Questions on Economics Concepts

QUESTION ONE [30]

1.1 Distinguish between the following economic terms, using examples to motivate your answer:
a). Scarcity and opportunity cost (6)
b). Marginal utility and weighted marginal utility (6)
c). Microeconomics and macroeconomics (6)
1.2 Examine the two (main) factors that contribute to economic growth according to the production possibility frontier model. (12)

QUESTION TWO [40]

2.1 The supply of goods or services can be influenced by many factors. In terms of this statement, examine four (4) factors that affect individual supply. (16)
2.2 Distinguish between accounting profit and economic profit. Include in your answer, an explanation of how each is calculated and discuss the significance of opportunity costs in determining economic profit. (14)
2.3 Examine the consumer equilibrium condition according to marginal utility theory. (10)

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Economics Subject Samples : Growth, Utility and Profit

Scarcity is defined as the availability of limited resources against the human wants whereas the opportunity cost is the value of next best alternative foregone.

Marginal utility is defined as the satisfaction recieved from consuming one or more unit of a good or service whereas weighted marginal utility takes into account the marginal utility and the price of good.

Microeconomics is the study of individual economic units such as demand and supply whereas macroeconomics takes into account the broader concepts including GDP, inflation and unemployment.

The two main factors that contribute to economics growth according to PPF model are increased resources and improved technology. These factors are responsible for shifting the PPF curve outward which suggests that there is higher production potential available in the economy.

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