PRINCIPLES OF ECONOMICS APRIL 2023 PAST PAPER

MONDAY: 24 April 2023. Morning Paper.                                                                        Time Allowed: 3 hours. Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.

QUESTION ONE

1. Explain the term “free market system” as used in economics           (2 marks)

Explain FOUR advantages of a free market system in an economy  (8 marks)

2. Distinguish between “price elasticity of demand” and “price elasticity of supply”.  (4 marks)

Explain THREE determinants of price elasticity of demand (6 marks)

(Total: 20 marks)

QUESTION TWO

1. (i) Using a diagram, explain the concept of indifference    (4 marks)

(ii)         Outline FOUR properties of indifference curves.   (4 marks)

2. Identify FOUR assumptions of the law of equi-marginal utility (4 marks)

3. The following information relates to the demand and supply functions of two commodities:

Required:

Determine the equilibrium price and quantity of commodities 1 and 2.   (8 marks)

(Total: 20 marks)

 

QUESTION THREE

1. Outline SIX merits associated with specialisation of labor (6 marks)

2. Explain THREE applications of the concept of consumer surplus in an economy (6 marks)

3. (i) With reference to the theory of production, define the term “mobility of a factor”.  (2 marks)

(ii)         Explain SIX determinants of the supply of a factor of production in an economy.  (6 marks)

(Total: 20 marks)

 

QUESTION FOUR

1. (i) With reference to market structure, define the term “price ring”.              (2 marks)

(ii)         State THREE factors that could lead to the success of a price ring in business. (3 marks)

2. Highlight FIVE differences between “monopolistic competition” and “monopoly market structures”. (5 marks)

3. Hazina, a medium size firm which specialises in the production of Nuts, has its determined cost structure per unit of Nuts produced as follows:

Required:

  • Compute the break-even number of Nuts that could facilitate economic profit (2 marks)
  • Determine the number of Nuts that would give a profit of 100,000. (2 marks)
  • If the price of Nut falls to 40 per Nut, determine the breakeven level of output. (2 marks)

4. Explain FOIUR factors that are responsible for wage differential between different occupations in an economy  (4 marks)

(Total: 20 marks)

QUESTION FIVE

1. The following data relates to a firm in the short-run

Required:

  • Calculate the average fixed cost and average variable cost when the firm produces 65 units  (4 marks)
  • Plot the marginal cost curve (8 marks)

2. Summarise FOUR reasons why it is necessary to measure the national income of a country  (8 marks)

(Total: 20 marks)

 

QUESTION SIX

1. With reference to Keynesian theory of money, explain THREE motives for people holding wealth in form of money (6 marks)

2. (i) Explain the term “currency devaluation”.              (2 marks)

(ii)         State THREE advantages of currency devaluation.              (3 marks)

3. With the aid of a well labelled diagram, distinguish between “shift in supply” and “movement along the supply curve”. (4 marks)

4. Outline FIVE obstacles that hinder economic development in developing countries  (5 marks)

(Total: 20 marks)

 

QUESTION SEVEN

1. (i) Explain the concept of unemployment as used in  economics           (2 marks)

(ii)         State SIX measures that could be adopted by developing countries to reduce unemployment.    (6 marks)

2. Outline FIVE roles of the central bank in an economy (5 marks)

3. Identify SEVEN factors that limit economic planning in developing countries(7 marks)

(Total: 20 marks)

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