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Econ 110: Introduction To Microeconomics Y1s1 Question Paper

Econ 110: Introduction To Microeconomics Y1s1

Course:Bachelor Of Science In Economics And Mathematics

Institution: Kabarak University question papers

Exam Year:2008

COURSE CODE: ECON 110
COURSE TITLE: INTRODUCTION TO
MICROECONOMICS
STREAM: Y1S1
INSTRUCTIONS:
1. Answer QUESTION ONE and any other TWO questions
2. Answer any other two (2) questions
3. Clear, concise illustrations are encouraged.
Q1. (COMPULSORY) 30 Marks
(a) Write brief notes on the following concepts:
(i) The economic problem (2mks)
(ii) “Close-down” point (provide an illustration) (2mks)
(iii) Complimentary goods (draw and indifference curve) (2mks)
(iv) Perfect mobility of factors (2mks)
(v) Diminishing marginal utility (2mks)
(b) (i) Define demand function (2mks)
(ii) With respect to demand explain the term ³Ceteris paribus´ (2mks)
(iii) With relevant examples explain the effect of the following changes on the
demand for beef:
a) A fall in the price of beef (1mk)
b) A health campaign which claims that beef makes you fat (1mk)
c) A rise in the price of substitutes of beef (1mk)
d) A fall in the price of substitutes (1mk)
e) A fall in the price incomes of consumers (1mk)
f) A rise in the wages of beef workers (1mk)
(iv) Differentiate between the following paired concepts
a) Variable costs and fixed costs (2mks)
b) Change in quantity demand and shift in demand (2mks)
c) Marginal utility and marginal productivity (2mks)
d) Budget line and budget space (2mks)
e) MRSxy and MRTSLK (2mks)
Q 2 (a) Define an indifference curve and give four of its characteristics (5mks)
(b) Show that indifference curves are non-intersecting (2mks)
(c) Why is it important that the indifference curve slopes downward from left
to right? (3mks)
(d) Using indifference curves analysis, show the effect of a change in the
price of commodity x (a normal good) while the price of commodity y is
held constant (10mks)
Q 3 Define supply and four factors that affect it (5mks)
Consider the following supply and demand schedules
Price Quantity demanded Quantity supplied
(Kshs.) (Kgs.) (Kgs.)
45 10 140
40 35 120
30 60 100
25 75 75
20 80 60
15 100 40
10 140 25
(a) Required
` (i) Plot the supply and demand curves associated with the supply and
demand schedules above (3mks)
(ii) If the market price were at Kshs. 40 what would you expect to
happen to price and why? (3mks)
(b) Using demand and supply analysis to explain the changes in equilibrium
price and quantity of each of the following cases:
(i) Beef following incidences of cattle rustling and an epidemic which
reduce livestock population (3mks)
(ii) Flowers on the day before valentine day(14th February) (3mks)
(iii) Milk in Nakuru following skirmishes that affect transportation
(3mks)
Q 3 (a) Define a production isoquant (2mks)
(b) Define production function (2mks)
(c) When would a producer be considered rational? (2mks)
(d) Discuss the differences between diminishing marginal returns and returns
to scale (4mks)
(e) Define and indicate the various types of economies of scale (6mks)
(f) What factors influence economies of scale? (4mks)
Q 4 (a) Define price elasticity of demand (2mks)
(b) Indicate three determinants of price elasticity of demand (3mks)
(c) Briefly describe three economic applications of the concept of elasticity of
demand (3mks)
(d) Explain why the prices of primary commodities tend to fluctuate more
than those of manufactured goods. (3mks)
(e) Differentiate between cross-price elasticity of demand and arc elasticity of
demand (4mks)
Q 5 (a) Briefly discuss the major differences between a perfectly competitive
market and pure monopoly in terms of:
(i) The demand curve facing each firm (5mks)
(ii) Utilization of resources (5mks)
(iii) Management decisions (5mks)
(b) Which of the above market systems would you prefer? Justify your
answer (5mks)

Econ 110: Introduction To Microeconomics Y1s1 Question Paper

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