Important Questions Class 11 Economics Indian Economic Development Chapter 5

Important Questions Class 11 Economics Indian Economic Development Chapter 5- Human Capital Formation in India 

For an economy, one of the essential resources required for economic growth and development is human capital. And for the development of human capital, economists have time and again stressed the importance of imparting education to the people. This will help build competent human capital that will further help produce good quality human capital. Governments should invest significantly in developing human capital to ensure continued economic growth. Chapter 5 of Class 11 Economics explains in detail this crucial resource. 

Students will learn about the concept of human resources, human capital formation and human development; Chapter 5 will also throw light on the relationship between human capital, economic growth and human development and the state of human resources in the Indian context. . 

The chapter on “Human Capital Formation in India” is hence important from the examination point of view and an in-depth understanding of Indian government spending on education and health, which in turn has a direct impact on human resources. Studying the Important Questions Class 11 Economics Indian Economic Development Chapter 5 provided by Extramarks can help students comprehend the concepts of this chapter.

At Extramarks, we understand the importance of practising important questions to provide a clear understanding of the concepts. For this reason, Extramarks is a trusted online study partner of many teachers and students across the nation. The subject experts at Extramarks prepare the Important Questions Class 11 Economics Indian Economic Development Chapter 5, keeping in mind the latest CBSE syllabus and guidelines to ensure maximum reliability and accuracy while preparing these sets of questions. . The step-by-step solutions prepared in simple language will help students comprehend concepts quickly and easily. Chapter 5 Class 11 Economics Indian Economic Development Important Questions are thus a helpful study resource for students preparing for their examinations.

Apart from Important Questions, Class 11 Economics Indian Economic Development Chapter 5 Extramarks also provides various other sources, including NCERT books, NCERT solutions, CBSE past years’ question papers, CBSE sample papers, CBSE revision notes, reference books, etc. Further, it is ensured that the vital question list is created, keeping in mind the latest NCERT books aligned with CBSE guidelines and syllabus. 

Important Questions Class 11 Economics Indian Economic Development Chapter 5 with Solutions 

At Extramarks, we understand the importance of solving important questions and we take our role seriously to provide the best resource to the students and help them excel in academics.To speed up their learning and improve their academic performance, students must register themselves now, to begin their preparation without any further delay. Chapter 5 of Human Capital Formation in India of Class 11 Economics includes a variety of topics. They have the concept of human capital, sources of human capital, their relationship with human development, the state of human capital formation in India, and a look into the education sector and what the future holds. Hence it becomes imperative for students to have an in-depth knowledge of this chapter, for which Important Questions Class 11 Economics Indian Economic Development Chapter 5 provided by Extramarks can be pretty helpful to  speed up their learning and improve their academic performance, through revisions and make them aware of their mistakes through guided practice and help to get the best results

Here is a list of Important Questions Class 11 Economics Indian Economic Development Chapter 5 provided by Extramarks can be helpful.

Question 1. What does AICTE stand for?

  1. All India Council for Technology Education
  2. All India Council for Technical Education
  3. All India Commission for Technology Education
  4.  All India Commission for Technical Education

Answer 1: d)  All India Commission for Technical Education.

Explanation: The All India Commission for Technical Education (AICTE) was founded as an Apex Advisory Body to survey the availability of technical education facilities and promote and develop technical education in the country.

Question 2. _______ & ______ are the twin pillars on which rests the edifice of social sector reforms. 

  1. Education and Poverty 
  2. Education and Employment 
  3. Education and Health 
  4. Education and Infrastructure  

Answer 2: c) Education and Health.

Explanation: Education and Health are the twin pillars on which rests the edifice of social sector reforms. They contribute to improving the country’s pace of human capital formation.

Question 3. A person becomes a human resource when he  ________.

  1. Is willing to work
  2. Is able to work
  3. Belongs to a particular age group
  4. All of the above

Answer 3: d) All of the above.

Explanation: The term “human resources” refers to the individuals who work. They function as resources for businesses or organisations and perform work or provide services that help companies run more effectively and efficiently.

