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Economics Question Paper

Economics

Course:Course In Applied Agricultural Meteorology

Institution: Orbit School Of Management Studies question papers

Exam Year:2007

CPA PART I
CPS PART I
ECONOMICS

Answer any FIVE questions.
ALL questions carry equal marks.

QUESTION ONE
a. Define the term "consumer rationality" and outline the conditions that must be fulfilled for consumer rationality to exist (6mks)

b. Using indifference curves, derive the demand curve for a normal good (6mks)

c. With the aid of a labelled diagram, distinguish between the income effect and substitution effect of a change in the price of a normal good (8mks)

QUESTION TWO
a. State the classical quantity theory of money (2mks)

b. Briefly explain the criticisms to the classical theory of interest rate determination (8mks)

c. Discuss the economic impact of increased money supply in an economy. (10mks)

QUESTION THREE
a. Define the term "opportunity cost" (2mks)

b. Describe five circumstances under which the concept of opportunity cost is applied in an economy. (10mks)

c. Using an illustration, explain the concept of market equilibrium in economics. (8mks)

QUESTION FOUR
Write explanatory notes on the following terms:
a. Transfer earnings (4mks)

b. Transfer payments (4mks)

c. Trade creation. (4mks)

d. Deflationary gap (4mks)

e. Veblen goods. (4mks)

QUESTION FIVE
a. Define the term "marginal factor cost" (2mks)

b. A middle level college intends to introduce a new course from January 2008. The college estimates that it will incur fixed costs of Sh. 2.4 million per annum and an average annual variable costs of Sh. 8,000 per student to run the course.

Required:
i. The number of students the college should enrol in order to breakeven if it intends to charge annual fees of Sh. 40,000 per student. (4mks)

ii. Using the level of enrolment obtained in (i) above, compute the level of expected total revenue and total cost of the college (4mks)

iii. With the aid of an illustration, describe the impact of a newly imposed levy on wood and wood products to the costs and the breakeven point of enrollment in the college. (6mks)

c. Describe the shut down price of a firm in the short-run (4mks)

QUESTION SIX
a. Briefly explain the concept of balance of payments (3mks)

b. Identify five factors that have led to the problem of unfavourable balance of payments in opt developing economies (5mks)

c. Import substitution is a strategy that could be adopted to correct the unfavourable balance of payments in most of the developing economies.
Discuss the advantages of adopting the import substitution strategy to correct unfavourable balance of payments in developing economies. (12mks)

QUESTION SEVEN
a. Define the term "collective bargaining" and identify factors that form the basis for wage increase claims by representatives of labour unions (10mks)

b. Using trade-off between leisure and work argument, explain why workers should be paid higher wages for working overtime (6mks)

c. List four reasons why agricultural wages tend to be lower than industrial wages (4mks)

QUESTION EIGHT
Country X is currently ranked as a developing economy. In order to enhance economic growth, the Government of Country X has come up with an economic recovery strategy paper geared towards realising economic development by the year 2030.

Discuss factors that might hinder Country X from realising this objective and measures that it should put in place to overcome these impediments. (20mks)

Economics Question Paper

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