WAEC Economics 2023 Theory — Question 4

Model answer

(a) An economic system is the social, legal and institutional framework for the management of resources in an economy. (b)(i) Aim of production: In capitalism, the aim of production is to make profit so goods and services are produced on a large scale. In socialism, the aim of production is to provide for the welfare of the citizens by making goods and services available at low/affordable prices. (ii) Consumer sovereignty: In capitalism, the consumer is king as it is he who dictates what is to be produced through his purchases — the consumer's taste drives production. In socialism, consumers' demands are determined by government so they have little or no influence on what is produced. (iii) Competition: Since profit is the motive in capitalism, competition exists and it ensures efficiency, leading to production of high quality goods that attract customers. In socialism, there is no competition since government decides what is to be produced, and this can lead to production of low quality goods. (c) Features of land as a factor of production: (i) Land is a natural gift and has a zero cost of production. (ii) The supply/size of land is fixed and cannot be increased or decreased. (iii) The quality of land can be degraded if not used with care. (iv) Land has many uses which are both short-term (farming, fishing) and long-term (roads, dams, factories). (v) The value of land depends on its location; land in urban centres costs higher than land in rural areas. (vi) Land is subject to diminishing returns if the right number of a variable factor is not applied to it. (vii) Land is geographically immobile.