Microeconomics tutorial questions

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WHAT IS YOUR UNDERSTANDING OF MARKET ECONOMY?
Market economy is defined as an economy in which most goods and services are produced and distributed through free markets. DISTINGUISH BETWEEN A CAPITALIST ECONOMIC SYSTEM AND SOCIALIST ECONOMIC SYSTEM.

CAPITALIST SYSTEM
SOCIALIST SYSTEM
Capitalist economy system is an economic system in which the ownership and control of important resources such as industries land and capital are in the hands of the private sector of the economy. Socialist economy system refers to an economic system in which important industries and resources are owned and controlled by the states.

EXPLAIN THE TERM CONSUMER SOVEREIGNITY.
It is defined as the situation in an economy where the desires and needs of consumers control the output of producers. WHAT ARE FACTORS OF PRODUCTION? LIST AND EXPLAIN THE FOUR FACTORS OF PRODUCTION. Factor of production is defined as the available resources an individual or business use to further the production of other consumable products.

1. LAND.
2. LABOUR
3. CAPITAL
4. ENTERPRENEUR

LAND: It is the economic resources encompassing natural resources found within a nation. LABOUR: Labor represents the human capital available to transform raw resources to consumable goods. CAPITAL: It is referred to as the monetary resources used to start up a business. ENTERPRENEUR: EntrepreneurUsually have ideas for creating a valuable good or services and assume the risk involved with transforming economic resources into consumer products.

WHAT ARE THE DIFFERENCE BETWEEN ECONOMIC CAPITAL AND FINANCIAL CAPITAL?

ECONOMIC CAPITAL
FINANCIAL CAPITAL
It is the money a financial institution or other trading organization set aside based on its own risk analyses. It is the capital or money used by entrepreneurs and businesses to buy what they need to make their products or provide the services or to that sector of the economy based on its operations.

EXPLAIN THE TERM ECONOMIC MODEL
Economic model attempts to abstract from complex human behaviorin a way that sheds some insights into a particular aspect of that behavior.

EXPLAIN FIVE MAIN ADVANTAGES OF USING A MARKET SYSTEM TO ALLOCATE RESOURCES. 1. FREE ENTRY AND EXIT: Individuals who wants to enter the market are free to do so and those who want to leave the market are also not prevented from doing that. 2. ECONOMIC EFFICIENCY: Price mechanism fulfills consumer choice more accurately than central planning. Thus; In this case consumers are the best judge of their own interest. 3. FREEDOM OF CHOICE: In a free enterprise or private ownership economy, people get to own their own properties I .e everyone has an opportunity to better his/ herself. 4. INCREASED RESPONSIVENESS TO CHANGES IN ECONOMIC CONDITIONS: Capitalism is also externally stable, in that survival in a capitalist system requires innovation and flexibility to keep up with changes in supply and demand. 5. IT PROVIDES INCENTIVES TO BEAR RISK: Proponents of free market economic system are of the view that the system rewards individuals for their ingenuity through profits which accrue to them through the sale of their inventions.

The above shows two commodities Gold and Crude oil that a certain country produce using all its available resources and the best technology. The use of these two items is to make it easy for graphical analysis. PP and P’ P’ represents production possibility curves for frontiers. Point A which is inside the curve is attainable with the current available resources while Point B which is outside the curve is unattainable regarding the current available resources. WHAT FACTORS MAY ACCOUNT FOR AN OUTWARD SHIFT OF A PPF.

Economic growth due to improved technology, human resource development, improvement in the quality of natural resources and discovery of new resources. WHAT DOES IT MEAN TO SAY THE PPF HAS SHIFTED OUTWARD?

It means that there is improvement.
WHAT IS THE DIFFERENCE BETWEEN ECONOMIC GROWTH AND ECONOMIC...
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