BUSS101  INTRODUCTION TO MICRO ECONOMICS .

UNIVERSITY EXAMINATIONS: 2018/2019
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS AND
INFORMATION TECHNOLOGY
BUSS101 INTRODUCTION TO MICRO ECONOMICS
FULLTIME/PARTTIME/DISTANCE LEARNING
DATE: AUGUST 2019 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One & ANY OTHER TWO questions.

QUESTION ONE
a) Outline any THREE characteristics of the indifference curves (6 Marks)
b) The table below shows the demand and supply schedules for a
product. Price (Sh. Per Kg.) Demand (Kg) Supply (Kg.)

Required:
Plot the demand and supply curves and determine the equilibrium price and quantity.(8 Marks)
c) With the aid of a well labled diagram, explain the profit maximizing position of a monopoly
in the short run .Does this position change in the long run? Explain (8 Marks)
d) Distinguish between the following terms as applied as applied in economics:
i) Scarcity and choice (2 Marks)
ii) Law of variable proportions and law of demand (2 Marks)
iii)Giffen good and inferior good (2 Marks)
iv) Marginal revenue and marginal cost (2 Marks)
(Total:30 Marks)
QUESTION TWO
a) Given that:
Qy = 9 – 0.5P
Qx = 8 + 0.5P
Required:
Identify which of the two functions is a demand and a supply function. (4 Marks)
b) Explain the importance of the concept of elasticity of Demand Citing the Factors that
influences elasticity of demand (10 Marks)
c) Using a well labled diagram, explain the long run equilibrium position of a firm in a
monopolistic market (6 Marks)
(Total:20 Marks)
QUESTION THREE
(a) Using examples discuss the various factors of production? (6 Marks)
(b) Given the demand function Qd= _4,000P+2000Y+0.08POP+1,800,000C+0.06A, determine the point price
elasticity of demand at the point where,
i)Price of product is sh,4,000 and Quantity demanded is 6,000,000 units (3 Marks)
ii) price of product is sh.4,500 and quantity demanded is 4,000,000 units (3 marks)
iii) Using the results in b(i) and (ii) above compute the Arc price Elasticity of demand (3 Marks)
C) Highlight three types of market equilibrium (8 Marks)
(Total:20 Marks)
QUESTION FOUR
(a) With the aid of a well labled diagram, explain the three stages of the law of variable
proportions (8 Marks)
(b) Given a firm’s demand function Q – 90 +2P = 0 and its average cost function AC
= Q2 – 8Q + 57 + 2/Q, determine the level of output which maximizes profits
(8 Marks)
(c) Illustrate and clearly explain the nature of indifference curves for perfect substitutes and for
Complementary goods (4 Marks)
(Total:20 Marks)
QUESTION FIVE
(a) Outline any Four characteristics of an Oligopolistic market structure (4 Marks)
(b) Write brief notes on the following terminologies as applied in economics
i) Positive Economics (4 Marks)
ii) Ordinal approach (4 Marks)
iii) Returns to scale ( 4Marks)
(c ) Discuss the importance of economics knowledge to any individual ( 4 Marks)
(Total: 20
Marks)

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