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These factors can be summarized below: (1) Change in taste or fashion: If the consumer's tastes have changed or if the commodity has gone out of fashion, the price falls

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These factors can be summarized below: (1) Change in taste or fashion: If the consumer's tastes have changed or if the commodity has gone out of fashion, the price falls. (ii) Change in income: If the consumer's income rises, demand may increase even with no change in price. Discovery of substitute: Discovery of an alternate substitute may cause demand to fall even with no change or decrease in price. ( Change in prices of substitutes: A decrease in prices of other goods may cause a decrease in demand even with decrease or no change in price. ) Change in the pricelsupply of complementary goods: If the price of one of the complementary goods changes, the demand of the other is also changed. (vi) Change in weather: Demand of a good may change due to an expected change in the weather without a change in price. (vii) Change in population: Demand of a product may increase due to increase in population without a corresponding change in price. (viii) Future expectations: The demand of a product may increase due to future expectation of an increase in price, even though there is no change in current price.
(b) In the mixed economic system, the state has an important role to play which is as follows: Distribution of income: Corrects the unequal distribution of income and wealth that exists under free market system. For that purpose, taxation, duties, subsidies etc. are used. Price control Restrains the monopolies that may exploit consumers by charging exorbitant prices. Price monitoring, price fixation, etc. are used. Production of needed goods/demerit goods: Provide commodities that private sector is unable to supply due to the absence of appropriate profitability e.g. state may establish food processing units, price floors etc. Control on economy Manages and controls the levels of inflation, unemployment, trade balance and economic growth to ensure economic stability. By way of monitory and fiscal policies the state intervenes in the economic activities of the country.
1.2 PRODUCTION POSSIBILITY CURVE The resources at the disposal of an economy are limited whereas the requirements are unlimited. A country therefore has to try to choose the best possible combination of goods and services that can be produced from the available resources, depending upon its economic needs. The production possibility curve depicts all possible combinations. The diagram is shown below: Y H 100 Quantity of Y produced 60 ? 60 90 Quantity of X produced For the purpose of simplicity the curve is based on two products only i.e. X and Y and we assume that all the resources are allocated for producing the two goods only. The curve indicates that the economy can produce a number of combinations such as 60 units of X and 100 units of Y or 90 units of X and 60 units of Y and so on.
The cost of an item measured in terms of the alternatives forgone is called its opportunity cost. Thus, if an economy produces 60 units of X and 100 units of Y (point H) instead of producing 90 units of X and 60 units of Y (point J), then the opportunity cost of producing (100-60) more units of Y would be the lost production of (90-60) units of X. If the economy produces lesser quantities, it would not be utilizing the full resources whereas quantities in excess of those represented by the curve cannot be produced on account of limited resources. ECONOMIC GROWTH (a) (i) the rate at which the gross domestic product per head of population is growing in real terms, i.e. after allowing for the distorting effects of inflation. (ii) welfare (b) (i) production possibility (ii) economic growth (ii) some degree of inefficiency in the use of resources, or a degree of unemployment (iv) unattainable (v) 13 million units of capital
(c) Any one of the following main factors: capital investment leading to the growth of the capital stock technological progress enabling a greater level of output from a given level of inputs research and development activity enabling technological progress to occur education and training systems that encourage greater levels of productivity in the labour force adequate investment in the infrastructure of the economy (d) (0) false (ii) false (iii) true (iv) true ISLAMIC ECONOMIC SYSTEM (a) Its main influence is how resources are distributed throughout the economy, rather than the "Science" of improving manufacturing etc. This has led to a number of features within the system: State ownership: There is no ban on the state owning an enterprise, however a free market still exists where entrepreneurs can profit so long as they abide by the other rules of the Islamic economic system. Practising of moderation: Islam aims for an equitable distribution of resources, and so the population is taught to share wealth where they can. Prohibition of charging interest: It is forbidden for a lending party to earn interest from a transaction without taking on as much risk. Instead there is a system whereby both parties must gain or lose from the transaction. 1.4
Earnings: must only be made from goods which are allowed in Islamic teachings. Ban on hoarding of wealth: As resources should be utilised for a good cause, rather than remaining in private possession. Zakat: This is a financial tax on the wealthy in order to aid the poorer in society. (b) Below is an idea for some which could be used Similarities: Entrepreneurs can earn profit Efficiencies are still sought after Acceptable for some members of society to be richer than others Differences: Interest not being charged on transactions Explicit attitude towards hoarding wealth General influence of religion in the operations of an economic system