CBSE Class 12 Micro Economics Important Questions

Below are 10 Important Questions from Class 12 Micro Economics chapters that are Important for preparing well and understanding concepts easily.

1. What is microeconomics?

Ans: Microeconomics is the branch of economics that studies individual units, such as households and firms, and their decision-making processes. It focuses on how these units interact in markets, how they allocate resources, and how they respond to changes in prices and policies. Key concepts include supply and demand, elasticity, and market structures. Understanding microeconomics is important for analysing specific economic issues and for making informed decisions in business and personal finance.

2. What are the main assumptions of the theory of consumer behaviour?

Ans: The theory of consumer behaviour is based on several key assumptions:

• Rationality: Consumers aim to maximise their satisfaction with goods and services.

• Preferences: Consumers have clear preferences that can be ranked based on satisfaction.

• Budget Constraint: Consumers have limited income and must make choices within that budget.

• Diminishing Marginal Utility: As a consumer consumes more of a good, the extra satisfaction gained from each additional unit decreases. This theory helps explain how consumers make choices based on their preferences and available resources.

3. What is the difference between fixed costs and variable costs?

Ans: Fixed costs are expenses that do not change with the level of output, such as rent, salaries of permanent staff, and insurance. They remain constant regardless of how much is produced. Variable costs, on the other hand, change with production levels, including costs for raw materials, direct labour, and utilities. Understanding the difference between these costs is crucial for businesses in budgeting, pricing strategies, and determining profitability.

4. What are the characteristics of a firm operating under perfect competition?

Ans: A firm operating under perfect competition has several key characteristics:

• Many Buyers and Sellers: There are numerous participants in the market, none of whom can influence prices.

• Homogeneous Products: The goods offered by different firms are identical, leading to no brand loyalty.

• Perfect Information: All market participants have access to complete information about prices and products.

• No Barriers to Entry or Exit: Firms can enter or leave the market freely, ensuring competition remains high. These conditions lead to firms being price takers, achieving allocative and productive efficiency.

5. How is market equilibrium achieved?

Ans: Market equilibrium is reached when the quantity of a good demanded by consumers equals the quantity supplied by producers at a specific price. At this point, there is neither a surplus nor a shortage of the goods in the market. If demand increases, prices may rise, leading to a new equilibrium. Conversely, if supply increases, prices may fall. Understanding market equilibrium helps analyse how various factors can affect prices and quantities in the market.

6. What is the law of demand?

Ans: The law of demand states that, all else being equal, when the price of a good decreases, the quantity demanded increases, and when the price increases, the quantity demanded decreases. This relationship reflects an inverse correlation between price and quantity demanded, which can be illustrated with a downward-sloping demand curve on a graph. Understanding this law is important for analysing consumer behavior and making pricing decisions.

7. What is the concept of elasticity in economics?

Ans: Elasticity measures how responsive the quantity demanded or supplied of a good is to changes in price or other factors. The main types of elasticity include:

• Price Elasticity of Demand: Measures the responsiveness of quantity demanded to a change in price.

• Price Elasticity of Supply: Measures the responsiveness of quantity supplied to a change in price.

• Income Elasticity of Demand: Measures how quantity demanded changes as consumer income changes. Understanding elasticity helps businesses and policymakers make informed decisions about pricing and production.

8. What is the relationship between total cost, average cost, and marginal cost?

Ans: Total cost is the sum of fixed and variable costs incurred in the production of goods. Average cost is calculated by dividing total cost by the quantity of output produced, providing an idea of the cost per unit. Marginal cost is the additional cost incurred by producing one more unit of output. The relationship among these costs is important for firms in determining pricing strategies and optimising production levels to maximize profits.

9. What are the factors that affect consumer behaviour?

Ans: Several factors influence consumer behaviour, including:

• Price: Changes in the price of goods can affect demand.

• Income Levels: Higher income can lead to increased purchasing power and changes in consumption patterns.

• Preferences and Tastes: Changes in consumer preferences can shift demand for certain products.

• Advertising and Marketing: Promotional activities can influence consumer choices and perceptions. Understanding these factors helps businesses tailor their strategies to meet consumer needs.

10. How do government policies affect market equilibrium?

Ans: Government policies can influence market equilibrium through various mechanisms, including:

• Taxes and Subsidies: Taxes can increase costs for producers, shifting the supply curve to the left, while subsidies can lower costs and shift the supply curve to the right.

• Price Controls: Price ceilings (maximum prices) and price floors (minimum prices) can create shortages or surpluses, disrupting the natural market equilibrium.

• Regulations: Government regulations can impact production costs and market dynamics, influencing supply and demand. Understanding these effects is crucial for analysing market behaviour and policy implications.

Here are Important Questions for Class 12 Micro Economics. For a better understanding of each chapter, please refer to the Chapter-wise Important Questions table. This resource will assist you in understanding the key concepts and Important Questions in each chapter and preparing effectively for your exams.

How do Micro Economics Important Questions Class 12 Help you with Exams?

• Micro Economics Important Questions for Class 12 highlight specific topics frequently tested, helping students focus their study efforts effectively.

• Engaging with these questions clarifies complex concepts, such as demand and supply, and enhances overall understanding.

• Practising Important Questions exposes students to various formats, preparing them for different types of exam questions.

• This practice improves time management skills, allowing students to use their time wisely during the exam.

• Regular practice increases confidence, making students feel more prepared and less anxious on exam day.

• Important Questions encourage the application of knowledge to real-world situations, strengthening analytical skills.

• They align with resources like NCERT textbooks and previous year's papers, ensuring students study relevant material for their exams.

Vedantu's CBSE Class 12 Chapter-wise Micro Economics Important Questions are a valuable resource for students aiming to excel in their studies. By focusing on key concepts and topics from textbooks like NCERT, these questions improve understanding and help students prepare effectively for exams. Engaging with these Important Questions develops critical thinking and increases confidence, ensuring that students are well-prepared for their assessments. Using this resource will not only support academic success but also encourage a greater interest in microeconomics as a subject.

Additional Study Materials for Class 12 Economics