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ECONOMICS OBJ (TYPE A)
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11-20: CCADAADDAC
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ECONOMICS ANSWERS (TYPE A)
SECTION A: ANSWER (1) QUESTION ONLY
(1)
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(2)
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SECTION B: ANSWER FOUR(4) QUESTIONS ONLY
(3a)
Capitalism is an economic system in which the means of production such as land, capital, and businesses are privately owned. In this system, individuals or private firms make decisions about what to produce, how to produce, and for whom to produce, guided by the profit motive. The government has minimal intervention, and the market forces of demand and supply largely determine prices and production.
(3b)
(i) Co-existence of Private and Public Sectors: In a mixed economy, some businesses and industries are owned by private individuals while others are owned and managed by the government. Private enterprises operate for profit, such as shops, factories, and service providers. Public enterprises focus on providing essential services like hospitals, electricity, and roads. This ensures a balance between profit-making activities and public welfare, combining efficiency with social needs.
(ii) Government Regulation and Intervention: The government monitors and regulates economic activities to prevent exploitation and unfair practices. It may control prices, issue licenses, or regulate monopolies to ensure a fair and stable economy. This intervention protects consumers and ensures that vital goods and services are accessible to all members of society, even if they are not profitable.
(iii) Profit Motive and Social Welfare: Private businesses operate to maximize profit, encouraging efficiency, innovation, and competitiveness. Meanwhile, the government provides services and goods for the welfare of society, such as free education, healthcare, and social security. This combination ensures that economic growth occurs alongside social protection, addressing both individual and collective needs.
(iv) Market Mechanism with Planning: A mixed economy allows the market forces of demand and supply to determine most prices and production. However, the government plans and intervenes in critical sectors to achieve national objectives, such as food security, employment, and infrastructure development. This feature ensures economic stability and prevents market failures while still encouraging private enterprise.
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(4a)
Internal economies of scale refer to the cost advantages a firm experiences as it increases its level of production. As a firm produces more, the average cost of production per unit decreases due to factors such as specialization of labor, use of more efficient machinery, bulk purchasing of raw materials, and better managerial efficiency. These cost savings arise within the firm itself and help it become more competitive.
(4b)
(i) High Capital Requirement: Large-scale production often requires a large investment in machinery, equipment, and infrastructure, which can be expensive. Small firms or new entrepreneurs may not afford these costs, making entry into the industry difficult.
(ii) Risk of Overproduction: Producing on a large scale can lead to overproduction, where supply exceeds demand. This may result in unsold stock, wastage, or falling prices, reducing profitability for the firm.
(iii) Management Problems: As firms grow, coordination and management become more complex. There may be communication gaps, slow decision-making, and inefficiencies due to the large number of employees and departments.
(iv) Labor Issues: Large-scale production can lead to monotony and alienation among workers, causing low morale, strikes, or high staff turnover. Additionally, hiring and training a large workforce increases costs and administrative challenges.
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(5a)
(i) Buying in Bulk: Wholesalers purchase large quantities of goods directly from producers, which reduces the producer’s marketing and distribution costs. By buying in bulk, they also ensure steady demand for the producer’s products and take advantage of lower prices due to bulk purchases.
(ii) Breaking Bulk: Wholesalers divide large quantities of goods into smaller, more manageable lots suitable for retailers. This makes goods affordable and accessible to small-scale retailers and ensures that products can reach different market areas efficiently.
(iii) Storage: Wholesalers provide storage facilities for goods, which prevents stock shortages and ensures goods are available when needed. Storage also helps to maintain quality and reduce losses due to spoilage or fluctuations in demand.
(iv) Risk Bearing: Wholesalers assume risks associated with holding and distributing goods, such as damage, spoilage, theft, or price changes. By taking these risks, they protect both producers and retailers from potential financial losses, allowing smoother trade operations.
(v) Providing Market Information: Wholesalers gather and share information about consumer preferences, market trends, and competitor activities with producers and retailers. This helps in planning production, setting prices, and making strategic business decisions, benefiting the entire supply chain.
