Topic-1 and Topic-2 Tutorial questions 1. What is economics? 2. 3. 4. 5. 6. Write short notes on the following perspectives a) Scarcity and choice b) Rational behaviour and rational self-interest c) Generalisations d) Ceteris Paribus Distinguish between the following concepts a) Microeconomics and macroeconomics b) Normative economics and positive economics c) Economic principle and economic policy d) Independent variable and dependent variable e) Direct relationship and indirect relationship between any two variables Explain the reasons why every economy is faced with the basic economic problem to answer fundamental questions such as what to produce, how to produce, for whom to produce? Differentiate between the following concepts al Consumer goods and capital goods bl Public goods and private goods The alternative production possibilities faced by the economy of Botswana in the production of cloth and bread are indicated in the following Production Possibilities Table (PPT). Production possibilities Bread (000' loaves) Cloth (000' metres) Combination 0 10 B 1 9 2 7 3 4 4 0 a) with cloth on vertical axis (Y) and bread on the horizontal axis (X), graph the above data using an appropriate scale to derive Production Possibilities Curve (PPC) b) If the economy wants to move from combination B to the combination C, what is the opportunity cost of producing one million more loaves of bread? c) Explain how the law of increasing opportunity cost is reflected in the shape of the production possibilities curve. 7. What is meant by demand and demand schedule? 8. What is law of demand? 9. Why is that demand curve downward sloping? 10. Distinguish between change in demand and change in the quantity demanded. 11. 12. Explain the non-price determinants of demand and their effect on demand. What will each of the following have on the demand for shoes? Show these effects graphically. a) Bata shoes become fashionable. b) Government workers have a higher income due to a generous salary increment (assuming Bata shoes are normal goods). c) The price of a substitute to Bata shoes, 'Nike shoes' falls. d) The consumers expect the price of Bata shoes to fall in the near future (assuming they will still fashionable) e) An increase in interest rates (assuming consumers are net borrowers) f) A reduction in income tax Distinguish between the following: 13. a) Normal and inferior goods. bl Substitutes and complements goods. 14. 15. How will the demand for normal a good change when income rises? How will the demand for a normal good change when income falls? How do your answers change if the good is an inferior good? Explain with the help of diagrams How will the demand for a good change when the price of its substitute decreases? How will the demand for a good change when the price of its complementary good falls? Explain with the help of diagrams.