12th HSC Board Economics: DISTINGUISH BETWEEN

 

12th HSC Board Economics: 

DISTINGUISH BETWEEN

Economics

1.	Choose the Correct Option	Solution	5 Marks
2	Complete the Correction	Solution	5 Marks
3	Give Economic Term	Solution	5 Marks
4	Find the Odd Word	Solution	5 Marks
5	Complete the following Statements	Solution	5 Marks
6	Assertion and Reasoning Questions	Solution	5 Marks
7	Identify and Explain the Concepts	Solution	6 Marks
8	Distinguish Between	Solution	6 Marks
9	Answer in Brief	Solution	12 Marks
10	State with Reasons, Do you Agree/ Disagree	Solution	12 Marks
11	Table, Diagram, Passage Based Questions	Solution	8 Marks
12	Answer in Detail	Solution	16 Marks

Chapter 1: Introduction to Microeconomics 

and Macroeconomics

Micro Economics and Macro Economics

Micro economics	Macro economics
It is a study of the behavior of individual economic units such as individual consumers, individual firms, individual prices, particular commodities etc.	It is a study of the behavior of large aggregates such as national income, national output, aggregate demand, aggregate supply, general price level etc.
Micro economic uses slicing method.	Macroeconomics uses lumping method.
Micro economics is narrow concept.	Macroeconomics is wider concept.
Micro economics popularized by Marshall.	Macroeconomics popularized by Keynes.
Micro economic analysis is used at individual level.	Macro economics analysis is used at national level.
Micro economics is a partial equilibrium analysis.	Macro economics is a general equilibrium analysis.
Micro economics is known as price theory.	Macro economics is known as income theory.
Micro economic approach gives us theoretical explanation.	Macroeconomic approach is more realistic and useful for all.
Micro economic analysis has limited scope.	Macroeconomic has wider scope.
Micro economics analysis assumes independence of economics units.	Micro economics analysis assumes interdependence of economics units.

                                            

              Partial Equilibrium and General Equilibrium        

Partial Equilibrium	General Equilibrium
Micro economics uses partial equilibrium analysis based on the assumption, other things remaining constant.	Macro economics uses general equilibrium. It is not based on assumption.
It studies the equilibrium of a consumer, a firm, an industry or a market.	It deals with the equilibrium position of the economy as a whole.
It deals with one or two variables at a time. So it is simple method.	It deals with all the variables of the economic system simultaneously. So it is sophisticated.
It is regarded as a worm’s eye – view.	It is a bird’s eye – view.
It is independent.	It is interdependence.

         Slicing method and lumping method

Slicing method	Lumping method
In slicing method, the entire economy is divided into small individual units for analysis.	In lumping method, the entire economy as a whole is taken into account for analysis.
Micro economic uses slicing method.	Macro economics uses lumping method.
It focuses on the study of individual economic units like individual demand.	It focuses on the study of aggregate units of the economy like aggregate demand.

         

         Micro Theory of Distribution and Macro Theory of Distribution   

Micro Theory of Distribution	Macro Theory of Distribution
Micro Theory of distribution refers to distribution of Factor Income to individual factor owners for their contribution to the production of a commodity or service.	Macro theory of distribution refers to distribution of National Income to factors like wages to the labourers, rent to landlords and interest to capitalist.
It is determined by the market forces of demand and supply	It is determined by the aggregate demand and aggregate supply and employment level in the country.

        Micro Variables and  Macro Variable

Micro Variable	Macro Variable
Micro variables refer to individual demand, market demand, individual supply, price of a commodity, etc.	Macro variables refer to inflation rate, aggregate, demand, aggregate supply, employment.
Micro variables are mostly independent. It does not affect the whole economy, as they are based on assumptions	Macro Variables are inter related and inter dependent. It affects the working of the economy as a whole.
E.g., Price and Quantity demanded are universally related. This will hold true only if the income of the consumer, taste, fashion, etc., remain constant	Change in aggregate demand, aggregate supply will affect income, employment, etc. in the economy.

