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Question 1

Define command economy

Answer 1

A command economy is where all resources are owned by the government or central authority, who decides what to produce, how to produce it and who for.

Question 2

Define ceteris paribus

Answer 2

All other things being equal.

Question 3

Define asymmetric information

Answer 3

Where one party in a transaction has more or superior information compared to another,

Question 4

Why may the government provide a good/service?

Answer 4

To reduce inequality, as good/service provided by private firms may be unaffordable for low income households.

To reduce imperfect information. This allows a more efficient allocation of scarce resources.

Question 5

What happens to the demand for inferior goods as income increases?

Answer 5

As income increases, demand for inferior goods decreases.

Question 6

PEY for inferior goods is…

Answer 6

negative.