Running Header: ECONOMICS PAPER 1 Question 4. Outline in detail: The notion of free exchange. Discuss the types of protectionism used around the world to reinforce restriction of free-trade and what they denote. Name and describe at least 5 organizations that promote these concepts. The Notion of Free Exchange Free exchange refers to the rights allowed to an investor to transfer assets to another party without paying for any transaction fees during the exchange (Boyes, 2010). There are different types of protectionism employed around the world as a way of reinforcing free-trade for instance through tariffs. This is whereby governments raise the price of imports to make them less attractive to foreign customers (Langholtz, 2003). Subsidies as well as import quotas are also used. Such protectionism is put in place in order to protect local industries from foreign competition (Dunkley, 2004). A number of organizations promote these concepts for instance the World Trade Organization (Boyes, 2010). Question 5 Explain the notion of (PPC) production possibilities curve. Include shapes shifts and operational points Production Possibilities Curve (PPC) Production Possibilities Curve or the PPC is a graphical representation of the various possibilities in alternative production facing a given economy (Dunkley, 2004). In other words, it is a graphical illustration of the total goods and services that can be made available in an economy at any given time, depending on the availability of resources (Boyes, 2010). If available resources are present and are fully employed, operational points of PPC can lie anywhere on the illustration other than inside or outside of it (Langholtz, 2003). Whenever the resources increase, the PPC shifts outward to the right indicating that more goods can be made available as compared to before (Dunkley, 2004). Question 6. Describe in some detail. The difference in allocation of resource (4 hints questions) between capitalism; socialism and communism? Use any model to explain, Centralized vs decentralized allocations. There exists a difference in allocation of resources between capitalism, communism and socialism. While Capitalism does not require government control in allocation of resources, Socialism relies on a public worker or owner for allocation of resources (Dunkley, 2004). This means that the worker owns the rights to resources (Langholtz, 2003). Communism is more political and allocation of resources is through people of power within the society (Boyes, 2010). Centralized vs. Decentralized allocations In centralized allocations, decisions regarding distribution of resources are made by people of a higher management (Dunkley, 2004). On the other hand decentralized allocations delegate decisions regarding allocation of resources to all levels of management (Langholtz, 2003). Question 7. Describe the notions inverse vs positive relationship; scarcity; association as causation; fallacy of composition.

1. Running Header: ECONOMICS PAPER
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Question 4. Outline in detail: The notion of free exchange.
Discuss the types of protectionism used around the world to
reinforce restriction of free-trade and what they denote. Name
and describe at least 5 organizations that promote these
concepts.
The Notion of Free Exchange
Free exchange refers to the rights allowed to an investor to
transfer assets to another party without paying for any
transaction fees during the exchange (Boyes, 2010). There are
different types of protectionism employed around the world as a
way of reinforcing free-trade for instance through tariffs. This
is whereby governments raise the price of imports to make them
less attractive to foreign customers (Langholtz, 2003).
Subsidies as well as import quotas are also used. Such
protectionism is put in place in order to protect local industries
from foreign competition (Dunkley, 2004). A number of
organizations promote these concepts for instance the World
Trade Organization (Boyes, 2010).
Question 5 Explain the notion of (PPC) production possibilities
curve. Include shapes shifts and operational points
Production Possibilities Curve (PPC)
Production Possibilities Curve or the PPC is a graphical
representation of the various possibilities in alternative
production facing a given economy (Dunkley, 2004). In other
words, it is a graphical illustration of the total goods and
services that can be made available in an economy at any given

2. time, depending on the availability of resources (Boyes, 2010).
If available resources are present and are fully employed,
operational points of PPC can lie anywhere on the illustration
other than inside or outside of it (Langholtz, 2003). Whenever
the resources increase, the PPC shifts outward to the right
indicating that more goods can be made available as compared
to before (Dunkley, 2004).
Question 6. Describe in some detail. The difference in
allocation of resource (4 hints questions) between capitalism;
socialism and communism? Use any model to explain,
Centralized vs decentralized allocations.
There exists a difference in allocation of resources between
capitalism, communism and socialism. While Capitalism does
not require government control in allocation of resources,
Socialism relies on a public worker or owner for allocation of
resources (Dunkley, 2004). This means that the worker owns
the rights to resources (Langholtz, 2003). Communism is more
political and allocation of resources is through people of power
within the society (Boyes, 2010).
Centralized vs. Decentralized allocations
In centralized allocations, decisions regarding distribution of
resources are made by people of a higher management
(Dunkley, 2004). On the other hand decentralized allocations
delegate decisions regarding allocation of resources to all levels
of management (Langholtz, 2003).
Question 7. Describe the notions inverse vs positive
relationship; scarcity; association as causation; fallacy of
composition and Rational self-interest.
Inverse vs. Positive Relationship
Inverse relationships also referred to as negative relationships
happen when increased value of a variable leads to a decreased
value of another variable (Boyes, 2010). The value of these
variables tends to move in opposite direction on number lines
when this occurs (Langholtz, 2003). On the other hand, positive
relationships or rather direct relationships take place when both

3. variables in a given equation lead to an increase or decrease in
value (Dunkley, 2004). On a number line, these variables tend
to move in the same direction unlike those in inverse
relationships.
Scarcity
This can be defined as a situation whereby there are fewer
products in the market than the demand for them (Boyes, 2010).
In other words, scarcity is when individuals want more than is
available in the market. This force, people to make certain
choices as they cannot have the products they want (Langholtz,
2003).
Association as causation
The term association can mean a number of things. It can be
defined as a group of individuals who come together for a
common purpose or a relationship between two variables, where
one is dependent or leads to the other (Dunkley, 2004).
Causation on the other hand refers to changes in a variable that
directly cause changes in another variable (Boyes, 2010).
Association and causation are intertwined in that by associating
two variables, changes are observed in either one of them.
Fallacy of composition and rational self-interest
This is the belief that what might apply to one individual will
apply to others in the same manner (Langholtz, 2003). In other
words, it argues that what might be true for a person is also true
for a society in general. It means that people will make the
choices that give them the greatest amount of satisfaction. This
is the assumption that people do not intentionally make
decisions that would leave them worse off. For example, if a
person can save more by spending less, then the society in
general can also do the same. This is however not the case.
Rational self-interest depends on the information at hand and
the individual’s perception of what is in his or her best interest.
People only focus on 1)Selfish or excessive regard for one's

4. personal advantage or interest and 2)Personal advantage or
interest.
References
Boyes, W., & Melvin, M. (2010). Economics. 8th Edition.
Eagan, MN: Cengage Learning.
Dunkley, G. (2004). Free Trade: Myths, Realities and
Alternatives. New York: Zed Books.
Langholtz, H.J. (2003). Resource-Allocation Behavior. Boston:
Springer.