QUESTION ONE
- (a) State the law of demand. (2mks)
- (b) Explain the applications of the concept of elasticity. (6mks)
- (c) Highlight the characteristics of a free market system. (5mks)
- (d) Distinguish between ordinal and cardinal utility theories. (4mks)
- (e) The demand and supply curves of commodity W in the market are defined by the following functions
P=100-2Qd
P=4Qs
Where Qd is the quantity demand. Qs is the quantity supplied and P is the price.
Determine the equilibrium price and quantity of W in the market. (4mks)
- (f) Following the price decrease of eggs from ksh 5 to ksh 3 per egg, the quantity demanded for eggs per day increased from 45 to 60. Calculate the price elasticity of demand. (4mks)
QUESTION TWO
- (a) Explain any three sources of monopoly power. (6mks)
- (b) Explain the exceptions of the law of demand. (6mks)
- (c) Distinguish between a normal and an inferior good. (3mks)
QUESTION THREE
- (a) Explain the properties of an indifference curve. (5mks)
- (b) With the aid of a diagram explain the stages of production. (10mks)
QUESTION FOUR
- Explain the factors of internal economies of scale. (8mks)
- Explain the concept of a kinked demand curve. (4mks)
- Explain the concept of a shift and movement in the supply curve. (3mks)
QUESTION FIVE
- Highlight the conditions necessary for profit maximization. (2mks)
- Distinguish between monopoly and monopolistic competition. (6mks)
- Illustrate the determination of normal and abnormal profits in a perfectly competitive market. (7mks)
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