Topic2: Question No.1 The basic economic problem is scarcity. It occurs when people want infinite but resources are limited. Scarcity is due to limited resources because people want more and more. Resources are shortage and have alternative uses. There are three causes of construction such as land, labour and capital. Scarcity is the excess of human wants over what can basically be produced ' '. The central economic problem effects on command economy. Command economy is a economy in which Government controls the economic deeds and give the judgment what to produce, how to produce and manage the distribution levels and setting prices. Such economies happen in China, North Korea, Cuba and the former Soviet Union. Conventionally, command …show more content…
The production possibility frontier describes that there are limited resources to production, so it is necessary to plan what combination of goods and services can be produced to get effectivene. The production possibility frontier is helpful in command economy, in taking important decisions on assigning the resources of economy to different sectors of development, and on several types of goods. It differentiates between what is possible and what is needed. Question No.2 The law of demand states that buyer will buy less of a good at higher prices and more of a good at lower prices. The law of supply states that producers will sell fewer goods at lower prices and more goods at higher prices. In state of equilibrium the amount of goods the consumer is willing to buy is equal to the quantity that producers are planning to sell. (a) Severe water shortage in the state of Arizona is because there is less supply of the Scottish water bottle. A decrease in supply is represented on a graph as a leftward shift (S2), then there would be shortage of a-b at the old price Equilibrium1, this causes price to rise to the new Equilibrium2. Quantity would fall from Equilibrium1 to Equilibrium2. There would be a movement through the demand curve from point a to c through the new supply curve (S2) from point b to c. This is explained in the following figure: (b) New technology which is subsidized by the UK
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What is the main purpose of the economic system? The main purpose of the economic system is method used to produce and distribute goods and service. The three economic questions are: “What goods should be produced?” “How should these goods and services be produced” And “Who consumes these goods and services?” The characteristic of a market economics is that self-interest is the motivating force in the free market, self regulating market. The interaction of buyers and sellers motivated by self-interest and regulated by competition, all happen without a central plan. In a market economy, economic decisions are made by individuals and are based on exchange or trade. However, characteristics of a command economic
This type of economy works in the private sector of business ie. Individual firms. A command economy is an entirely different system in which a central government decides how to answer the three central economic questions. The government would decide what is to be produced, how it is to be priced etc.
The first part is about economic growth. In command economy, the government planned the demand and supply as well as resources distributions, which makes it easier
All societies for one reason or another face economic problem. The economic problem exists because the needs and wants of people are essentially endless; however the resources available to satisfy
Free enterprise and Command economies tend to contradict each other with the way they handle the production and growth with in an economy. But when a Mixed economy is into play these two different economies get combined. In this essay I will explain both of the economies and tell how they work together
Supply and demand is a fundamental element of economics; it is the main support system of a market economy. Demand can be interpreted by the quantity of a product or service a consumer is desired to acquire at a given time period. Quantity demanded is the amount of product consumers are willing to purchase at a given price; the relationship between price and quantity demanded is commonly known as the demand relationship. Supply however, accounts for how much a market produces for consumers. The quantity supplied refers to the actual amount of a certain good firms are willing to supply to consumers when receiving a certain price. Having limited resources we all have to
Apple juice and orange juice are substitutes for consumers, so the fall in the price of apple juice decreases the demand for orange juice. The demand curve for orange juice shifts leftward. The increase in the wage rate paid to orange grove workers raises the cost of producing orange juice. The supply of orange juice decreases and the supply curve of orange juice shifts leftward. The net effect of these events decreases the equilibrium quantity but has an undetermined effect on equilibrium price. If supply decreases by more than the demand, the shift in the
In addition to the law of demand, the law of supply also serves as the second major resource in studying economics. The law of supply states that with other factors remaining constant, as the price rises, the quantity of the product supplied also rises. Conversely, as the price falls, quantity of the product supplied also falls (Colander, 2006, p 97). The law of supply is refers to how producers can effectively substitute the production of one product for another (Colander, 2006, p.
In a market economy, consumers decide what is produced, producers decide where and how to produce, and consumers decide who gets the products. Also, all productive resources are privately owned and operated. In a traditional economy all resources come from self labor and the government owns all resources. In a command economy, the government plans ways to allocate resources in key industries. Command economy’s government owns all basic resources and anything else is privately owned.
The basic economic problem refers to a situation where human wants are unlimited while human resources are finite; it is the economic problem of scarcity of resources. At any one particular time, the resources of the earth are capable of producing a limited number of goods and services, however, human wants exceed limited production possibilities and this gives rise to what is known as the economic problem of scarcity.
1) According to the Law of Demand, the demand curve for a good will A) shift leftward when the price of the good increases. B) shift rightward when the price of the good increases. C) slope downward. D) slope upward. Answer: C 2) An increase in the price of pork will lead to A) a movement up along the demand curve. B) a movement down along the demand curve. C) a rightward shift of the demand curve. D) a leftward shift of the demand curve. Answer: A 3) An increase in consumer incomes will lead to A) a rightward shift of the demand curve for plasma TVs. B) a movement upward along the demand curve for plasma TVs. C) a rightward shift of the supply curve for plasma TVs. D) no change of the demand curve for plasma TVs. Answer: