Q.Examine the correctness of the following statement and correct it if incorrect, without changing the underlined portion : The law of equimerginal utility is otherwise known as the law of substitution.

The classification of a good as necessary, comfort or luxury depends on the consumer and the purpose, not on the good. For a busy doctor a car is a professional necessary, so the answer is (a) Necessary.

In business economics, consumers' goods are grouped by the intensity of the want they satisfy:

• Necessaries are goods essential for life, efficiency or a person's occupation (food, basic clothing, and tools/means needed to earn a living).
• Comforts make life easier and more pleasant but are not essential (a fan, a sofa).
• Luxuries are expensive goods meant mainly for display or extra satisfaction (costly jewellery, a sports car kept for pleasure). …

Goods with exchange value are scarce and command a price, which is the defining mark of economic goods. Answer: (c) Economic goods.

Free goods exist in unlimited supply relative to human wants (air, sunlight). Because they are not scarce, nobody pays for them — they have no exchange value and no price.

Economic goods are scarce in relation to the demand for them. Their scarcity means they can be obtained only by paying a price, so they possess value in exchange — they can be exchanged for money or for other goods. Possessing exchange value is precisely what distinguishes an economic good from a free good.

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Producers' (capital) goods satisfy human wants indirectly because they are used to make the final consumer goods. Answer: (c) Producers' goods.

Goods are classified by the nature of the satisfaction they give:

• Consumers' goods (e.g. bread, clothes) satisfy human wants directly — they are used up by the final consumer to meet a want.
• Producers' goods / capital goods (e.g. machines, tools, raw materials, factory equipment) satisfy human wants indirectly. They are not consumed for their own sake; they are used in the process of production to turn out consumer goods, and it is through those final goods that wants are ultimately met. …

Wealth needs utility, scarcity and transferability/marketability. Health has utility and scarcity but cannot be transferred or sold, so it fails the marketability test. Answer: (c) Marketability.

In economics a thing is called wealth only if it possesses all of these characteristics:

1. Utility — it can satisfy a want.
2. Scarcity — it is limited relative to demand.
3. Transferability / Marketability — ownership can be transferred and it can be exchanged for a price in the market.
4. Externality (it must be external to a person, not a personal quality). …

Consumption is the act of using up goods/services to satisfy wants, which destroys their utility. Answer: (c) Consumption.

The four basic economic activities are linked to utility as follows:

• Production is the creation of utility (making goods capable of satisfying wants).
• Consumption is the using up / destruction of utility — when a want is satisfied by using a good, the utility embodied in it is exhausted. Eating food or burning fuel destroys the utility that was created in it.
• Distribution refers to sharing the national product (rewards to factors), and exchange to the transfer of goods — neither is the destruction of utility. …

The statement is correct — the law of equi-marginal utility is also called the law of substitution, because a consumer keeps substituting goods until marginal utilities per rupee are equal.

The law of equi-marginal utility states that a consumer with limited income gets maximum total satisfaction when he allocates his expenditure so that the marginal utility of the last unit of money spent on each good is equal (i.e. the ratio of marginal utility to price is the same for every good).

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The correct answer is (c) Lionel Robbins, who gave the scarcity (choice) definition of Economics.

Definitions of Economics evolved over time, and this question tests which economist is linked with the scarcity definition — a standard idea for CHSE Odisha +2 Class-12 Business Economics (the syllabus aligns with the NCERT/CBSE economics curriculum).

• Adam Smith (a) is linked with the wealth definition — economics as a study of the nature and causes of the wealth of nations.
• Alfred Marshall (b) gave the welfare definition — economics as a study of mankind in the ordinary business of life, concerned with material welfare. …

The correct answer is (b) exchange value of a commodity.

This is a basic-concepts item in CHSE Odisha +2 Business Economics. The word 'value' must be distinguished from related terms:

• Usefulness / want-satisfying power (a and d) describe utility, not value. Utility is the capacity of a good to satisfy a want; a good can have high utility yet little exchange value (e.g. water).
• Pleasure derived (c) is a subjective satisfaction, again closer to utility than to value. …

The statement is incorrect; the correct word is 'utility', not 'consumption'.

This is a correct-the-statement item in CHSE Odisha +2 Business Economics, where the underlined part — 'The want satisfying capacity of a commodity is called' — must be kept unchanged.

• The want-satisfying capacity of a good or service is the standard definition of utility. …

The statement is correct — a national highway is an example of national wealth.

This is a correct-the-statement item in CHSE Odisha +2 Business Economics.

Wealth in economics is anything that has utility, is scarce, is transferable and has exchange value. Wealth can be classified as:

• Individual (private) wealth — owned by a person (house, car, bank balance).
• National (collective/social) wealth — assets owned by the community or the State, available for common use, such as roads, railways, rivers, public parks, bridges and national highways. …