                                    

Chapter 2: Utility Analysis

            Form utility and Place utility

Form utility	Place utility
It is created by changing the form or shape of goods	If by changing the place of commodity and its utility increases than we say that the commodity has provided place utility.
Manufacturing goods creates form utility.	Transport creates place utility.
e.g when steel is converted into utensils.	E.g. Food grains from village farm are sold in city markets.

    Desire and Demand

Desire	Demand
Desire is a mere wish for something.	Demand is a desire backed by ability and willingness to purchase.
Desire has no limits.	Demand is limited by ability and willingness to pay.
Desire is not related to price.	Demand is related to time and price.
Desire of a beggar to own a car.	Demand for a BMW car by Ratan Tata.

        

          Utility and Usefulness

Utility	Usefulness
Utility is the capacity of a commodity to satisfy human wants	Anything (goods or services) are useful if they satisfy human want and generate human welfare
A product may have utility irrespective of the commodity is useful or harmful, desirable or undesirable.	product is useful only when it is desirable or beneficial and does not do any harm to a person.
All commodities have utility such as car. clothes, even harmful products like drugs. liquor, cigarettes, narcotics, etc.	Products such as food items, medicine, clothes, etc. are useful. Also services such as education, recreation are useful to
The term utility is subjective in nature as it changes from person to person, from place to place and from time to time.	The term usefulness is absolute in nature, it never changes.

        

       Utility and Satisfaction

Utility	Satisfaction
Utility is the capacity of a commodity to satisfy human wants	Satisfaction is actual realization from consumption of a commodity.
It is what the commodity possesses.	It is what the commodity gives.
It is a means.	la an end.
It is expected satisfaction before Consumption	It is actual realization which comes after consumption.

            Total Utility and Marginal Utility         

Total Utility	Marginal Utility
Total utility is the sum total of utilities derived from the consumption of all units in a given stock of a commodity	Marginal utility is the additional utility derived from consuming additional unit of a commodity.
TU = ⅀ MU	MUn = TUn – TUn-1
TU increases but at a diminishing rate	MU continuously diminishes
At point of satiety TU is maximum.	At point of satiety MU is zero.
After point of satiety TU starts diminishing.	After point of satiety MU becomes negative.
Numerical value of TU is always positive	Numerical value of MU can be positive. negative or zero
TU indicates value-in-use	MU indicates value-in-exchange
When TU is maximum, the MU is zero	When the MU is maximum the TU is minimum

    

        Form Utility and Service Utility

Form Utility	Service Utility
Form utility arises when the structure of given material changes.	It arises when service is rendered by one person to another
Furniture made out of wood is an example of form utility.	Knowledge given by teacher to student is an example of service utility.
It is related to material welfare	It is related to non-material welfare.
Form utility is mainly created by artisans like tailor, carpenter, etc.	Service utility is mainly created by professionals like doctor, lawyers, etc

         Knowledge Utility and Possession Utility

Knowledge Utility	Possession Utility
Knowledge utility arises when a person acquires knowledge regarding a product	Possession utility arises when the ownership of a product is transferred from one person to another.
Use of mobile, computer, etc. creates knowledge utility.	Sale and purchase of goods creates possession utility
In this case, a consumer is interested to know various functions of product.	In this case, a consumer is interested to satisfy his wants.
Knowledge utility increases due to utilisation.	Possession utility increases due to demand.

  Extension of demand and contraction of demand

Extension of demand	Contraction of demand
When more quantity of commodity is demanded with fall in price then there is extension in demand.	When with a rise in price less quantity of commodity is demanded with fall in price then there is contraction in demand.
There is downward movement towards x – axis on the same demand curve.	There is an upward movement towards x – axis on the same demand curve.

        Perfectly elastic demand and perfectly inelastic demand

Perfectly elastic demand	Perfectly inelastic demand
When the change in price brings about infinite change in quantity demanded is known as perfectly elastic demand.	When demand does not give any response to the change in price is known as perfectly inelastic demand.
Numerical co-efficient of such a demand is infinity.	Numerical co-efficient of such a demand is zero.
E.g. such elasticity of demand is only a theoretical possible.	E.g. salt has much demand.

