UNIT CODE		: 	ECON 101
UNIT	TITLE	:	PRINCIPLES OF MACROECONOMICS 
Instructions: Answer question one and any other two questions. 

Question One 
a)	(i) Given the following economic functions differentiate between the demand function and the supply function.  Explain your answer with clear calculations. 									(6mks) 
QX = 25-
QY = 100P + 

(ii) At which values of price and quantity is the market equilibrium?(4mks) 

b)	Explain clearly the differences between monopolies and monopolistic competition market structures. 						(6mks) 
c)	(i) Illustrate and clearly explain the nature of indifference curves. (4mks) 
(ii) Using the cardinals approach of consumer behavior, distinguish between income and substitution effect of a price rise for a normal good. (10mks) 

Question Two 
a)	With aid of a well labeled diagram distinguish between price floor and price ceiling and explain the consequences of each. 		(10mks) 
b)	Given the following market schedules 
Price (Ksh.)	Quantity demanded (kgs)	Quantity supplied (kg)	
10
12
14
16
18	1000
800
600
400
200	2000
3000
4000
5000
6000	

(i)	Derive the demand function. 				(3mks) 
(ii)	Derive the supply function. 				(3mks) 
(iii)	Calculate the equilibrium price and output. 		(4mks) 

Question Three 
a)	Using a well labeled diagram clearly explain the fixed cost, variable cost and the marginal cost.							(10mks) 
b)	Discuss at least three economic systems. 			(10mks) 

Question Four 
a)	Distinguish between a change in demand and a change in quantity demanded. 								(10mks) 
b)	Using a well labeled graph explain the stages in production. (10mks) 

Question Five 
Write short notes on the following 
(i)	Oligopoly markets 
(ii)	Marginal civility 
(iii)	Elasticity of demand 
(iv)	Opportunity cost