Only when a person can work, wants to work, and falls within a specific age range does that person become a human resource.

Question 4. People of which age group are treated as a productive labour force?

  1. 0–6
  2. 15–30
  3. 20–35
  4. 60–80

Answer 4: b) 15-30.

Explanation: People between the ages of 15 and 60 are educated, healthy, and capable of receiving on-the-job training. They thereby make significant contributions to society.

Question 5. Which institution guides higher education? 

  1. UGC 
  2. NCERT 
  3. IGNOU 
  4. None of these 

Answer 5: a) UGC

Explanation: The UGC is in charge of coordinating, selecting, and maintaining higher education standards. The University Grants Commission accredits Indian universities and distributes funding to those accredited colleges and universities.

Question 6. What are the two primary sources of human capital in a country?

Answer 6: A nation’s human capital is its current stock of skills and knowledge. Human knowledge and abilities are indeed priceless assets for economic development and prosperity. This is so because a country’s overall production and economic well-being increase when its human capital is of higher quality and more productive. Investments in enhancing human capital are, therefore, crucial and long-lasting.

The two primary sources of human capital in a country are given below:

  1. Investment in Educational Sector:

Education boosts the capacity and productivity of a country’s workforce by developing their skills. Education also helps a primitive economy escape the chains of tradition and backwardness by increasing the acceptability of practical approaches. A financial investment in the education industry has two advantages. It creates an equal society by improving both the ability to generate income and the skewed distribution of income. Investments in the education industry produce long-term benefits. It not only enhances a country’s current economic situation but also  future prospects. The value of education extends beyond simply imparting knowledge to individuals but also helping a developing economy address various linked macroeconomic issues, such as resource underutilisation, population growth, income inequality, and poverty.

2. Investment in Health Sector:

Investment in the health sector boosts the effectiveness, efficacy, and productivity of a nation’s workforce. A healthy individual can work more effectively than a sick person, which allows them to contribute a more significant proportion of the total GDP. In addition to extending life expectancy, good health and access to medical care raise living standards. Better medical facilities, simple access to life-saving medicines, routine vaccinations, the distribution of medical information, sufficient sanitation and clean drinking water, etc., are some of the recurring costs  in the health industry. 

Question 7. Write three differences between physical capital and human capital.

Answer 7: Three significant differences between physical capital and human capital are enumerated below:

Basis of Comparison Physical Capital  Human Capital
Meaning Physical capital is those assets which are tangible and help in the process of manufacturing and production. 

Physical capital includes plant and machinery, tools and equipment, office supplies, etc.

Human capital refers to the organisation’s employees bringing knowledge, skills, talent, skills and unique competencies. 
Formation The formation of physical capital is a result of economic and technical processes. Human capital formation results from social processes and conscious decision-making from the organisation.
Financial Statement  The physical capital of an organisation is reflected in the financial statements. Human capital does not appear in the financial statements of the organisation. 

Question 8. What are the main issues in human capital formation in India?

Answer 8: The main problem India faces when it comes to human capital formation are:

  1. Rising Population:

The increasing population puts a strain on the available scarce resources. In other words, it decreases the number of amenities like housing, sanitisation, education, power supply, etc., that are available per person. As a result, the strain on these facilities reduces both the ability to learn specialised skills and information to enhance the quality of life.

2. Brain Drain:

People move from one location to another in search of greater employment possibilities and lucrative incomes. This severely compromises the development of human capital. It results in the loss of high-calibre individuals who are scarce in emerging nations, such as doctors, engineers, and other professionals. Such a loss of skilled human capital comes at a very high cost.

3. Improper  Manpower Planning:

India struggles with effective workforce planning. No significant measures have been taken to maintain the demand-supply balance of the expanding labour force. As a result, it wastes and misallocates human skills.

4. Low Academic Standards:

Numerous educational institutions are set up to promote education, regardless of quality. These institutions provide education and training of substandard quality, which affects productivity and efficiency negatively. One of the significant problems to the growth of high-calibre human capital formation.

