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4(c)(i) A decrease in income tax When there is a decrease income tax it will increase the disposable income of consumers which will enable them to demand more normal goods (ii) increase in advertising Increase in advertisement will lure more consumers to buy more quantities of normal good (iii) Fall in prices of complement A fall in price of complement will lead to an increase in demand of normal goods. This is because complementary goods are used together hence a fall in price of one will cause the quantity demand of it to increase , therefore will cause the demand of the complement to increase.

4(a) Competitive supply arises when two or more goods are supply or produce by using the same inputs such that when there is increase in supply of one results in decrease in the supply of other 4b)(i) A decrease in the cost of production. When there is a fall in the prices of inputs , the cost of production also falls. This , therefore gives the producers the incentives to produce and supply more quantities 4(b) (ii) Government subsidies. The subsidization of policy of government reduces the cost of production of producers, thereby enabling them to produce and supply more

(3a) An economic system is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. (3b) (i) The market economy is a market system whereby the pricing of goods and services is primarily determined by the sellers and buyers, and is hence based on demand and supply. While a command economy is an economy whereby the market system is fully controlled by the government. (ii) The market economy is regulated by the producers and consumers and there exist minor to none government regulation, While a command economy is regulated by the government.

(iii) The objective of a free market economy is the maximization of profits. While a command economy focuses on social as well as macroeconomic objectives. (iv) In a market economy, consumers’ preferences are taken into consideration. While the consumers’ preferences are not taken into consideration in a command economy as the government decides the item and amount of production. (3c) (i) Private Property and Freedom of ownership: A capitalist economy is always having the institution of private property. An individual can accumulate property and use it according to his will. Government protects the right to property. After the death of every person his property goes to his successors. (ii) Right of Private Property: The most important feature of capitalism is the existence of private property and the system of inheritance. Everybody has a right to acquire private property to keep it and after his death, to pass it on to his heirs. (iii) Price Mechanism: This type of economy has a freely working price mechanism to guide consumers. Price mechanism means the free working of the supply and demand forces without any intervention. Producers are also helped by the price mechanism in-deciding what to produce, how much to produce, when to produce and where to produce. (iv) Profit Motive: In this economy the desire to earn profit is the most important inducement for economic activity. All entrepreneurs try to start those industries or occupations in which they hope to earn the highest profit.

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