© 2026 LearnInShort
Basic Economic Concepts: The Vocabulary Every Economy Question Assumes
Economics begins with one fact: wants are unlimited but resources are scarce, so every society must choose what to produce, how to produce it and for whom. Adam Smith, whose Wealth of Nations appeared in 1776, is called the father of economics. Alfred Marshall later defined it as the study of mankind in the ordinary business of life.
Almost every exam question on budgets, inflation or national income quietly assumes a few basic terms. If those are shaky, the advanced topics never settle.
This short builds that base in four parts: the split between microeconomics and macroeconomics; the four factors of production and the reward each one earns; utility and the law of diminishing marginal utility, with a worked table; and the three economic systems, ending with why India is called a mixed economy.
1. Who coined the terms 'microeconomics' and 'macroeconomics'?
2. Which of the following is studied in macroeconomics?
3. What is the reward of the entrepreneur as a factor of production?
4. When marginal utility becomes zero, total utility is
5. A consumer's total utility from 1, 2 and 3 cups of tea is 10, 18 and 24 units respectively. What is the marginal utility of the third cup?
6. Which feature belongs to a socialist economy?
7. Why is India described as a mixed economy?
8. By which Constitutional Amendment was the word 'socialist' added to the Preamble?