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Econ 101: Principles Of Microeconomics Question Paper

Econ 101: Principles Of Microeconomics

Course:Agriculture And Natural Resource

Institution: Kenya Methodist University question papers

Exam Year:2012

INTRODUCTION: Answer questions ONE and ANY other TWO.
Question One
(a) Discuss any THREE causes of demand curves shifts. (6marks)
(b) Describe any FOUR exceptions to the law of demand.(8 marks)
(c) Define the following terms.(8marks)
i. Scarcity
ii. Choice
iii. Opportunity cost
iv. Price elasticity of Demand.
(d) Define and illustrate the following.(8 marks)
i. Relative elasticity
ii. Relative inelasticity
iii. Perfect elasticity
iv. Perfect inelasticity
Question Two
Given below are the demand and the supply functions for oil in the world market where D is demand in barrels, S is supply in barrels and P is the price per barrel in US $ D=225.2-1.8p,
S=3.6+0.6p
Required
a. Calculate the market equilibrium price of oil in the world market.(5 marks)
b. What would be the consequences in the market when oil producing and exporting countries (OPEC) reduce production and when demand for motor vehicles increases. (5 marks)
c. Highlight the advantages and disadvantages of government intervention policies in setting prices. (10 marks)
Question Three
Demand schedule for milk in a certain urban market is given below;
Price per litre (Kshs) Quantity demanded per month(in thousands litres)
20 12
19 14
18 16
17 18
26 20
12 28
11 30

From the data given plot the demand curve. (4 marks)
Using graphical method, determine the equilibrium price and quantity of the milk in this market, if the estimated supply curve has an intercept of 8 shillings per litre and a slope of 4 shillings per one thousand litres. (10 marks)
Calculate the price elasticity of demand from an initial price of shs.19 to a new price of shs.16 per litre and interpret your results. (6 marks)
Question Four
a. Distinguish between perfect and imperfect markets (10 marks)
b. Distinguish between monopoly and monopolistic completion (10 marks)
Question Five
a. State FIVE assumptions of indifference curves. (5 marks)
b. Explain the rate of price mechanism in a free market system economy. (8 marks)
c. Explain the main feature of a mixed economy. (7 marks)

Econ 101: Principles Of Microeconomics Question Paper

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