ECO 120 Principles of Economics Assignment

WAN MUHAMAD QUSYAIRI BIN WAN MAZLAN   2013xxxxxx  DIPLOMA IN MICROBIOLOGY

ECO 120 PRINCIPLES OF ECONOMICS

ECONOMICS ASSIGNMENT

1.     Differentiate between socialism and capitalism economic systems.

	CAPITALISM	SOCIALISM
Definition	A theory or system of social organization based on a free market and privatization in which ownership is ascribed to the individual persons. Voluntary co-ownership is also permitted.	A theory or system of social organization based on the holding of most property in common, with actual ownership ascribed to the workers.
Key Elements	Competition for ownership of capital drives economic activity & creates a price system that determines resource allocation; profits are reinvested in the economy. "Production for profit": useful goods and services are a byproduct of pursuing profit.	Economic activity and production especially are adjusted by the State to meet human needs and economic demands. "Production for use": useful goods and services are produced specifically for their usefulness.
Economic System	Market-based economy combined with private or corporate ownership of the means of production. Goods and services are produced to make a profit, and this profit is reinvested into the economy to fuel economic growth.	The means of production are owned by public enterprises or cooperatives, and individuals are compensated based on the principle of individual contribution. Production may variously be coordinated through either economic planning or markets.

2..     Discuss the basic economic problems.

                    I.            What to produce?

·         Depends on what type of goods and services to produce.

                  II.            How to produce?

·         Depends on the cheapest method of production.

               III.            For whom to produce?

·         Depends on the distribution of income

3.      

A.     Define demand

·         Demand is defined as the ability and willingness to buy specific quantities of goods in a given period of time at a particular price, ceteris paribus. 

B.     List non-price determinants of demands.

Non-Price Determinants of Demand

·         Changes in Consumer Incomes.

·         Changes in Tastes and Preferences for Consumer Goods.

·         Changes in Population Size and Population Demographics.

·         Changes in Expectations of Future Prices.

·         Changes in the Prices of Related Substitute and Complement Goods.

4.     What is the difference between individual supply and market supply?

Individual supply	Market supply
The relationship between quantity of a product supplied by a single seller and its price	The relationship between total quantity of the product supplied by adding all the quantities supplied by all sellers in the market and its price

5.     Differentiate between floor price and ceiling price.

ceiling price	floor price
price is not allowed to raise	price is not allowed to fall
known as maximum price	known as minimum price
a shortage occurs	surplus occurs

6.     Discuss the determinants of price elasticity of demand.

·         Measure how much the quantity demanded of the good response to a change in the price of that good.

·         It is computed as a percentage change in quantity demanded divided by a percentage change in price.

7.     What is a monopoly? What are the characteristics of monopoly structure?

      A monopoly is a market structure in which there are a single seller and large numbers of buyers that sell products that have no close substitutes.  The entry and exit barriers are also high.

      The characteristics of monopoly structure :

                                                         i.   One seller and a large number of buyers.

A monopolist is a price maker since there is only one seller and it has the power to control the prices in the market.

                                                       ii.   No close substitutes:

Monopolies firm would sell products in which there are no close substitutes.

                                                     iii.   Restriction of entry of new firms.

                                                     iv.   Advertising: Advertising in a monopoly market depends on the products sold.