 Income elasticity of demand and Cross elasticity of demand

Income elasticity of demand	Cross elasticity of demand
When demand gives response to change in income of consumer is known as income elasticity demand.	When demand gives response to change in price of substitute is known as cross elasticity of demand.
Ey =   =	Exy =     =
It is positive in case of superior goods, negative in inferior goods and strongly negative in giffen goods.	It is positive in case of normal goods and complementary goods and negative in substitute’s goods.

     Supply and Stock                   

Supply	Stock
Supply is the actual part of the stock which the sellers are able and willing to offer for sale at a given price.	Stock is the total quantity of goods manufactured or stored.
Supply comes from stock.	Stock is the source of supply.
Supply is always less than stock or supply cannot exceed stock.	Stock is always greater / more than supply or stock can exceed supply.
Supply is the function of stock.	Stock is the function of production.
In case of perishable goods, supply would be equal to stock.	In case of durable goods, the stock is more than supply.
Supply is a flow concept.	Stock is a fund.
Supply is more elastic.	Stock is less elastic.

 Perfect competition and Monopoly                                                                          

	Perfect competition	Monopoly
1.	Under this market there are large number of buyers and sellers in the market.	Under this market there is only one seller and many buyers.
2.	Firm is a price taker.	Firm is a price maker.
3.	There is free entry and exit of firm.	Entry of firm is restricted due to legal and natural factor.
4.	A single firm cannot influence the market supply of a commodity and its price.	A monopolist form has complete control over market supply. So, it can influence its price.
5.	The demand curve is perfectly elastic.	The demand curve is downward sloping.
6.	Firm earns normal profit in the long run.	Firm earns super normal profits in the long run.
7.	There exists single price in the market.	There can be multiple prices.
8.	Perfect competition is not found in reality.	Limited monopoly is found in reality.

            Average Revenue and Average cost                                                             

Average revenue	Average cost
It refers to revenue per unit of output sold.	It refers to total cost of production per unit.
It is calculated by dividing TR by total output.	It is calculated by dividing TC by total output.
AR =	AC =

            Public finance and Private finance

Public finance	Private finance
It refers to raising and spending of funds by the government.	It represents to raising and spending of funds by private individual.
It offers maximum social advantage to the society.	It offers maximum fulfilment of private interest.
In this, Government first decides the volume and different ways of its expenditure.	In this, an individual first considers his income and then decide the expenditure.
They have high degree of credit in the market.	They hold limited degree of credit in the market.
The government has right to print notes through RBI.	Private individual does not enjoy any such rights.
It brings huge impact on the economy of a country.	It brings very less effect on the economy of a country.

 

Gross National Product and Net National Product

Gross National Product	Net National Product
GNP is defined as aggregate market value of all final goods and services produced in any economy, during a given period of time.	NNP is defined as market value of net output of final goods and services in an economy during a given period of time.
GNP is expressed as GNP = C+I+G+(X –M)+(R – P)	NNP is expressed as NNP = GNP – Depreciation
It involves consumption, investment, government services net earnings from abroad and net receipts for foreign transaction.	It is derived by deducting depreciation, which refers to wear and tear of capital goods, during the process of production.
It is always greater than NNP.	It is less than GNP.

