Introduction to Economics

When marginal opportunity cost is falling, the production possibility frontier becomes convex to the origin (bowed inward). This indicates increasing returns - each additional unit produced requires giving up less of the other good.

Capital refers to wealth that is used to produce more wealth, such as machinery, buildings, and tools. All capital is indeed wealth because it has economic value, but not all wealth qualifies as capital - for example, a painting owned for personal enjoyment is wealth but not capital. Robbins defined economics as the science of scarcity and choice, not welfare economics.

Net Domestic Product at Factor Cost (NDP@FC) is derived from Net Domestic Product at Market Price (NDP@MP) by adjusting for net indirect taxes. Specifically, we subtract indirect taxes (which make market prices higher than factor costs) and add subsidies (which make market prices lower than factor costs). Thus: NDP@FC = NDP@MP - Indirect Taxes + Subsidies.

Macroeconomics deals with aggregate economic variables at the economy-wide level - growth theory, price level determination (inflation), and employment theory are all core macro topics. Price determination of individual goods through supply and demand is fundamentally a microeconomic concept, as it deals with individual markets rather than the economy as a whole.

In the circular flow of income model, leakages (or withdrawals) are flows that reduce aggregate demand - money leaving the circulation loop. Imports, savings, and taxes are all leakages because they represent spending that is diverted away from domestic consumption. Government expenditure is an injection, not a leakage - it adds money back into the circular flow.

Economic activities: Actions that involve the production, distribution and consumption of goods and services at all levels within a society.
Out of the given options, only medical facilities provided by the charitable hospital is an economic activity.

National income can be measured through three equivalent approaches: the production (value-added) method sums output at each stage, the outlay (expenditure) method sums total spending on final goods, and the income method sums all factor incomes earned. These three methods must theoretically yield the same result because every rupee spent is someone's income.

In a simplified two-sector economy (households and firms only), equilibrium occurs where aggregate savings equal aggregate investment. This ensures that all income not consumed by households is channeled back into production through firms' investment spending. The other options involve government or foreign sectors which don't exist in a pure two-sector model.

Economics is fundamentally about trade-offs due to scarcity - every choice requires giving up something. Taking a nap means sacrificing study time, watching soccer means not doing other work, and going to college means giving up immediate earnings. All these involve opportunity cost, making 'All of these' the correct answer.

The primary sector involves extraction and production of raw materials directly from natural resources. Agriculture (crop cultivation, animal husbandry) is the classic example of primary sector activity. Banking, transport, and communication are all service-based activities belonging to the tertiary sector.

Savings is that part of income not spend on consumption during some given time period.

The secondary sector includes those economic sectors that produce a finished, usable product production and construction.

Mining                                                - Primary Sector
Manufacturing                                  - Secondary Sector
Transportation and Banking          - Tertiary Sector

Real per capita income accounts for both population growth and inflation, making it the most accurate indicator of the average individual's economic well-being and productivity increase.

The tertiary sector provides services rather than goods. Banking is a financial service - it accepts deposits and lends money, facilitating economic activity without producing physical goods. Forest products (primary), manufacturing (secondary), and mining (primary) all involve tangible goods production or extraction.

The economic goods are limited in supply.