With reference to the basic economic activities, consider the following statements: 1. Production, exchange, and consumption are considered the basic economic activities of life. 2. The problem of choice arises primarily because resources have single, specific usages. Which of the statements given above is/are correct?

The correct option is 1 only Explanation Economics is the study of how individuals and societies choose to employ scarce resources that could have alternative uses in order to produce various commodities and distribute them for consumption. The fundamental economic problem revolves around the scarcity of resources relative to human wants. Statement-wise Analysis: - Statement 1 is Correct: In any society, the fundamental economic activities essential for sustenance and growth are production (creating utility), exchange (buying and selling to satisfy wants), and consumption (using goods and services). Some classifications also include investment (capital formation) as a basic activity. - Statement 2 is Incorrect: The problem of choice arises because resources (land, labour, capital, etc.) are scarce and have alternative uses. If a resource had only a single, specific usage, there would be no problem of choice regarding its allocation; it would simply be used for that one purpose. The necessity to choose between different applications of a resource creates the central economic problem. Key Takeaway: The root cause of central economic problems is the scarcity of resources combined with the fact that these resources have alternative uses.

NCERT Class 12 Economics — Chapter 1: Introduction

mcqeasy

With reference to the basic economic activities, consider the following statements:

Production, exchange, and consumption are considered the basic economic activities of life.
The problem of choice arises primarily because resources have single, specific usages.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 only
BNeither 1 nor 2
C1 only
DBoth 1 and 2

Did you get this right?

Solution

The correct option is
1 only

Explanation

Economics is the study of how individuals and societies choose to employ scarce resources that could have alternative uses in order to produce various commodities and distribute them for consumption. The fundamental economic problem revolves around the scarcity of resources relative to human wants.

Statement-wise Analysis:

Statement 1 is Correct: In any society, the fundamental economic activities essential for sustenance and growth are production (creating utility), exchange (buying and selling to satisfy wants), and consumption (using goods and services). Some classifications also include investment (capital formation) as a basic activity.
Statement 2 is Incorrect: The problem of choice arises because resources (land, labour, capital, etc.) are scarce and have alternative uses. If a resource had only a single, specific usage, there would be no problem of choice regarding its allocation; it would simply be used for that one purpose. The necessity to choose between different applications of a resource creates the central economic problem.

Key Takeaway:
The root cause of central economic problems is the scarcity of resources combined with the fact that these resources have alternative uses.

Your note

More from Chapter 1: Introduction

Consider the following statements regarding the "Mixed Economy": 1. It is an economy where both the government and the market play a role in economic activities. 2. It is an economy where all decisions are taken solely by the market. 3. India is cited as an example of a mixed economy. Which of the statements given above is/are correct?

easy

Consider the following statements regarding the fundamental nature of an economy: 1. Individuals in a society possess limited resources compared to their needs. 2. The scarcity of resources is a phenomenon faced by individuals but not by the society as a whole. 3. Compatibility between what people collectively want and what they produce is essential for an economy. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the "Central Problems of an Economy": 1. The problem of "What is produced" is unrelated to the quantity of goods to be produced. 2. The problem of "How are these goods produced" relates to the choice of technology to be adopted. 3. The problem of "For whom are these goods produced" involves determining the distribution of final goods among individuals. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the allocation of resources: 1. In a market economy, allocation is determined solely by the central planning authority. 2. Allocation of resources refers to how much of which resource is devoted to the production of each good. 3. Allocation of resources has no impact on the combination of goods and services produced. Which of the statements given above is/are correct?

medium

With reference to the "Production Possibility Frontier" (PPF), consider the following statements: 1. It represents the collection of all possible combinations of goods that can be produced with available resources. 2. A point strictly below the frontier indicates that resources are fully and efficiently utilized. 3. The curve gives the maximum amount of one good that can be produced for any given amount of the other good. Which of the statements given above is/are correct?

hard

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