(a)      (i) - Private ownership of resources.

-    Freedom of choice and enterprise

-    Heavy reliance on the price system for production and distribution of goods and services.

-     Price competition in business affairs.

-    Economic activity dominated by self-interest or the quest for profit.

-    Little or no government interference in economic affairs.

(ii) - Motive of production is social welfare and not profit.

-    Very little or no freedom of choice and enterprise.

-     Little or no private ownership of resources.

-     Almost complete absence of market forces.

(b)      (i) - It is self-regulatory

-     It possesses economic efficiency.

-     Production reflects choices of consumers.

-     There are greater incentives to works.

-     More adaptable to changes.

-     Higher standards of living.

(11)  - Reduced consumer sovereignty.

-    Production hardly reflects consumer’s real want.

-    Costly to operate due to the absence of the costless price mechanism.

-    Characterized by shortages and surpluses due to the absence of the price mechanism.

-     Little or no incentives in production.

-     Time wasted in state planning.

(c)      - North Korea

-      China

-      Cuba

-      Vietnam

-      Laos

(a)      (i) - Private ownership of resources.

-    Freedom of choice and enterprise

-    Heavy reliance on the price system for production and distribution of goods and services.

-     Price competition in business affairs.

-    Economic activity dominated by self-interest or the quest for profit.

-    Little or no government interference in economic affairs.

(ii) - Motive of production is social welfare and not profit.

-    Very little or no freedom of choice and enterprise.

-     Little or no private ownership of resources.

-     Almost complete absence of market forces.

(b)      (i) - It is self-regulatory

-     It possesses economic efficiency.

-     Production reflects choices of consumers.

-     There are greater incentives to works.

-     More adaptable to changes.

-     Higher standards of living.

(11)  - Reduced consumer sovereignty.

-    Production hardly reflects consumer’s real want.

-    Costly to operate due to the absence of the costless price mechanism.

-    Characterized by shortages and surpluses due to the absence of the price mechanism.

-     Little or no incentives in production.

-     Time wasted in state planning.

(c)      - North Korea

-      China

-      Cuba

-      Vietnam

-      Laos

a)      - Difficulty of effectively testing hypothesis in Economics.

Economists use a lot of normative statements in policy matters.

There are many schools of thought in Economics whose followers have very defensive attitudes. Economics studies human behaviour and such behavior is very unpredictable.

Economics is a young science with many of its aspects being obscure and untested.

Some assumptions and postulations are irrelevant with time due to technical, economic and cultural changes.

Most economic concepts are given various definitions by various Economists.

Most Economic problems have more than one possible solution.

b)      Economics uses the scientific method to arrive at conclusions and develop theories/laws i.e. they use positive statements, formulate testable hypothesis

which are scientifically tested and build theories and laws. Consequently, there should be little room for disagreement.

c)       - Economics deals with unpredictable human behaviour, while the other sciences deal with predictable inanimate matter.

-      Experiments in Economics are conducted under real life situations which cannot be controlled meanwhile those of other sciences are conducted in laboratories under controlled conditions.

-      Economics uses both quantitative and qualitative data but pure sciences use only quantitative data.

-      Economics relies on past data while pure sciences are based on experimental data at present.

d)      - Mathematics

-      Statistics

-      Demography                                 /

-      Geography

-      Econometrics

-      Sociology

-      Accounting

-      History

-      Psychology

e)      We study Economics to:

-      Understand the proper allocation of resources.

-      Understand how to make rational and intelligent choices from among alternatives.

-      To learn how to evaluate the efficiency of various policies.

-      Understand the functioning of various economies.

-      Be able to improve our wellbeing.

-      To promote our critical and independent reasoning.

-      Be able to forecast.

ii) - Production possibilities or possibility curve Production possibility frontier Production possibilities boundary Transformation curve
Opportunity cost frontier
b (i). If the economy is already producing 100 units of good X, then in order to produce an additional 25 units of good Y, the production of good X has to be reduced from 100 to 75 i.e.
Opportunity cost of 25 units of good Y=100-75 units of good X =25 units of good X
(ii)    . See point A on the graph. The reasons are: - Inefficient utilisation of resources - Underutilisation of resources
c)    - Only two goods X and Y are being produced Resources are fully utilised Resources are equally efficient Technology is fixed
Resources are perfectly mobile Stock of resources is fixed
d)    . - An increase in resources
An improvement in technology Economies of large scale production Political and social stability
NB: The aforementioned points can all be classified under either improved technology or increased resources

b)     i) Inefficient use of resources.

ii) Less than full employment of resources.

b)     No. Because this combination falls outside the production possibilities curve.

c)     The opportunity cost is 20 units of good Y.

d)     More of good X would be now produced for each level of resources while the production of good Y remains the same resulting in the production possibilities curve sketched below.

