Proposed HND Questions 2015

Economics

Time allowed 2 Hours

1. A) State the law of supply and lists 4 determinants of supply (2.5 marks)

b) Define income elasticity of demand and calculate the income elasticity of demand for a
product whose demand moved from 400 to 500 units following a change in consumers’
income from 60000 to 100000fcfa and qualify the nature of the elasticity (2.5marks)

2. The table below contains costs and revenue items of an agro-pastoral entrepreneurs’
poultry farm .Examine it and answer the questions that follow (5marks)

Item value
Bought feed 500000fcfa
Bought drugs 50000fcfa
Bought Day-old 400000fcfa
Paid temporal workers 200000fcfa
Paid permanent workers 300000fcfa
Depreciation on equipment and building 150000fcfa
Sold fowls 2500000fcfa
Sold manure 200000 fcfa
Calculate

a) Total variable cost

b) Total fixed cost
c) Gross Margin
d) Profit
e) Total cost

3. a) Define Marketing (1mark)

b) Give and explain 4 characteristic factors that affect the marketing of agricultural products
(4marks)

4. a) what is market segmentation? (2.5 marks)

b) State the law of diminishing returns and say when profits are maximized under this
condition (2.5marks)
 Marking Guide

1.a)The law of supply states that the quantity supplied of a commodity increases as the price
increases. It also implies that the quantity supplied decreases as the price decreases. In other
words the prices and quantities supplied are directly related.

b) Income elasticity of demand is the degree of responsiveness of demand to changes in

consumers’ incomes

Income elasticity of demand EY can be calculated using the following formula

100 60000
EY = x =0.375
40000 400

This implies that EY is inelastic and the product is a necessity

2. a) 1150000fcfa

b) 450000fcfa

c) TR-VC=2700000-1150000 =1550000fcfa

d) TR-TC=2700000-1600000=1100000fcfa

e) 1600000fcfa

3.a)Marketing refers to all the activities involved in the movement of goods from the producer
till the goods reach the final consumer. Such activities may include production, transportation,
storage, processing, advertisement etc

b) Four characteristic factors affecting the marketing of agricultural products include

 Perishability: most farm produce are perishable in nature and the period of
perishability varies from a few hours to a few months.
 Bulkiness: bulkiness makes transportation and storage of agric products difficult and
expensive. Price spread in bulky products is higher because of higher cost of
transformation and storage.
 Seasonality: most farm products are produce in a particular season and not throughout
the year. During harvest prices fall.
 Price fluctuation:

4. a) Market segmentation involves the grouping of the consumers of a product in to various

groups or categories depending on location, income, culture, demand etc.This grouping of
consumers can help the marketer to decide the strategy to employ in each segment to improve
sales
b) The law of diminishing returns states that as more and more of a variable factor (s) of
production is used in combination with fixed factors marginal product increases and reaches a
maximum becomes constant and finally starts falling. Under such a condition, profits are
maximized at the production level where MC=MR