Q.Discuss briefly the central problem of 'How to produce'.

The Scope of Economics: What Does Economics Actually Study?

Think about your day so far. You woke up, had breakfast, came to school. Every single thing you used — the bed you slept on, the food you ate, the bus or bicycle you took — was produced by someone, somewhere, using limited resources. And you made choices: Which dish to eat? Which route to take? That's the seed of economics.

Economics is not just about money, stock markets, or government budgets. It is the study of choice under scarcity. Scarcity means our wants are unlimited, but the resources to satisfy them — time, land, labour, capital — are limited. So every society must answer three fundamental questions:

1. What to produce? (Should we make more phones or more food?)
2. How to produce? (Should we use more machines or more workers?)
3. For whom to produce? (Who gets to consume what?)

The scope of economics is the answer to: What all does this subject cover? It is the boundary of the field — the topics, methods, and questions that economics deals with.

The Two Broad Branches of Economics

Economics is divided into two main parts, and understanding this division is the first step in grasping its scope.

Microeconomics (from the Greek mikros = small) studies individual economic units — a single consumer, a single firm, a single market. It asks: How does a household decide what to buy? How does a firm decide how much to produce? How is the price of a particular good determined?

Macroeconomics (from makros = large) studies the economy as a whole. It looks at aggregates — total output, total employment, the general price level, national income. It asks: Why does the whole economy sometimes slow down? What causes inflation? How does the government manage the overall level of economic activity?

The NCERT Class 11 textbook (Introductory Microeconomics) and Class 12 textbook (Introductory Macroeconomics) are built exactly on this division.

What Falls Within the Scope? (The Core Topics)

Here is what the NCERT syllabus actually covers under the scope of economics:

Why Does the Scope Matter?

Knowing the scope tells you what tools you will learn and what questions you can answer.

• Microeconomics gives you the tools to understand individual markets — why petrol prices rise, why a movie ticket costs more in a multiplex than in a single-screen theatre, why farmers sometimes destroy crops. …

Positive Economic Analysis: What Is, Not What Ought to Be

Imagine you're watching the evening news. Two different types of statements might come up:

"The unemployment rate has fallen to 6.5% this quarter."

"The government should do more to help the unemployed."

The first statement is about a fact — something you could, in principle, check with data. The second is about a value judgment — what someone believes ought to happen. Positive economic analysis deals with the first kind of statement. It is the branch of economics that describes, explains, and predicts economic phenomena as they are, without saying whether they are good or bad.

The precise meaning

Positive economics is objective and testable. A positive statement can be proven true or false by looking at evidence. For example:

• "A rise in the price of petrol leads to a fall in the quantity demanded." — This can be tested with data.
• "If the government increases the GST rate on luxury cars, tax revenue will rise." — This is a prediction that can be checked.

Positive analysis does not ask "Should we do this?" It asks "If we do this, what will happen?" It is the toolkit economists use to build models, run regressions, and make forecasts.

Why it matters for you

In Class 11 and 12, almost everything you learn in Microeconomics and Macroeconomics is positive analysis. When you study the law of demand, you are learning a positive relationship: price up, quantity demanded down (ceteris paribus). When you study the multiplier, you are learning a positive formula that tells you how much national income will change given a change in investment.

Where it has a formula: The Expenditure Multiplier

A classic example of positive analysis in macroeconomics is the investment multiplier. The NCERT textbook (Class 12, Macroeconomics) states the formula:

Where:

• $K$ = the multiplier (the factor by which national income changes)
• $MPC$ = marginal propensity to consume (the fraction of additional income that is spent on consumption)

This is a positive relationship. It tells you: If the MPC is 0.8, then a ₹100 crore increase in investment will increase national income by ₹500 crore (because $K = 1/(1-0.8) = 5$). You can test this prediction against real data. The formula does not say whether the increase is desirable — that is a separate question.

A diagram in words …