Observation

This question attracted a lot of candidates most of whom scored relatively high marks.      Candidates were asked to define a market economy and to distinguish between capital intensive and labour intensive methods of production in the (a) and (b) parts of the question respectively. Candidates were also required to determine how the economic problem of what to produce is resolved in a market economy, socialist economy and mixed economy in the (c) part of the question. Most candidates were able to define market economy and distinguish between capital and labour intensive methods of production correctly in the (a) and (b) part of the question respectively. Some of them    were also able to identify the way in which the problem of what to produce is resolved in a market economy, socialist economy and mixed economy in the (c) part of the question.
           
            Candidates were expected to answer thus:

(a)        A market economy is an economic system in which the means of production are predominantly owned and controlled by the private sector and market forces decide what to produce.

(b)        A capital intensive method of production is one that employs large inputs of capital equipment with a relatively small proportion of labour.                        

            A labour intensive method on the other hand employs a large proportion of labour relative to capital equipment in production. Production is dominated by human effort.

(c)(i)    In a market economy, the problem of what to produce is resolved through the forces of demand and supply (price mechanism). When buyers are ready to offer higher prices for a good, producers are ready to supply more because such goods offer them higher profits. When the price falls and production is not profitable, supply is reduced.        

     (ii)   In a socialist economy, a planning committee determines what is good for the society and the capacity of the economy to produce the goods. It is the good approved by the planning committee that is produced.                                                       

(iii) In a mixed economy, both the private sector and the public sector coexist. The
government moderates the activities of the private sector or the price mechanism.