(5b)
Producer/Manufacturer –> Wholesaler –> Retailer –> Consumer
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(6a)
Commercial farming is a type of agriculture mainly carried out for profit rather than personal consumption. Farmers produce crops and rear animals in large quantities using modern methods, machinery, and improved inputs such as fertilizers, pesticides, and high-yield seeds. The produce is sold in markets, often both locally and internationally, to generate income.
(6b)
(i) Contribution to National Income: Commercial farming generates significant revenue for the country through the sale of farm produce both locally and internationally. Taxes collected from farmers and profits from export crops add to the national income and help boost the country’s economy.
(ii) Provision of Employment: It creates jobs for a large number of people. Farmers employ laborers for planting, harvesting, processing, and transporting crops, while other people work in related sectors such as agro-processing, storage, and marketing, reducing overall unemployment.
(iii) Supply of Raw Materials to Industries: Commercial farms provide essential raw materials to industries. For example, cotton from farms is used in textile industries, sugarcane in sugar factories, and cocoa in chocolate production, which encourages industrial growth and stimulates the economy.
(iv) Ensuring Food Security: By producing crops and livestock in large quantities, commercial farming ensures a steady and reliable supply of food for the population. This reduces the risk of food shortages, stabilizes prices, and supports population growth and overall well-being.
(v) Earning Foreign Exchange: Commercial farming allows the country to export agricultural produce such as cocoa, coffee, and tea. The sale of these products brings foreign currency into the country, strengthens the balance of payments, and supports economic development through international trade.
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(7a)
Fiscal policy is the use of government revenue and expenditure to influence the economy. It involves taxation, government spending, and borrowing to achieve economic objectives such as economic growth, price stability, employment generation, and redistribution of income.
(7b)
(i) Government Spending: When the government increases its spending on infrastructure, health, education, and other public projects, it directly creates jobs for workers and stimulates demand for goods and services. This leads to an increase in national income as production rises, and more people are employed in both government and related private sector activities.
(ii) Taxation Policy: By adjusting taxes, the government can influence household and business behavior. Lower taxes increase disposable income for consumers, encouraging spending on goods and services. Businesses also have more funds for investment, which raises production, creates jobs, and increases national income. Conversely, higher taxes can slow down demand to control inflation.
(iii) Subsidies and Grants: The government can provide subsidies or grants to industries and farmers, reducing production costs and encouraging higher output. As production expands, businesses hire more workers, which increases employment. The resulting rise in output also contributes to higher national income and economic growth.
(iv) Borrowing and Public Debt Management: Government borrowing, especially for productive investments like roads, schools, and power projects, injects money into the economy, creating employment opportunities and stimulating production. Effective debt management ensures that borrowing does not crowd out private investment, while still supporting national income growth and job creation.
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(8a)
A protective tariff is a tax imposed by a government on imported goods with the aim of protecting domestic industries from foreign competition. By making imported goods more expensive, it encourages consumers to buy locally produced goods, helps local industries grow, and preserves employment within the country.
(8b)
(i) Protection of Infant Industries: Protective tariffs help newly established or small domestic industries that are not yet strong enough to compete with large foreign firms. By making imported goods more expensive, local industries are given time to grow and strengthen their production capacity.
(ii) Reduction of Unemployment: A protective tariff encourages consumers to buy locally produced goods, which increases the demand for domestic products. As production expands, local industries are forced to hire more workers, thereby reducing unemployment.
(iii) Diversification of the Economy: Countries that depend heavily on one or two export products can use protective tariffs to encourage the growth of new industries. By shielding developing sectors from foreign pressure, the economy becomes more diversified and stable.
(iv) Conservation of Foreign Exchange: By imposing high tariffs on imported goods, a country can discourage excessive importation and therefore reduce the amount of foreign currency spent on imports. The foreign exchange saved can then be used for more important purposes.
(8c)
(i) Access to a Variety of Goods: Free trade allows consumers to purchase a wider range of goods and services at competitive prices, increasing consumer choice.
(ii) Promotion of International Relations: Free trade fosters cooperation and good relations between countries, encouraging peaceful economic and diplomatic interactions.
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