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Cbm 02: Introduction To Economics Question Paper

Cbm 02: Introduction To Economics

Course:Certificate In Business Management

Institution: Chuka University question papers

Exam Year:2012

CHUKA UNIVERSITY

COLLEGE

UNIVERSITY EXAMINATIONS

EXAMINATION FOR THE AWARD OF
CERTIFICATE IN BUSINESS MANAGEMENT

CBM 02: INTRODUCTION TO ECONOMICS

STREAMS: CERT. (BUS. MGT) TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 11.30 A.M – 1.30 P.M.
INSTRUCTIONS:

Answer question ONE and any other two.
Do not write on the question paper.

Q1. (a) Briefly explain what you understand by the term Economics. [2 marks]

(b) Write short notes on the following fundamental Economic concepts.

(i) Scarcity and choice [5 marks]
(ii) Opportunity cost [5 marks]
(iii) Production Possibility Frontier [5 marks]
(iv) Demand, supply ad Equilibrium price [5 marks]

(c) The table below shows the Demand and Supply Schedule for a product.

Price (Sh. Per Kg) Demand (Kg) Supply (Kg)
10 100 20
20 85 36
30 70 53
40 55 70
50 40 87
60 25 103
70 10 120

Plot the demand and supply curves and determine the equilibrium price and
quantity. [8 marks]
Q2. (a) Identify and explain the functions of money. [4 marks]

(b) Distinguish between own price elasticity of demand and cross elasticity of
demand. [4 marks]

(c) Given the following demand function

Qx + 100 – 2P2

Calculate the price elasticity of demand when the price is KSh.2 and when price is Ksh.6. [4 marks]

(d) Distinguish between perfectly competitive market and monopoly. [8 marks]

Q3. (a) Define Elasticity of Supply and briefly explain any five factors that influence the
elasticity of supply. [10 marks]

(b) The demand for a commodity is 20 units when the prevailing market price equals
Sh.80 per unit. However when the price rises to Sh.100, the quantity demanded rises to 30 units. Calculate both the arc and point elasticities of this commodity.
[4 marks]

(c) Distinguish between (i) Giffen good, normal and inferior good
(ii) Substitutes goods and complement goods.
[6 marks]

Q4. (a) What is inflation, explain its causes. [5 marks]

(b) State the objectives of fiscal policy in Kenya. [5 marks]

(c) Briefly explain the following tools of Monetary Policy.

(i) Open Market operations
(ii) Bank rate
(iii) Cash Ratio
(iv) Moral Persuation
(v) Selection lending [5 marks]

(d) Given the following demand and supply functions of a commodity X, compute
the equilibrium price and quantity.

Qd = 100 – 2P
Qs = 40 + P [5 marks]

Q5. (a) State the law of diminishing returns as applied to production functions.
[3 marks]

(b) What determines the supply for and demand of the factors of production.
[9 marks]

(c) Distinguish between price floors and price ceilings. [4 marks]

(d) Illustrate the determinants of equilibrium market price. [4 marks]

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Cbm 02: Introduction To Economics Question Paper

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