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2.1 Answer the following questions: 2.1.1 Give any TWO examples of fixed costs - NSC Economics - Question 2 - 2024 - Paper 2

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2.1 Answer the following questions: 2.1.1 Give any TWO examples of fixed costs. 2.1.2 Why is the demand curve horizontal for an individual firm in a perfect market... show full transcript

Worked Solution & Example Answer:2.1 Answer the following questions: 2.1.1 Give any TWO examples of fixed costs - NSC Economics - Question 2 - 2024 - Paper 2

Step 1

Give any TWO examples of fixed costs.

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Answer

  1. Rent for premises.
  2. Insurance premiums.

Fixed costs are expenses that do not change with the level of output, meaning they remain constant regardless of production or sales volume.

Step 2

Why is the demand curve horizontal for an individual firm in a perfect market?

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Answer

The demand curve for an individual firm in a perfect market is horizontal because the firm is a price taker. It can sell any quantity of its product at the market price determined by supply and demand, but it cannot influence the price. If the firm attempts to charge a higher price, consumers will simply buy from other firms offering the same product at the market price.

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