Fundamental concepts of Scarcity and Choice

Scarcity being the central economic problem is defined as the inadequacy/ insufficiency/ inability of (economic) resources or goods and services available to fully satisfy unlimited wants. Human wants are people‟s desires for goods and services (backed by the ability to pay) and the circumstances that enhance their material well-being. Human wants are, therefore, the varied

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Factors that may cause a fall in the supply of a commodity

Increase in cost of production: An increase in factor prices, for instance, tends to increase the cost of production which reduces the ability of firms to maintain or even expand their scale of production leading to a fall in supply. Inappropriate technology: since production depends on the method(s) used, the decision to use less mechanization

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Define unemployment and explain how it is measured

The unemployed are those individuals who do not currently have a job and who have actively looked for work in the last 4 weeks (International Labour Organisation). Individuals who looked for work in the past beyond 4 weeks but are not looking currently are not counted as unemployed. The employed are individuals who currently have

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Explain what is meant by market equilibrium and analyse the effects on the equilibrium price and quantity of; The introduction of a new, cost-saving technology and an increase in the price of a complementary good

The market is defined as that place where buyers and sellers come together to exchange goods and services for a particular price and quantity. It consists of both demand and supply. Demand representing consumer behaviour and supply represent firm behaviour. [Diagram demonstrating equilibrium] a. Introduction of a new, cost saving technology. This causes the supply

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List and explain the determinants of Demand, distinguishing between the movement along a demand curve and a shift in a demand curve. Use diagrams as appropriate

The Law of Demand states that the quantity of a good demanded will fall as its price rises and will rise as the price falls – all things being equal. Quantity demanded of a good is therefore inversely related to price. The determinants of Demand are: • Price of the good itself. • Price of

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