Question

 

1. In an essay of least two paragraphs, answer the following question. Why do markets exist? Be sure to include discussion of specialization and the concepts of buying and selling in your answer.

 

2. In an essay of at least two paragraphs, discuss the various factors of production. Be sure to include the definitions and relevant examples of each.

 

3. In an essay of at least four paragraphs, explain the three economic questions that every society must answer as well as the various economics goals that each tries to achieve.

Answer 1

1. Market, in economics, is a system which not only includes a place but it also includes an area, state, country and the whole world where a communication is possibile between sellers and buyers and the seller sells the commodity to the buyer in terms of money. Hence, market mainly exist for the sale and purchase of goods and services. It facilitates the consumer what they want to buy and also it gives chance to the sellers and producers to produce goods.

Specialisation in buying selling is one of the important aspect of marketing. The modern market extensively using the specialisation process in buying and selling. The specialisation increases the quality of the product and the demand also can increase. Selling concept speaks about the aggresive selling and sales promotion. Buyers concept is to get goods which are having a quality and at a less price.

2. Factors of production in economics means the various elements required to produce a commodity. It can be divided into 4 categories. They are -

a. Land - It is the upper surface of earth. It is the free gift of nature. It not only includes land but also includes soil, forest, rivers, etc. It is the natural factor of production. Examples are soil, rock, crops, rivers, etc.

b. Labour - It is the mental and physical effort of an individual in the production process. Labour has a poor bargaining power.It includes all skilled, unskilled, semiskilled labour and professionals.

c. Capital - It is the produced means of production. It is the monetary factor. Capital is aquired to invest in a business in the form of fixed capital and working capital. It may be machine, human beings, tools, factories, etc.

d. Entrepreneur - Is someone who takes initiative and undertakes an enterprise. He works in an uncertain condition and risk situation and all the time thinking of doing something new.Initiative, risk bearing and innovation are the main features of an entrepreneur.

3. These are also called as the central economic problems. These problems arises due to unlimited wants and limited resources. They are -

a. What to produce and how much to produce - It tells about what an economy should produce with the limited availability of the resources. It also tells about the quantity of each product to be produced. Here the economy has to decide what to produce.

b. How to produce - It is all about the production process. There are different ways to produce the commodity. The economy has to decide how to produce the commodities.

c. For whom to produce - Once the items are produced, the questions comes who will use it. Hence, the economy has to decide about the people who are going to use it. Also it tells about the distribution of the goods to the different sectors of people.