Question 9. What is the difference between literacy and education? 

Answer 9: 

Basis of Comparison  Literacy  Education
Meaning Literacy refers to the ability to read, write, speak, and listen in ways that enable people to communicate effectively with one another and make sense of the external world. Education refers to the holistic development of the individual, where with the ability to read and write, they also possess skills to analyse situations in a broader term.
Effect  Literacy cannot help in making people wiser. Education is a vehicle that helps people differentiate between what is good and what is bad. It gives them the knowledge to make the right decision at the right time.
Scope Literacy is a narrow concept. Education is a much broader concept.

Question 10. Explain how investment in education stimulates economic growth.

Answer 10: An rise in the output of a country’s goods and services (national income) over a given period is referred to as economic growth. A higher level of investment in the education sector would result in a higher percentage of educated workers who participate more actively in the economy and, as a result, in higher economic growth. The different ways that spending on education encourages economic development include the following:

  1. Imparts Quality Skills and Knowledge:

Education provides people with high-quality skills, which helps in increasing their productivity. It improves people’s opportunities and ability to earn a living. Additionally, it makes it possible for human capital to make the best use of the physical capital on hand.

2. Develops Mental Abilities:

People’s mental capabilities grow due to education, enabling them to make intelligent and logical decisions. Good citizens are produced by education by instilling values in them.

3. Acceptability of Modernisation:

A country’s educated public is more likely to accept modernisation and modern methods. In addition to expanding the economy, this also enables a primitive economy to escape the confines of tradition and outdated technology.

4. Eradicates Skewed Income Distribution:

Education creates an equal society by increasing money-earning potential while reducing economic inequality.

5. Raises Standard and Quality of Living:

Education increases a person’s ability to generate money, raising their standard of living and enhancing their quality of life.

6. Increases the Participation Rate:

Encouraging greater participation of individuals in the growth and development process promotes economic development.

7. One Solution for Other Economic Problems:

Education is crucial for solving various interconnected macroeconomic issues in developing economies, such as poverty, income inequality, population growth, underinvestment in infrastructure, and resource underutilisation.

Question 11. ‘School dropouts are giving way to child labour.’ Discuss how this is a loss of human capital. 

Answer 11: School dropout and child labour are associated with low socioeconomic status because parents seek to send their children to work to supplement the family income where the family cannot make ends meet. The following are the reasons for school dropout:

  1. Poverty.
  2. Migration.
  3. Child marriage.
  4. Child labour.

Of the reasons mentioned above, child labour and poverty prove to be the significant reasons that contribute to school dropouts. The following points enumerate why this is so:

  1. Children are compelled to forgo their schooling and find work as labourers due to the harsh  circumstances of poverty.
  2. Children who are forced into child labour are deprived of their youth and suffer adverse effects on their physical, emotional, and mental well-being.
  3. School dropouts impede children from learning to read and provide a pathway to forms of child labour. Typically, these young people work in dhabas, homes, construction sites, and other low-paying employment.
  4. Being illiterate accelerates the poverty cycle, resulting in an inefficient process of human capital formation.
  5. If these youngsters had stayed in school, they would have received an education, opening the path for a better-paying career where they could use their skills and knowledge. However, doing menial employment does not increase one’s skills or income, which results in the loss of human capital.

Findings at the Micro Family Level:

  1. In the long run, child work perpetuates household poverty by reducing human capital.
  2. Education and child labour are not always compatible.
  3. Most non-agricultural wage-employment industries employ children, although this does not generally lead to skill development.
  4. Long-term, child labour worsens poverty by raising fertility rates.

Findings at the Macro Family Level:

  1. Child work can hinder long-term growth and societal development by limiting human capital accumulation.
  2. Child labour is frequently seen in the unorganised and small-scale economic sectors.
  3. If child labour is reduced, capital investment and technical innovation will either increase or decrease depending on the impact on adult income.
  4. More girls than boys may be harmed by child labour, which would increase the educational gender gap.
  5. It’s debatable whether substituting children for adult workers lowers adult wages or increases adult unemployment.

Hence from the above observations, it can be stated that child labour indeed results in a loss of human capital.

Question 12. Discuss the need for promoting women’s education in India.

Answer 12: Indian society has been historically in favour of the male population regarding education, which has led to the neglect of women’s educational opportunities. The economy as a whole has been affected since women are a part of it but cannot make a meaningful contribution because they are ill-treated. . Equal rights for men and women are necessary for a nation to develop. To achieve overall economic development and growth, The nation cannot ignore the role of women in the social and economic spheres. Women play a critical role in achieving economic progress.

The country’s progress can only be ensured with education. The following points enumerate why the government should promote women’s education in a country like India:

  1. Women should be educated to improve the economic stability of the nation.
  2. Educating women will help raise the status of women in society, which will lead to the overall growth and prosperity of society.
  3. A well-educated woman will teach the importance of education in the minds of the future generation, thus ensuring that backward practices are no longer followed and the future is on better growth prospects.
  4. Women’s education will also help to create a society that gives due importance to health concerns appropriately. . This will ensure a healthy workforce for the years to come.

Question 13. How do government organisations facilitate the functioning of schools and hospitals in India?

Answer 13: Government organisations play a crucial role in maintaining India’s educational system by using available resources. To make facilities accessible to the general public and aid the weaker segments of society to acquire access to better education and healthcare, government funding and intervention are necessary for the education and health sectors because of their lengthy periods. The following organisations support the operation of hospitals and schools in India:

  1. NCERT- The National Council of Education Research and Training, or NCERT, is the organisation that develops the curriculum for students across  India from primary level to high school. 
  2. UGC- The primary body that grants academic institutions university status is the University Grants Commission (UGC).
  3. AICTE- The leading organisation for technical education in India is the All India Council for Technical Education (AICTE).
  4. National Institute of Health and Family Welfare- The National Institute of Health and Family Welfare is in charge of advocating for health and family welfare initiatives across the nation.
  5. ICMR- The ICMR, or India Council for Medical Research, is the entity in charge of regulating health-related research and education.

Question 14. What are the indicators of educational achievement in a country?

Answer 14: Following are the indicators of educational achievement in a country: 

  1. Primary Education Completion Rate:

The percentage of children who have finished their final year of primary school is shown by the primary education completion rate. It comprises kids in grades 1 through 8 between the ages of 6 and 14. Lower primary education completion rates have been found to play a significant role in lower youth literacy rates, leading to lower adult literacy rates.

2. Youth Literacy Rate:

The youth literacy rate demonstrates the percentage of literate people who can read and write between the ages of 15 and 24. Since young people constitute a country’s foundation, the better educated they are, the more the nation will progress. .

3. Adult Literacy Rate:

It refers to the total literate population who are older than 15. It is expressed as a percentage, and the greater the rate, the more employment prospects there will be. This category is vital since a literate population will be more capable of doing multiple tasks. It is a crucial metric that indicates how many people can actively contribute to economic development.

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Q.1 (a) Why the demand curve faced by a firm under perfect competition is perfectly elastic

(b) Selling cost is very important in all forms of the market. Do you agree with the statement Give a reason to support your answer. [3+3]


(a) Under perfect competition, all firms are selling homogenous products at the uniform price. If a firm increases its price even by a small fraction, all consumers of that firm will shift to the other firms. Thus, demand contracts from the given quantity to zero. Similarly, if a firm reduces its price even by a small fraction, all consumers of other firms will shift to that firm. Thus, demand expands from the given quantity to infinity. So, the demand curve faced by a firm under perfect competition is perfectly elastic as demand responds infinity with a small change in price.

(b) No, the selling cost is not very important in all forms of market. Under perfect competition, all firms are selling homogenous products at the uniform price determined by the market forces. Also, buyers and sellers have perfect knowledge regarding the product. So, firms under perfect competition do not incur expenses on advertising, marketing, and promotion of products, etc. Similarly, there is only a single firm under monopoly and no close substitutes are available. So, it also does not require to spend a large amount of sales promotion activities.

