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Economics Question Paper

Economics

Course:Computerized Accounting

Institution: Onix Computer Services question papers

Exam Year:2010

Orbit School of Management Studies

Economics

Monday 31 May 2010
Time Allowed: 3 hours

Answer any FIVE questions.
ALL questions carry equal marks.

QUESTION ONE
a. Define the term "price ring" (2mks)

b. Outline two factors that would ensure successful implementation of a price ring. (4mks)

c. Distinguish between a "price ceiling" and a "price floor". (4mks)

d. Highlight the effects of instituting the following in an economy:
i. Price floor. (5mks)
ii. Price ceilings (5mks)

QUESTION TWO
a. Distinguish between "near money" and "money substitutes". (4mks)

b. Explain four factors that would limit the effectiveness of fiscal policy instruments in developing countries. (8mks)

c. Define the term "inflation". (2mks)

d. Explain the effects of inflation on the functions of money in an economy. (6mks)

QUESTION THREE
a. Using a well labelled diagram, explain the concept of the regressive demand curve. (6mks)

b. Explain how the government could influence the allocation of economic resources in a country (10mks)

c. Outline four advantages of a controlled market system. (4mks)

QUESTION FOUR
Distinguish between the following sets of terms:

a. Depreciation and devaluation of a currency. (4mks)

b. Expansion path and price consumption curve. (4mks)

c. Transfer payments and transfer earnings. (4mks)

d. Balance of trade and terms of trade. (4mks)

e. Gross national product at market price and net national product at factor cost. (4mks)

QUESTION FIVE
Maji Mazuri Water and Sewerage Company Limited is the only water service provider in Mjini City. The company supplies water to two distinct markets; domestic and commercial users.

The demand for the company's product in the two markets is represented by the following equations:

Q1 = 101 - 0.5 P1

Q2 = 160.4 - 0.2 P2

Where:
Q1 = Output sold to domestic users.
Q2 = Output role to commercial users.
P1= Price charged to domestic users.
P2= Price charged to commercial users.

The unit cost of the company is given by the function:

C = 160 + 2Q + (18Q)Q

The total demand for the company's output is given by the equation: Q= 200 - 4P

Required:

a. The profit maximising level of output for the two markets. (6mks)

b. Prices to be charged in the two markets. (2mks)

c. The amount of profit the firm would earn if it sold the product at a single price in the two markets and if it discriminates the price charged in the two markets. (8mks)

d. The price elasticity of demand for each of the two markets at equilibrium price and quantity. (4mks)

QUESTION SIX
a. Explain the relationship between the short-run and the long-run average cost curves of a firm. (4mks)

b. State the law of diminishing marginal utility. (2mks)

c. With the aid of a well labelled diagram, explain the law of diminishing marginal utility. (6mks)

d. Highlight the barriers to occupational mobility of labour. (8mks)

QUESTION SEVEN
a. Define the term "unemployment" (2mks)

b. Explain five reasons why unemployment is a major policy issue in developing countries. (10mks)

c. Outline the limitations to the cardinal approach in measuring utility (8mks)

Economics Question Paper

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