NCERT Solutions for Class 12 Macro Economics Chapter 1 Introduction

In our daily life we use different-different types of goods and services. We are using these goods and services even while sleeping. For example: From the time when you wake up in the morning and till you go to sleep, you utilise many goods and services such as: Toothpaste, Toothbrush, Tea, Sugar, Bread, Electricity, Fan, Bulb, Mixer, Transportation, etc. Every human being uses different set of goods and services as per their need and liking. A family farm may own a land, farming tools and equipment, labour services of family members, grains, etc. A teacher in the school can earn money by educating the children and fulfil his need of goods and services using that money.

Some others in the society may not have any resource excepting their own labour services. Each of these decision-making units can produce some goods or services by using the resources they have, they can use a part of the produce for their consumption and by the rest of the produce they can procure clothing, housing, and various services or goods of their need. It goes without saying that no individual has unlimited resources compared to his need. The amount of corn a family can produce is limited by the amount of resources it has, and hence, the amount of different goods and services that it can procure in exchange of corn is also limited.

As a result, the family is forced to make a choice between the goods and services that are available. This means that if the family is opting for some new or better goods or services which will cost them more than usual, they will have to cut down the expenses on other things. Like, if they want more and better education for their children, they may have to give up some of the luxuries of life. The same is the case with other individuals in the society. Everyone faces scarcity of resources, and therefore, has to use the limited resources in the best possible way to fulfil their needs.

Everyone in the society is engaged in producing some goods or services but the problem is that everyone needs many different goods and services in their daily life. Sadly, all of them cannot be produced by a single individual. We don’t have to tell this that the amount of the goods produced must have some compatibility between what the people of the society collectively wants. For example, the total amount of corn produced by a family farm along with other farming units in a society must match the total amount of corn that people in the society collectively wants to consume.

If the total production of the corn exceeds the consuming capacity of the society, then the extra corn is used to produce some other high demand goods or services. Just as the resources of an individual are scarce, the same thing goes with the society as well. The scarce resources of the society have to be allocated properly in the production of different goods and services in keeping with the likes and dislikes of the society members.

Allocation of resources of the society would result in the production of different sets of goods and services. So, after the production, these goods and services has to be distributed among the individuals as per the demand. The allocation of the limited resources and distribution of the final mix of products are two of the basic problems of an economy.

Production, exchange and consumption of goods and services e among the basic economic activities of life. While performing these basic activities, every society has to face scarcity of resources and it is the scarcity of resources that gives rise to the problem of choice. The scarce resources of an economy have competing usage. In simpler words, every society has to decide on how to use its scarce resources.