10.1.4 ECONOMICS 1: ASSIGNMENT 1 [100]

QUESTION ONE [25]

Fully discuss how the production possibility frontier demonstrates the basic economic

problem of scarcity.

QUESTION TWO [25]

2.1 Using demand and supply analysis, explain the effect on the equilibrium price

and quantity of a good or service if the number of buyers in the market for this

good or service increases. (12)

2.2 Discuss the type of price control that a government would implement, if it wishes

to impose a national minimum wage. Include in your answer the economic effects

of such a price control. Motivate your answer with the aid of a diagram. (13)

QUESTION THREE [20]

Examine the impact on total revenue in terms of an elastic demand curve and inelastic

demand curve. Use diagrams to motivate your answer.

QUESTION FOUR [30]

Discuss in detail the macroeconomic circular flow diagram. Substantiate your answer

with the aid of a diagram.