Question

1.In a capitalist economy, the market value of something is determined by......and....... Prices are the quantification of those values in terms of the money that is used. When the supply of something is high, relative to demand, the price will be........ When the demand for something is .........relative to the supply, the price will be high. When the....... for something is low relative to the......., the price will be high. Prices play an important role in the market economy because the provide the self-interested individual with ......., telling each of how to use our unique combination of skills, talents and strengths to produce the greatest amount of material wealth for ourselves.

2.Resources are allocated among industries in response to signals sent by both product and resources ........ These also indicate which resources would be combined in what way, in the production of a good or service, in order to.......production costs, thereby using society's scarce resources most........ A person can increase his income by producing....... output or by specializing in the production of something for which society is willing to pay a higher price (relative to cost). The........ of goods, services and resources are not determined by some government agency, but by countless decisions of individuals about which goods and services to produce and buy.

3. An economist would say that trade is mutually beneficial. That means that rather than being a.........sum game, trade benefits both parties simultaneously. In a........ economy, trade requires a "double coincidence." That is, the buyer must find a seller who has what he wants and the seller must also want what the buyer has to trade.........reduces this necessity to a .......... coincidence.

4 The term private property, an essential characteristic of capitalism, has two implications. One is that you get to keep what you have .........., and secondly, it is individuals rather than the government that......... society's scarce resources.

5. In the year......... (fill in actual year), a professor of morals at the University of Glasgow (Scotland) named .........authored a book that founded the discipline of economics. The book's name is ....... It was here that the most famous analogy in economics, the.............. was first used.

Answer 1

ANS: a)

  In a capitalist economy, the market value of something is determined by Demand and Supply. Prices are the quantification of those values in terms of the money that is used. When the supply of something is high, relative to demand, the price will be low . When the demand for something is high relative to the supply, the price will be high. When the Supply for something is low relative to the Demand , the price will be high. Prices play an important role in the market economy because the provide the self-interested individual with moral sentiments , telling each of how to use our unique combination of skills, talents and strengths to produce the greatest amount of material wealth for ourselves.

b)

Resources are allocated among industries in response to signals sent by both product and resources PRICES.These also indicate which resources would be combined in what way, in the production of a good or service, in order to minimize production costs, thereby using society's scarce resources most efficiently. A person can increase his income by producing more output or by specializing in the production of something for which society is willing to pay a higher price (relative to cost). The price of goods, services and resources are not determined by some government agency, but by countless decisions of individuals about which goods and services to produce and buy.

c)

3. An economist would say that trade is mutually beneficial. That means that rather than being a zero sum game, trade benefits both parties simultaneously. In a barter economy, trade requires a "double coincidence." That is, the buyer must find a seller who has what he wants and the seller must also want what the buyer has to trade. Money reduces this necessity to a zero coincidence.

d)

Private property or privately owned property is legal designation for the ownership of property by non-governmental legal entities . Two implication of private property are :

1) Right to ownership : It allows legal rights which cannot be encroached upon by just anyone at will . Exclusive rights and ownership helps in generating secured environment for economic activities . As for example if I own a land legally and know that nobody is going to claim it as their own in future or the government will not take it away which some urgent reason , then I can safely invest and produce goods on the land .

2) Resources distributed among private and public entity : Individuals owning private property helps in maximum utilization of scarce resources for production purposes . Public owning of property is not always used for value generation

e)

  In the year 1776 (fill in actual year), a professor of morals at the University of Glasgow (Scotland) named Adam Smith authored a book that founded the discipline of economics. The book's name is An Inquiry into the Nature and Causes of the Wealth of Nations ( Wealth of Nations as abbreviated ). It was here that the most famous analogy in economics, the invisible hand was first used.