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Set 214: Economics For Engineers Question Paper

Set 214: Economics For Engineers

Course:Mechanical Engineering

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
SCIENCE (MECHANICAL ENGINEERING)
SET 214: ECONOMICS FOR ENGINEERS
DATE: WEDNESDAY, 11TH JUNE 2008
TIME: 8.00A.M. – 10.00 A.M.
_________________________________________________________________________

INSTRUCTIONS: Question ONE is compulsory. Answer any other TWO

questions.

QUESTION ONE (30 MARKS)

(a) A firm faces an elastic demand for its product. The manager goes to an economist to
advice him on whether to lower the price of the product. The answer he gives is:
maybe. Why is this the right answer?

(4 marks)
(b) Using the principle of rational choice, explain why a change in taste will shift a
demand curve.

(4 marks)
(c) Commodity A and B are in composite demand. Analyze the effect of a decrease in
price of A on the supply of B. Graphically illustrate your answer.
(4 marks)
(d) Outline the problems associated with the value added approach to measuring national
income.

(4 marks)
(e) Distinguish between monetary and fiscal policy.

(4 marks)
(f) Illustrate by use of diagrams the profit maximizing output of a firm operating in a
perfectly competitive market structure.

(5 marks)
(g) Briefly explain any five Keyne’s subjective factors that influence the consumption
function.

(5 marks)

QUESTION TWO (20 MARKS)

(a) Explain what happens to the combination of consumer and producer surplus in the
market if a price moves from disequilibrium to equilibrium.
(5 marks)

2

(b) (i) Define the meaning of the terms “maximum price control”.
(2 marks)

(ii) Explain briefly the effects of price decontrol to a growing economy. (8 marks)

(c) Explain the importance of the concept of price elasticity of demand to a

manufacturer of cigarettes.

(5 marks)

QUESTION 3 (20 MARKS)

(a) (i) Explain the law of variable proportions.

(2 marks)

(ii) Outline the assumptions that underlie this law.

(3 marks)
(iii) Explain the significance of the law in (a) above in the management

and economic policy decision making process.

(4 marks)
(b) (i) What are the main causes of inequality of distribution of national income.

(5 marks)

(ii) Explain the arguments in favour of distribution of national income.

(5 marks)
QUESTION FOUR (20 MARKS)

(a) (i) What are the major causes of inflation?

(4 marks)

(ii) Discuss the implications of inflation on the Kenyan economy.

(6 marks)
(b) Define the quantity theory of money and explain its assumptions.

(7 marks)
(c) Distinguish the two conventions used in computing the elasticity of

demand.

(3 marks)

QUESTION 5 (20 MARKS)

(a) (i) Distinguish between economic development and economic welfare.

(4 marks)

(ii) Discuss the main objectives or goals of economic development.

(9 marks)
(b) Explain the salient characteristics that distinguishes pure capitalism

from pure communism.

(7 marks)
*****************

Set 214: Economics For Engineers Question Paper

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