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Aec 100 Elements Of Microeconomics Question Paper

Aec 100 Elements Of Microeconomics

Course:Bachelor Of Commerce

Institution: Pwani University question papers

Exam Year:2012

Pwani University
Degree for Bachelor of commerce
INSTRUCTIONS
Answer question one and any other three
QUESTION ONE
a) Distinguish between the following parts or concepts. Use diagrams where necessary.
i) Marginal revenue and Marginal cost.(3mks)
ii) Economic rent and Transfer earning of a factor of production (3mks)
iii) Consistency and transitivity in consumer theory (3mks)
iv) Demand curve and Engel curve(3mks)
V) Cardinal and ordinal utility (3mks)
b) With the help of a diagram, uses a brief description to distinguish between income and substitution effects of a fall in price for a normal good. (6mks)
c) Given the following expression in the theory of the firm
p=R-C
Where p=profit, R=total revenue and C=total cost
State the necessary and sufficient conditions for equilibrium of the firm (4mks)
QUESTION TWO
a) With the help of a well labeled diagram, explain the consumer equilibrium in the ordinalist approach to utility analysis (10mks)
b) Bongotex spends kshs.3to purchase an extra satisfaction of 15 units. He spends kshs.5 to purchase him extra satisfaction of 25 units
Required
i) State the equilibrium condition for Bongotex assuming that he consumes the two commodities only (2mks)
ii) Is Bongotex operating at equilibrium point? Explain. (3mks)

QUESTION THREE
Given the following demand and supply functions for commodity x;
Px=37-3Qdx
Qxs=2Px-18
WHERE Px-PRICE, Q=QUANTITY

REQUIRED
i) Determine the equilibrium price and quantity (4mks)
ii)What is the effect of setting a maximum price of commodity x at kshs 10 per unit and at kshs 15per unit (give reasons) (4marks)
iii) Compute price elasticity of demand for commodity x at equilibrium (4mks)
iv) With the aid of a diagram show the effect on the equilibrium point if the price of commodity y which is close substitute of commodity x increases (3mks)
QUESTION FOUR
a) Use indifference curve theory to derive consumers demand curve for a given commodity (6mks)
b) With the aid of diagrams, describe the characteristics of the three stages of production (5mks)
c) Give a critique of the indifference curves approach (4mks)
QUESTION FIVE
a) Using an illustration, explain the meaning of market demand (4mks)
b) What is meant by price mechanism? Discuss the advantages and disadvantages of price mechanism (7mks)
c) Briefly discuss mechanism and resource allocation in both free and controlled economy (4mks)
QUESTION SIX
a) Explain the concept of equilibrium of an industry (4mks)
b) Explain with an illustration how price is determined under monopoly (5mks)
c) What is price discrimination? Is it justified? Give the conditions necessary for successful price discrimination (6mks)

Aec 100 Elements Of Microeconomics Question Paper

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