What is the equilibrium price and what does the tertiary economic activities sector encompass?

Here are the solutions to the economics questions: Question 20: Which accounting principle requires businesses to record expenses and liabilities as soon as they are incurred, regardless of when cash is exchanged? The correct option is B. The price at which demand and supply are equal. Equilibrium price is the market price where the quantity of a good or service demanded by consumers equals the quantity supplied by producers. --- SECTION B 1. What do you understand by term Tertiary Economic Activities? Tertiary economic activities refer to the service sector of the economy. This sector provides services to businesses and consumers rather than producing tangible goods. Examples include healthcare, education, retail, transportation, and financial services. 2. Identify any three (3) disadvantages of the Capitalist Economic System. Income Inequality: Capitalism often leads to significant disparities in wealth and income, as the system rewards those who own capital and have high-demand skills, potentially leaving others behind. Market Failures: Markets can fail to allocate resources efficiently in certain situations, such as with public goods, externalities (e.g., pollution), or information asymmetry, leading to suboptimal outcomes. Monopolies and Oligopolies: The pursuit of profit can lead to the formation of monopolies or oligopolies, where a few firms dominate a market, reducing competition, potentially leading to higher prices and less innovation. 3. To simplify issues, the Production Possibility Curve (PPC) is drawn based on certain assumptions. State these assumptions. Fixed Resources: The total quantity of resources (land, labor, capital, entrepreneurship) available in the economy is fixed. Full Employment: All available resources are fully and efficiently employed in production. Fixed Technology: The state of technology remains constant during the period under consideration. Two Goods: The economy produces only two types of goods or services. 4. State any three (3) specific instances under which abnormal demand curve can occur. Giffen Goods: These are inferior goods for which the income effect (which encourages less consumption as income rises) outweighs the substitution effect (which encourages more consumption as price falls), leading to an upward-sloping demand curve. Veblen Goods: These are luxury goods whose demand increases as their price increases, due to their status-symbol appeal. Consumers perceive higher-priced items as more exclusive or prestigious. Speculative Markets: In markets where prices are expected to rise further (e.g., stocks, real estate), a rise in current price might lead to an increase in demand as buyers anticipate future gains. 5. Given initial and new prices as GH¢12 and GH¢10 respectively and also initial and new quantities as 16 and 80, calculate the price elasticity of demand and interpret your result. Initial Price (P_1) = GH¢12 New Price (P_2) = GH¢10 Initial Quantity (Q_1) = 16 New Quantity (Q_2) = 80 We will use the midpoint formula for price elasticity of demand (PED): PED = (Q_2 - Q_1)/((Q_1 + Q_2)/2)(P_2 - P_1)/((P_1 + P_2)/2) Step 1: Calculate the percentage change in quantity. \% Q = (80 - 16)/((16 + 80)/2) = (64)/(96/2) = (64)/(48) = (4)/(3) ≈ 1.333 Step 2: Calculate the percentage change in price. \% P = (10 - 12)/((12 + 10)/2) = (-2)/(22/2) = (-2)/(11) ≈ -0.182 Step 3: Calculate the Price Elasticity of Demand (PED). PED = (4/3)/(-2/11) = (4)/(3) × (11)/(-2) = (44)/(-6) = -(22)/(3) ≈ -7.33 Interpretation: The absolute value of the price elasticity of demand is |-7.33| = 7.33. Since 7.33 > 1, the demand for the good is elastic. This means that a small percentage change in price leads to a proportionally larger percentage change in quantity demanded. 6. State any three (3) weaknesses the cardinalist utility approach. Subjectivity of Utility Measurement: Utility is a subjective psychological concept and cannot be objectively measured in cardinal numbers (e.g., utils) as assumed. It's difficult to assign a numerical value to satisfaction. Interpersonal Comparison of Utility: The cardinal approach implies that utility can be compared across different individuals, which is not feasible. One person's "10 utils" of satisfaction cannot be meaningfully compared to another person's "10 utils." Unrealistic Assumption of Constant Marginal Utility of Money: The approach often assumes that the marginal utility of money remains constant, which is generally not true. The value of an additional unit of money typically diminishes as one's income increases. 7. Briefly explain the term a budget line. A budget line (or budget constraint) is a graphical representation showing all the possible combinations of two goods or services that a consumer can purchase given their fixed income and the prevailing market prices of those goods. It illustrates the trade-offs a consumer faces due to limited resources. 8. Explain the differences between Fixed inputs and Variable inputs of Production. Fixed Inputs: These are factors of production whose quantity cannot be easily changed in the short run, regardless of the level of output. Their cost remains constant even if production stops. Examples include factory buildings, heavy machinery, and land. Variable Inputs: These are factors of production whose quantity can be changed in the short run in response to changes in the level of output. Their cost varies directly with the level of production. Examples include raw materials, electricity, and most labor. The key difference is their flexibility in the short run in relation to changes in output. --- Production Function Question: Imagine production function for Tuna is given by q = 6K + 4L; Where q is output, K is capital and L is labour. Assuming that capital is fixed at K = 6, how much L is required to produce 60 tuna cans per hour? Given the production function: q = 6K + 4L We are given: Output (q) = 60 tuna cans Capital (K) = 6 Step 1: Substitute the given values into the production function. 60 = 6(6) + 4L Step 2: Simplify the equation. 60 = 36 + 4L Step 3: Isolate the term with L. 60 - 36 = 4L 24 = 4L Step 4: Solve for L. L = (24)/(4) L = 6 Therefore, 6 units of labor are required to produce 60 tuna cans per hour when capital is fixed at 6. The final answer is 6. --- External Diseconomies of Scale Question: Mention any three (3) factors that explain why there are external diseconomies of scale? External diseconomies of scale occur when the growth of an entire industry in a particular area leads to rising average costs for individual firms within that industry. Increased Input Prices: As an industry expands, it may increase demand for common inputs (e.g., specialized labor, raw materials, land) in the local market, driving up their prices for all firms in the industry. Strain on Infrastructure: Rapid industrial growth can overload existing public infrastructure such as transportation networks (leading to congestion), utilities (electricity, water), and waste disposal systems, increasing costs and inefficiencies for businesses. Environmental Costs/Pollution: A concentration of industries can lead to increased pollution and environmental degradation, which might necessitate costly compliance measures or reduce the quality of local resources, impacting all firms.