Section A mid year study

Question 1

Draw circular flow of income

Answer 1

V———————–Income————–^
Individuals ———>labour————> Business
V ^
I———————————————I
I Expenditure I
I I
Saving ——–Financial institution ——- investment
Tax ——————–govt———————govt spending
Imports ——- international sector —–exports

Leakages injections

Question 2

What are the four types of economic resources (and rewards)

Answer 2

Land - rent
Labour - wages
Capital - interest
Enterprise - profit

Question 3

What is the law of supply

Answer 3

As price of a product rises quantity supplied by producers will rise - impacted by price of other goods and services or changes in the cost of factors of production

Question 4

What is the law of demand

Answer 4

Quantity demanded falls as price rises - impacted by expected future prices and consumer tastes/preferences