 

    Gross National Product and Gross Domestic Product

Gross National Product	Gross Domestic Product
It refers to aggregate market value of all final goods and services produced in an economy, during a given period of time.	It refers to the money value of all goods and services produced within the geographical boundary of a country.
It includes the contribution to production made by the citizen staying abroad.	It does not include the contribution to production mad by citizen outside the country.
The part of the income is earned by the residents of the country inside and outside the country form GNP.	The part of the income earned abroad by the residents of the country is excluded to get GDP.
GNP = C + I + G + (X – M) + (R – P)	GDP = C + I + G

   

    Deficit budget and surplus budget               

Deficit budget	Surplus budget
A deficit budget is one in which estimated expenditure exceeds estimated revenue.	A surplus budget is one in which estimated revenues are greater than expenditure.
It leads to flow of money from government to the economy and increases aggregate demand.	It leads to flow of money from economy to government and lead to decrease in aggregate demand.
It is suitable for governments especially when the economy suffers from depressions.	It is suitable for individuals and families but not favoured for government.
This policy would lead to employment and revival of economic activities.	This policy would lead to unemployment and recession due to low investment.
It is not desirable during inflation.	It is advocated during inflation to reduce demand and prices by imposing high taxes.

 

    Time deposit and Demand deposits

Time deposit	Demand deposit
Deposits that are repayable after a certain period of time are known as time deposits or term deposits.	Deposits that are withdrawable on demand are known as demand deposits.
Commercial banks provides more interest on time deposits.	Commercial banks provides less interest on demand deposits.
Fixed deposits and Recurring deposits are the time deposits.	Saving deposits and Current deposits are the demand deposits.

 

    Internal trade and External trade

Internal trade	External trade
Buying and selling of goods and services within the boundaries of a nation is called internal trade.	Buying and selling goods and services outside the boundaries of a nation is called external trade.
It is also known as Home Trade or Domestic trade.	It is also known as Foreign Trade and International Trade.
Wholesale Trade and Retail trade are the types of internal trade.	Import Trade, Export Trade and Entrepot Trade are the types of international trade.

 

    Current account and saving account

Current account	Saving account
This account is usually opened by businessperson, industrial enterprises, public bodies etc.	This account is held by the households, salaried class, small traders etc.
This account facilitates regular business transactions.	The main purpose of saving account is to encourage saving among people.
No interest paid on current account.	Nominal interest is paid on saving account.
There is no restriction on withdrawals.	Withdrawals are allowed subject to certain restrictions.

    Direct tax and Indirect tax   

Direct tax	Indirect tax
A direct tax is paid by a person on whom it is legally imposed. It cannot be transferred.	Indirect tax is imposed on one person but paid by the other.
Impact and incidence are on the same person i.e. the tax payer is also tax bearer. Tax burden cannot be shifted.	The impact and incidence may be on different persons i.e. there is a shifting of thpe tax burden.
Direct tax is either on the person’s income, wealth or property.	Indirect tax is on commodities and services.
This tax is paid at the time of earning income.	This tax is paid at the time of spending income.
e.g. Income tax, Wealth tax etc.	e.g. Sales tax, excise duty, service tax etc.

 

    Price index number and Quantity index number

Price index number	Quantity index number
It estimates the relative changes in the prices of goods and services in any two different time periods.	It estimates the relative changes in the quantities or volume of goods sold, consume or produce over a period of time.
It is obtained by taking the ratio of price level in the current year to the base year.	It is obtained by taking the ratio of quantity in the current year to the base year.
Formula	Formula

    Central bank and Commercial bank

Central bank	Commercial bank
The central bank is defined as the apex banking and monetary institution.	Commercial banks are the intermediary financial institutions which deal in money.
The main function of central bank is to control, regulate and stabilize the banking and monetary system of the country.	The main function is to accept deposits and lend loans and advances.
It does not deal with public directly. It acts as the bank of government and bank of the banks.	It deals with the public. It accepts deposits from public and lends loans and advances to the businessmen, organizations.
The main objective is to control money supply and stabilize price level. It is welfare oriented organizations.	The main objective of commercial bank is profit making through its function of accepting deposits and lending loans.
It enjoys the monopoly right to print and issue currency notes.	Commercial banks do not possess such right.
Central bank controls the credit.	Commercial banks create credit.
There is only one central bank in India. RBI owned by government.	There are several commercial banks like, SBI, ICICI bank, Canara bank etc. owned by private or government.
Currency issued by Central bank is legal tender money.	Commercial bank issues bank money which is optional money.

