Paper 1
INSTRUCTIONS: Answer all the questions
QUESTION 1.
1a) Briefly explain the following; (6 marks)
I) opportunity cost
ii) Scarcity
iii) Choice
b) Explain the advantages and disadvantages of free market economic system (12 marks)
QUESTION 2
a) Explain how the government influences its resources (10 marks)
b) List the factors limiting consumer sovereignty (10 marks)
QUESTION 3
a) Explain the factors affecting demand of a commodity in the market (8 marks)
b) With the aid of a diagram explain the movement along and shift in demand curve (12 marks)
QUESTION 4
a) The demand function of a good is given by the following
Qd=150-3p-p2
Where Qd- quantity demanded
P-price
Required:
i) Calculate the point elasticity of demand when price is sh.5 (4 marks )
ii) Comment on the results above (2 marks )
b) What is income elasticity (2 marks)
c) With the illustration of a diagram explain the abnormal supply curve (6 marks)
d) Explain the factors affecting supply of a commodity in the market (6 marks)
QUESTION 5
a) The following data shows the demand and supply schedule in a hypothetical market.
Price per kg quantity demanded quantity supplied
(000) kgs (000) kgs
20 110 5
40 90 46
60 77.5 77.5
80 67.5 100
100 62.5 115
120 60 122.5
Required:
i) Plot the graph of the demand and supply curves (8 marks )
ii) Identify the equilibrium price and quantity (4 marks )
b) Briefly explain the categories of elasticity of demand (8 marks)
END
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