KNEC| KASNEB| KISM| Study notes and Revision materials for schools in Kenya. KNEC certificate courses, Diplomas, Higher Diplomas, KISM courses cpsp-k and aps-k, KASNEB cpa, atd, cs, cifa, ccp, dcm, cict and cict, Ksce and Kcpe
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
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
Costs to the unemployed • Even though, people may have more time to pursue leisure activities, they may be constrained in so doing by a lack of income. • The unemployed may also suffer a loss of status. • More likely to experience divorce, nervous breakdowns, bad health and are more likely to attempt suicide
Frictional unemployment It represents unemployment that occurs naturally during the normal workings of an economy. It can occur for a variety of reasons such as people changing jobs, moving across the country, searching for new opportunities or taking their time after they enter the labour force to find appropriate jobs. It arises because it takes
Long Run is defined as that period where all factors of production can change. Short run is defined as that period of time where only variable factors can change. Firms must cover average variable costs in the short run and they must cover average costs in the long run. [The student is encouraged to draw
Use diagrams as appropriate. Under perfect competition, there are many buyers and sellers in the industry. The firms are price takers and cannot influence price, as such they must always compete at their maximum level of efficiency. There are no barriers to entry. Firms attempt to maximize profits. In the short run, if firms are
The circular flow of income diagram illustrates how income flows through an economy. Firms in order to produce goods and services require command over factors of production; entrepreneurs achieve this command by purchasing or hiring the required factors of production. Households supply the labour which is a factor of production Households are the consumers of
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
Internal Economies of Scale are economies or benefits which accrue from the increase in the scale of output of an individual firm and they provide benefits to that firm alone. They are usually classified as: (1) Technical Economies of Scale. (2) Marketing Economies of Scale. (3) Financial Economies of Scale. External Economies of Scale are
Accounting Profits are based on historical information and indicate the difference between revenue (received and due) on the one hand and expenditure paid and owed on the other. An economist sees cost, an element of profit in terms of opportunity cost. I.e. the cost in terms of alternatives foregone. Therefore accounting profits are generally greater