 

      Simple index number and Weighted index number

Simple index number	Weighted index number
It is the ratio of two values representing the variable, measured in two different situations or time periods.	It is calculated by assigning weights to different items is called weighted index number.
In this method equal importance is given to all items.	In this method equal importance is not given to all items.
Price index, Quantity index and Value index are the types of Simple index number.	Laspeyres’ index and Paasche’s index, Fisher’s ideal index etc. are the types of weighted index number.

    Export and Import

Export	Import
When traders of a country sell the goods and services to foreign countries. It is called export trade.	When traders of a country purchase the goods and services from foreign countries. It is called import trade.
It is an outflow of goods and services from domestic country to foreign countries.	It is an inflow of goods and services to domestic country from foreign countries.
E.g. India is the leading exporter of Basmati Rice to Saudi Arabia.	E.g. India import electronic goods from Japan.

 

    Balance of Payment and Balance of Trade

Balance of Payment	Balance of Trade
It refers to a systematic record of all international economic transactions of that country during a given period.	It is the difference between the value of a country’s exports and imports for a given period of time.
It is a wider concept.	It is a narrower concept.
It includes visible items, invisible items, unilateral transfers and capital transfers.	It includes only visible items.

 

    Slicing method and lumping method

Slicing method	Lumping method
In slicing method, the entire economy is divided into small individual units for analysis.	In lumping method, the entire economy as a whole is taken into account for analysis.
Micro economic uses slicing method.	Macro economics uses lumping method.
It focuses on the study of individual economic units like individual demand.	It focuses on the study of aggregate units of the economy like aggregate demand.

 

Form utility and Knowledge utility.              

Form utility	Knowledge utility
It is created by changing the form or shape of goods	It is created by filling the gap of knowledge gap.
Manufacturing goods creates form utility.	Advertisement creates knowledge utility.
e.g when steel is converted into utensils.	e.g. computer knowledge to a student increases its utility.

 

     Increase in demand and decrease in demand

Increase in demand	Decrease in demand
It means when the demand of commodity rises due to favorable changes in other factor, price remain constant.	It means fall in demand of commodity due when the supply of commodity decreases due to unfavorable change in other factor, price remain constant.
E.g. If size of population increases, the demand of commodity is also increases.	E.g. when the income of consumer decreases, the demand of commodity is also decreases.
The demand curve shifts upward (towards right) forming a new demand curve.	The demand curve shifts downward (towards left) forming a new demand curve.

    Perfect competition and Monopolistic competition                         

Perfect competition	Monopolistic competition
Perfect competition market is market of large number of buyers and large number of seller selling homogeneous goods.	In monopolistic competition there are large numbers of sellers selling differentiated product in the market.
Perfect competition is not price competition market.	There is price competition in monopolistic competition.
There is no substitute available.	In Monopolistic competition many close substitute are available.
Perfect competition is ideal market, but not realistic.	Monopolistic competition is realistic market.
The products sold in such market are homogeneous hence, the selling cost on advertisement, poster etc. do not incur.	In order to popularize the product seller has to incur selling cost.

 

    Perfect competition and Oligopoly

Perfect competition	Oligopoly
Perfect competition market is market of large number of buyers and large number of seller selling homogeneous goods.	Oligopoly is a form of market in which there are few sellers selling either homogeneous or differentiated products.
Under perfect competition, product of all firms are homogeneous.	Under oligopoly, products of all firms are either homogeneous or differentiated.
Firms are price taker under perfect competition.	Firms are price maker under oligopoly market.

    Monopoly and Oligopoly

Monopoly	Oligopoly
It is a market situation in which there is a single seller and many buyers.	It is a form of market in which there are few sellers selling either homogeneous or differentiated products.
In monopoly market, various entry barriers are imposed on the entry of firms.	In oligopoly market, there is free entry and exit for firms.
No selling cost is incurred by monopolist under monopoly market.	Heavy selling cost is incurred by sellers under oligopoly market.