Preparation for Exam

Chapter 1 and 2

1.Define economy
- Study the behaviour of individual 
- allocation the limited factor of production
- maximize production of goods

2.Explain each of the economic problem below.

I) Scarcity
- Limited factor of production 
- Not enough resources to prpducre everything we want .

II) Choice 
- Choice involves rational decision to be made due to scarcity of resources

III) Opportunity cost
- Second best alternative foregone when a choice is made .

3. Explain the factor of production

I ) Land
- This is free gift of nature .Return of land is fees

II) Capital
- Human made resources which are used in production process . Return of the land is interest

III ) Labour
- Production process that involves both mental and physical effort . Return of the labour is wages .

1. A) With the aid of a diagram , discuss how a market could achieve equilibrium 
- Equal
  
 B) Explain by using appropriate diagrams, the effect on the market for Perodua's car in each of the following cases :

i) an increase of the price of petrol
- increase in quantity supply , increase price
ii ) an increase in the cost of tyre
- Increase in quantity supply , increase price
iii ) a decrease in using labour
- Decrease in quantity supply .