I)      This is because resources used for the production of good Y are not perfectly adaptable to the production of good X. In other words, there are increasing costs of production or diminishing returns to production as resources are successively moved from one domain to the other.

g) No, because there could be the discovery of new economic resources, improvements in technology etc . leading to an outward shift of the production possibilities curve or economic growth.

a)     If each worker can now make 4 clay pots a day, then following the same reasoning as in “a” the new production combinations would be as represented below and illustrated by the resultant production possibilities curve as follows;

b)     These production possibilities curves are all straight lines. This reflects the fact that resources are perfectly adaptable to different uses or that there are constant returns to production. If we were to take the more realistic situation where resources are not perfectly adaptable to different uses, or where there could be increasing and decreasing returns to production, then the production possibilities curves would be concave and not straight lines as in “a” and "b” above.

a)

b)   No because this combination falls outside the production possibilities curve.

c)   20 units of good X. In order to increase the production of good Y from 300 to 500 units, the production of good X would have to fall from 40 to 20 units.

d)   - Diminishing returns or increasing costs.

-       Factors of production not being perfectly adaptable between different uses.

Diseconomies of scale

a)     i) Scarcity of resources

the concept of opportunity cost or real cost, the alternative use of resources.

11)   - the marginal rate of substitution.

b)     i) When some resources are lying idle or under­utilised or when all resources are being utilised but inefficiently.

11)   It is possible to produce at point C when there is an improvement in technology, discovery of new resources etc or in short when economic growth takes place.

c)     Growth path Y to A or YA. This permits the initial production of more producer goods and less consumer goods. Subsequently, the greater amount of producer goods can be used to produce more of consumer and producer goods and hence long-term economic growth.

d)     i) Point A permits current lower living standards because it involves more of capital goods and less consumer goods while point B allows for present higher living standards because it has more of consumer goods than producer goods.

11)   Point A makes for higher living standards in the future while point B makes for lower future living standards as explained in d(i) above.

Economics is the study of how individuals, firms and governments use scarce resources that have alternative

uses to produce goods and services and how the goods and services are distributed. Economics is a Social Science that can be split into two main categories - Micro-economics and Macro-economics.

Micro-economics is concerned with the objectives and decisions of individual economic units like consumers, firms, government agencies etc.

On the other hand, macro-economics is concerned with the behaviour of the economy as a whole and consequently with aggregates like national income, the general price level, balance of payments etc. Macro- economcis is also concerned with how changes in these aggregates affect other aggregates.

Economics is considered a science for the simple reason that Economics uses the scientific method of analysis.

Economics like any other subject is concerned with developing theories to help explain and predict economic phenomena around us. In so doing, economics uses the scientific method as earlier mentioned and this scientific method consists of the following stages:

In the first phase of the scientific method of analysis in Economics, there is the observation of facts and definition of concepts. There is need to observe facts relating to whatever interests the economist e.g,saving, investment etc.

In the second step, a hypothesis (prediction) is constructed about human behaviour and which may be right or wrong. The hypothesis could be something like “more of a good is demanded at a lower price, everything being equal”.

In the third stage, a model is built describing the behaviour of economic variables or influencing factors involved in the initial hypothesis. For instance, the factors that influence demand as per the previous hypothesis.

In the fourth phase, the hypothesis is tested against empirical or real world evidence by the use of a model. An economic model is a simplified framework designed to illustrate complex processes and often but not always using mathematical techniques.

If in the final analysis, the hypothesis cannot be disproved, it becomes an accepted theory.

From the foregoing analysis, it follows that economics is a science and a social science for that matter because it follows the scientific method of analysis and is concerned with the behaviour of society from a given perspective.

A market economic system is one in which the production and distribution of goods and services is essentially carried out by the price system or the price mechanism. This is as opposed to a planned economic system in which the production and distribution of goods and services is essentially carried out by a central planning committee. These two main economic systems have their relative merits and demerits but emphasis in this essay shall obviously be on the merits of a planned economic system in order to justify the preference for a planned economic system.

Despite the advantages of market economic systems like greater efficiency resulting from competition and self­interest, consumer sovereignty and satisfaction of consumer choices, greater variety of goods and services, self-regulation through the functioning of the price system, flexibility, faster economic growth and higher

living standards, many economies still opt for the planned economic system because of its advantages. These advantages of the planned economic system include the following:

There is little or no consumer exploitation because production is generally void of profit motives.

In a planned economic system, there is greater stability of economic activities because of constant government intervention and hence no likelihood of monetary crises.

In a planned economy, there are fewer monopolies and consequently fewer ills of monopoly and hence a more equitable distribution of income.

There is a greater production of public and merit goods in a command economy given the absence of the profit motive. There is equally a minimal level of negative externalities for the same reason.

The absence of competition in a planned economy implies a more optimal allocation of resources.

Furthermore, if countries were to opt for market economies and not planned economies, they would or could face the following problems:

There could be excessive competition thus leading to a wastage of resources.

There could be the excessive production of demerit and harmful goods like hard drugs in so far as they are demanded and this would be done at the expense of basic products for the poor.

There would be a likelihood of instability in economic activities due to the lack of or very limited government regulation and resulting in costs like inflation and unemployment, exploitative monopolies, etc.

There would be great inequalities in the distribution of wealth and income as a result of self-interest and the profit motive.

There would be lots of negative externalities in terms of pollution, congestion etc., as individuals pursue their profit motives.

By way of conclusion, it can be said that if there is a preference for the planned economic system, this is as a result of its dominant advantages vis a vis the demerits of other systems.