Q1

1. A need is something that a person cannot survive without (eg: food, clothing, shelter),
whereas a want is something that a person would like to have but is not necessary
for survival (luxury cars, phones, etc… ).
2. The basic economic problem is infinite wants exceeding finite resources, also known
as scarcity. (eg: a person wants 10 Rolex watches (infinite  want) but only 5 can be
produced (finite resources).)
3. Opportunity cost is the next best alternative forgone. (eg: a person had to choose
between building a school or building a hospital, and they chose to build a hospital so
the opportunity cost was building a school.)
4. The factors of production required to construct a road are:
 Land
Is gifts of nature available for production. 
 Labour
Is all the human effort used for production. 
 Capital
Is any human made goods used to make other goods
 Enterprise
The risk bearing and key decision making factor that brings the other 3 factors
together.
5. OMIT
6. The three sectors of industry are as follows:
 Primary sector
Is concerned with extracting raw materials and natural resources from the
land and from beneath the land.(eg: tomatoes)
 Secondary sector
Is concerned with manufacturing goods using the primary sector products.
(eg: tomato ketchup)
 Tertiary sector
Is concerned with providing services. (eg:selling ketchup in a grocery shop )
7. OMIT
8. A PPC (production possibility curve) shows the maximum production capacity that an
economy can achieve when all resources are efficiently used.
Q2]

a. A PPC (production possibility curve) shows the maximum production capacity that an
economy can achieve when all resources are efficiently used. 
b. Soap is a basic need of humans therefore it is inelastic.

Whereas perfume is a want and therefore has an elastic demand. 

c. If the income increases people will want more luxury products which include these
luxury perfumes, so the demand for them will increase.
As shown below the original demand curve is represented by “D” which intersects
supply “S” and original price is represented by “p” and original quantity demanded is
represented by “Q1”. Now that the price has increased from p to p1 the demand
shifts outwards from D to D1 still intersecting the original supply S and the quantity
demanded shifts the the right from Q1 to Q.
Q3]

a. Cash and bank balance

b. - The central bank is the only bank that is allowed to print banknotes and coins
- The central bank is also known as the banker bank, they give money to commercial
banks (eg: RBI) when they go bankrupt. 

Q4]s

a. Supply is the ability and willingness of a producer to sell a product at a particular

price.
b. - The government can provide subsidies to the merit good producers.
- The government can charge high taxes on demerit goods.
Q5]
 a. Market failure occurs when the price mechanism fails to allocate resources
effectively. It is a disadvantage of the market economy. When the social costs
exceed social benefits this is also a part of market failure. Pollution and the import of
unhealthy food is a cost to the society and not a benefit but as the government
continues to allow the import of unhealthy food and increased pollution rather than
put up campaigns and advertisements of how harmful it is to citizens health. This is
the cause of market failure.

b. Having a large primary sector is an advantage to the economy because, when all the
raw materials are abundant, the firm doesn't have to pay another producer in the
primary sector in order to receive the goods to manufacture further. Rather when a
company has all three sectors it can make a lot of profit, they can take the good
needed to produce from primary sector of their firm and use it in secondary to
manufacture the good.

Q6]

b) Opportunity cost is the next best alternative forgone. (eg: if the government had to choose
between building a school or building a hospital, and they chose to build a hospital as the
finance they are putting in is giving them a good amount of profit so the opportunity cost was
building a school. The government might have found the school not giving them enough
profit in comparison to the sum of money they invested in it, or they didn’t find that building a
school would benefit the citizens.)

c) Trade unions that have a lot of members tend to have a lot of power sometimes even
more than the entrepreneur and government making them feel like they are on cloud nine. If
the trade union demands for more pay the company will have to pay them because they are
more in number and more number means more power. In future if they keep asking for a rise
in payment every month then the company might eventually have to shut down because it
isn’t earning enough profit. Which is why the government feels threatened by the trade
unions and hence has a no trade union policy in some of the countries. 
• changing government legislation, which seeks to reduce union influence
• a decline in manufacturing, which is traditionally unionized
• growth in part·time employment, as pan-time workers are less likely to join a trade
union
• firms independently agreeing fair terms and conditions with their employees
without negotiating with trade unions
• an increase in unemployment (see Chapter 19)
• an increase in employment in small firms, as it is more difficult to organize unions
within such finns
Q7] a,b,c 

a. A free good is a good that is abundant in nature, and includes no opportunity cost as
no resources are used in making it.(water)
b. Secondary sector is concerned with manufacturing goods using the primary sector
products. An example would be tomato ketchup which is made from raw tomatoes.
c. Tertiary sector is concerned with providing services. An example would be selling the
tomato ketchup in a grocery shop.
Q8] a,d

a) - Number of producers in the cotton industry. As Uzbekistan is the 5th largest producer
the supply is inelastic.
- availability of substitute goods. As cotton doesnt have another substitute, it is inelastic. 
d) Agricultural growth in an economy means that it is moving forwards towards the primary
sector, suggesting that the economy isn’t developed but developing. So by dedicating more
of its resources to the primary sector the opportunity cost is less resources put in secondary
and tertiary sector

Q9] (b) Explain two advantages of a market economic system. [4]

Q10] a,b,c
Q11]

Q12]
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