Q.2 Explain the following features in different forms of the market:

1. Single producer

2. Absence of transportation cost

3. Barriers to the entry of new firms


(1) Single producer: In a monopoly, there is only a single firm or producer that is producing a good or service which has no close substitutes. As there is a single firm, it has a complete share of market supply. Thus, a firm under monopoly has complete control over price and is called a price maker.

(2) Absence of transportation cost: There is no transportation cost in the perfect competition since all goods are produced locally. This ensures uniform pricing in the market.

(3) Barriers to Entry of New Firms: Under monopoly, no new firm can enter the industry. There are strong barriers that restrict new firms to enter the industry. These barriers can be economic, institutional, or artificial in nature. The monopoly firm enjoys full control over the supply of the commodity because of some natural conditions or legal restrictions like patent law, copyrights, etc.

Q.3 (a) Why can a firm not earn abnormal profits under perfect competition in the long run Explain. [4+2]

(b) Explain Perfect knowledge about the markets characteristic under perfect competition.


(a) Under perfect competition, no firm cannot earn abnormal profits in the long run. If the firms are making abnormal profits in the short run that means price > SAC then this situation would attract new firms in the industry. More firms mean more supply of a commodity which would lead to a fall in its price. Moreover, there would also be an increase in the demand for factors that indicate higher factor prices and thus leading to a higher average cost curve. Both factors lead to a fall in abnormal profit till abnormal profits are wiped out and the firm reaches to break-even point at which AR = LAC.

(b) Under perfect competition, all the buyers and sellers have perfect knowledge regarding price, quantity, quality, and market. Thus, neither a producer can charge a higher price than the equilibrium price nor a buyer can ask for a low price than the price prevailing in the market.

Q.4 Why does the demand curve be indeterminate under oligopoly


In an oligopoly market, the degree and direction of change in demand due to the change in the price of a firm depend on the reactions of other rival firms. When a firm reduces its price to promote its sales, it also affects the other firms and they may react by reducing their prices as well. In this situation, the reduction in price does not result in the expansion of demand for the given firm. Similarly, when a firm increases its price, the other firms may not increase their price which results in a contraction in the demand for the given firm. Thus, it is difficult to anticipate the reactions of rival firms; the demand curve faced by a firm under oligopoly is indeterminate and shifting.

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FAQs (Frequently Asked Questions)

1. What topics are covered in Chapter 5 of Class 11 Economics?

The topics covered in Chapter 5 of Class 11 Economics include the following:

  • Meaning of human capital
  • Sources of human capital
  • Human capital and human development
  • Human capital formation in India: great prospects
  • The education sector in India
  • Future prospects
  • Conclusion

To prepare well for Chapter 5 of Human Capital Formation in India, students can first go through the NCERT book, in which they will find all the crucial information explained thoroughly. Post this; they can refer to CBSE past years’ question papers and practice the Class 11 Economics Indian Economic Development Chapter 5 Important Questions provided by Extramarks.

2. How many books are assigned for Class 11 Economics?

For Class 11 Economics, the Central Board of Secondary Education has prescribed two books. The first book, called the Indian Economic Development, covers topics such as the Indian economy, liberalisation, privatisation and globalisation policies, rural development, poverty, infrastructure, environment, etc.

The second book, Statistics for Economics, contains topics such as collection, organisation and presentation of data, central tendency, measures of dispersion, correlation and use of statistical tools, etc.

Students can benefit from studying both NCERT books because they will learn about essential topics in comparatively straightforward terminology. The NCERT books are updated annually to reflect the most recent exam patterns and curriculum. As a result, reading the NCERT books would enable students to comprehend the fundamental concepts of microeconomics and macroeconomics. They will be able to understand every concept and answer any question easily. Furthermore, this encourages them to master the topic and increases their confidence in achieving a higher grade.