Question1. Why is democracy associated with capitalism? Think the impact of the capitalistic free market on the following:

• The mobility of Capital and Labor
• The affect of less government regulation which is characteristic of capitalism
• The impact of the free market on the level of government ownership of firms.
• The affect of government regulation on non-capitalistic nations.

Question2. In contrast to a socialist economic organization, how would a capitalist system differ? Consider who owns the capital (means of production) in the two models.

Question3. When do assumptions made in conjunction with economic theorizing have to be realistic? Can unrealistic assumptions provide useful outcomes?

Question4. What basic principles does the production possibilities (or transformation) curve illustrate? Consider whether an increase in the production of one good requires an increase or decrease in the production of other goods when K and L are held constant.

Question5. Determine when does the idea of opportunity cost indicate? think how the production of one good affects the possible production level of other goods.

Question6. Will a change in the price cause the demand for X, a normal good, to change?