SECTION 2: ALLOCATION OF RESOURCES
UNIT 4: MARKET AND MIXED ECONOMY
A planned economyis an economy where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives. A planned economy can be also called as centrally planned, command or collectivist economy.
A market economyis an economy where consumers determine what to produce, resources are allocated by price mechanism and land and capital are privately owned.
Mixed economyhas a combination of the features of a planned and a market economy. Some firms are privately owned (in the private sector) and some are state-owned (in the public sector).
UNIT 5: EQUILIBRIUM PRICE
Demandis the want for a commodity backed up by the ability and the willingness to pay for it.
Market demandis the total demand for a product.
A extension in demand is a rise in quantity demanded caused by a fall in the price of the product itself.
A contraction in demandis a fall in quantity demanded caused by a rise in the price of the product itself.
Supplyis the amount that the producer is ready and willing to sell in the market.
Market supply is the total supply of a product.
A extension in supplyis a rise in quantity supplied caused by a rise in the price of the product itself.
A contraction in supplya fall in quantity supplied caused by a fall in the price of the product itself.
Equilibrium priceis the price where the demand and the supply are equal.
Disequilibrium priceis a situation where the demand and supply are not equal.
UNIT 6: CHANGES IN DEMAND
Changes in demandare the shifts in the demand curve.
An increase in demand curveis a rise in demand at any given price, causing the demand curve to shift to the right.
A decrease in the demand curveis a fall in demand at any given price, causing the demand curve to shift to the left.
Normal goodis the product whose demand increases when the income increases and decreases when income falls.
Inferior goodis the product whose demand decreases when the…