Past Year Question (October 2008)

PAST YEAR QUESTION (OCTOBER 2008)
PART B
QUESTION 1
a) shortly explain the basic economic problems.
i-P: What to produce.
E: The economic system of every nation has to take a fundamental conclusion of what to produce because of the limited economic resources. Every society essential choose the type and the quantity of goods and services that it will produce.
X: How many cars should be produced? Should more clinics be built than schools?

ii-P: How to produce.
E: This refers to the cheapest method of production. There are alternative techniques of producing goods and services.
X: Should cars be produced by automatic machines or assembly dividing line workers?

iii-P: For whom to produce.
E: This refers to dispersion. Distribution of economic benefits depends on the distribution of income.
X: How is the national income distributed?




















b) Using appropriate diagrams, explain wherefore it is important for a supplier to know
whether the demand for his/her product is stretch or inelastic.

DIAGRAMEXPLANATION
P




d
Q

- Elastic demand.

- Small percentage transmit in price will
lead to a larger percentage change in
quantity supplied.
P





d
Q

- Inelastic demand.

- openhanded percentage change in price will only
shanghai a small percentage of the quantity
supplied.




P
d





Q

- dead inelastic demand.

- A percentage change in price has no effect
on the percentage change in quantity
supplied.
P



d


Q

- Perfectly elastic demand.

- An almost zero percentage change in price
brings a very large percentage change in
the quantity supplied.









c) Using appropriate simple numerical examples, explain the difference between
economic profit and...If you want to get a full essay, order it on our website: Orderessay



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