W1-2-60-1-6 JOMO KENYATTA UNIVERSITY University Examinations 2013/2014 ‘YEAR I SEMESTER I EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE/BACHELOR OF PURCHASING AND SUPPLIES MANAGEMENT/ ‘BACHELOR OF BUSINESS INFORMATION TECHNOLOGY/ BACHELOR OF ‘SCIENCE HBC 2107; INTRODUCTION TOMICROECONOMICS DATE: APRIL 2014 ‘TIME: 2 HOURS INSTRUCTIONS: ANSWER QUESTION ONE (COMPULSORY) AND ANY OTHER TWO QUESTIONS. (QUESTION ONE (30 MARK: (e) Distinguish between the following terms: i) Scarcity and choice (4 marks) ii) Diminishing marginal utility and diminishing marginal product (4 marks) (©) Given the following elements functions: Qa 6P*—8 and Qu = 86 ~ Pi where P represents Price and Q is Quantity ‘REQUIRED: 3) Which of the two functions (Qe Qs) represents a demand curve, supply curve and why? (6 marks) #8) Determine the equilibrium value of price and quantity. (6 marks) 4) Explain with the aid of a diagram, the effect on the demand and supply function indicated in (a) above of a simultaneous increase in cost of production and a decrease in the price of a complementary goods,QUESTION TWO _ (20 MARKS) (e) Explain the characteristics of the following worker stractures: i) Perfect competition (S marks) i) Oligopoly (S marks) (0) Using a well illustrated diagram describe how a consumer attain equilibrium using the ordinal approach. (10 marks) QUESTION THREE (20 MARKS) (a) Explain the advantages of free market economy over planned economy. (10 marks) (0)' Write short notes on the following processes: 4) Nationalization 4) Privatization (10 marks) QUESTION FOUR_(20 MARK: (2) 3) What is meant by the term “Production function"? (2 marks) 1) Explain why three forms of production function. (6 marks) 4il) Giving appropriate examples, explain the term “fixed factor of production” (@ marks) (0) Explain and illustrate the resultant hypothetical total and marginal production curves in an economy with only two factors of production, ‘one of which is fixed. (10 marks) (QUESTION FIVE (20 MARKS) (2) i) Distinguish between price floors and price ceiling. (4 marks) ii) Explain the consequences of each situation in (a) (i) above. (8 marks) (0) Discuss the various measures undertaken by authority to control the effects of monopoly. (@ marks)