for the healing that knowledge may bring.” It is a positive statement that 26.4% people live below poverty line in India. It is a normative statement that poverty should be eradicated. Both are important. As by both statements we shall get to know the gap we need to bridge and we shall be able to formulate policies accordingly. Q8. What are the vital activities in an economy? Ans. Consumption: Consumption deals with satisfaction of human wants. It is an economic activity which deals with the use of goods and services for the satisfaction of human wants. For example, if you are feeling hot and when you use fan, it gives you satisfaction in the form of comfort, you are consuming electricity. Production: Production includes all those activities which are undertaken to produce goods and services for generation of income by enhancing utility of goods

and services. It is the process which adds to the level of utility. For example, when wood is converted into furniture, it increases the worth of wood. Similarly, transport creates place utility by taking goods or persons from place where their utility is less to places where their utility is more. For the production of any goods and services, a person needs land, labour, capital and entrepreneur. Distribution: Distribution is that economic activity which studies how income generated is distributed amongst different factors of production of land, labour, capital and entrepreneur in the form of rent, wages, interest and profits. It studies if income is distributed equally or unequally. Q9. How do scarcity and choice go together? Ans. Had there been no scarcity, there would have been no need for optimizing the resources. But the fact is that resources are scarce in relation to unlimited human wants and therefore, we need to optimize their utilization so as to maximize our utility level. It is used for decisions at individual as well as society level. Had there been no scarcity, there would have been no problem of making a choice. We need not make choice in case of abundant things. Therefore, it is right to say that scarcity and choice go together.

Q10. Differentiate between economic and non economic activities. Ans. Basis



Economic Activities

Non Economic Activities

Meaning

Activities which are undertaken to earn Activities which are undertaken because of money are called economic activities. love, care, religious factors, emotional reasons, hygienic reasons etc are non-economic activities. In other words, all activities other than economic activities are non-economic activities.

National Income

These activities are included in National These activities are not included in national Income. income.

Example

A teacher teaching in a school; A doctor treating a patient; A farmer working in his farm; A lady performing on stage as a paid artist etc.

A student preparing for IAS and being taught by his father; a father dropping his child to school; a person brushing his teeth; a person offering prayers in the morning etc.

What is Economics?  n 13

Q11. G i ve s o m e r e c e n t d e f i n i t i o n s o f Economics. Ans. Some recent definitions have been called growth definitions. According to Professor Henry Smith, “Economics is the study of how in a civilized society one obtains the share of what other people have produced and of how the total product of society changes and is determined.” According to Jacob Viner, “Economics is what economists do.” According to Paul A Samuelson, “Economics is the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in future amongst various people and groups of society.”

III. LONG ANSWER TYPE QUESTIONS Q1. Any transaction which involves money is associated with Economics. Defend or refute. Justify your answer. Ans. I refute this statement. Any activity concerned with production, distribution or investment is said to be associated with Economics. Many activities which involve money but are not a part of Economics are exemplified below: • Donations; • Prizes; • Pocket Money; • Gifts; • Gambling etc. On the other hand, many activities are a part of Economics but are not involving money. It includes: • Production for self consumption; • Investment in own business; • Barter system etc.

Q2. Differentiate between Economics as a positive and as a normative Science. Basis

Positive Economics

Normative Economics

Meaning

It deals with laws, principles, theories and facts of economics.

It deals with opinions, policy evaluation and idealistic part of economics.

Reality vs. Idealism

It deals with reality, i.e. ‘what is’.

It deals with idealistic situation, i.e. ‘What ought to be’

Value Judgments

No value judgments are associated with positive economics.

Value judgments are associated with normative economics.

Example

(a) There is inverse relation between price and quantity demanded, other things being equal. (b) In India, 34% marginal farmers are living below poverty line. (c) MGNREGA was launched in 2005.

(a) Globalization is widening the gap between countries. (b) Poverty is worse than unemployment. (c) Price rise is disastrous for the economy. (d) We should not give subsidies on fertilizers.

TEST ASSIGNMENT Max Marks: 25 Marks I. Choose the Correct Option: Q1. Who coined the term scarcity in economics? (a) Robbins (b) Marshall

14 n Economics (Statistics) – XI

Time Allowed: 1 hr. (1 × 5 = 5)

(c) Adam Smith

(d) Henri Smith

Q2. Who said, “Economics is neutral between ends?” (a) Robbins (b) Marshall (c) Adam Smith (d) Henri Smith Q3. Who associated Economics with welfare? (a) Robbins (b) Marshall (c) Adam Smith (d) Henri Smith Q4. A person painting for his hobby is engaged in: (a) Production (b) Consumption (c) Economic Activity (d) Non Economic Activity Q5. Which of the following is an example of free good? (a) Air (b) Drinking water (c) Packed Hydrogen (d) All of the above II. State whether following statements are true or false: (1 × 5 = 5) 1. Core aspect of Samuelson’s Definition is Growth. 2. Marshall has talked about normative aspect of economics while Robbins has talked of positive economics. 3. A book titled “Nature and causes of wealth” was written by Robbins. 4. Same thing done for money is economic activity and if done for leisure, becomes non economic. 5. By ‘means’ Robbins meant ‘resources’ and by ‘ends’ he meant ‘wants’. III. Answer in 60 words: (3 × 5 = 15) Q1. Differentiate between economic and Non Economic Activity Q2. Differentiate between Positive and Normative Economics. Q3. What is scarcity? How does it lead to Economic Problem? Q4. Why should we learn economics? Q5. Why is Adam Smith called ‘Father of Economics’? qqq



What is Economics?  n 15

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