Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Indian Economic Development: Indian Economy:1950-1990

Question:

Read the passage and answer the following questions.

Shubham works for Ministry of External Affairs and was given a chance to visit China for work purpose. In China, he noticed that people didn’t even have basic rights like freedom to speak and had no right over the production activities they performed. He was disappointed with their state and came home happily realizing that in India everyone can exercise their rights without any bondage from the government or any other entity. But the question which came in his mind was that if India has such an efficient economic system then why we still face such a huge level of unemployment. He went to his friend Rajan who worked for Planning Commission of India. He asked Ranjan, "What do you think is the solution to the problem of unemployment?" to which Ranjan replied, "Strengthening the Manufacturing sector will lead to reduction in unemployment."

Which of the following options show government intervention?

Options:

Minimum support price

Ceiling on LPG

Both 1 and 2

None of the above

Correct Answer:

Both 1 and 2

Explanation:

The correct option is: Option 3: Both 1 and 2.

Explanation:

  1. Minimum support price (MSP) is a form of government intervention in agricultural markets where the government sets a minimum price for certain crops to support farmers and stabilize agricultural incomes.

  2. Ceiling on LPG (liquefied petroleum gas) refers to government-imposed limits on the quantity of LPG that households can purchase at subsidized rates. This is a form of government intervention aimed at managing the distribution and affordability of essential commodities.

"Government intervention means that the government interfere in the day to day functioning of the market forces. MSP stands for minimum support price, it is the minimum price which the government decides for certain crops. If left in the hands of demand and supply, it will cause the prices of crops to fall too low causing losses to farmers. Similarly, ceiling on LPG is kept because LPG is an essential commodity consumed by everyone. So, if prices rise poor population will not be able to afford it."

Both of these options involve government intervention in economic activities, making Option 3 the correct choice.