CONFIDENTIAL BM/JUL 2017/ECO415 Zz) UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION -—— COURSE ECONOMICS COURSE CODE ECO415 EXAMINATION JULY 2017 TIME 3 HOURS INSTRUCTIONS TO CANDIDATES 1, This question paper consists of two (2) parts: PART A (2 Questions) PART B (4 Questions) 2 ‘Answer ALL questions from PART A and any three (3) from PART B in the Answer Booklet Start each answer on a new page. 3 Do not bring any material into the examination room unless permission is given by the invigilator. 4 Please check to make sure that this examination pack consists of: ’) the Question Paper. ji) an Answer Booklet ~ provided by the Faculty. 5. Answer ALL questions in English DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 4 printed pages ‘© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, PARTA QUESTION 1 TABLE 1 PRICE ELASTICITY OF DEMAND FOR GOODS AND SERVICES BM/JUL 2017/ECO415 Basket of goods and se Basket 1 Airline travel Restaurant meals Fresh fish New cars| Basket 2 Cigarettes | Coffee Gasoline Electricity Source: The Economy Today (Schiller) a) Define price elasticity of demand. (2 marks) ii) Determine and explain the price elasticity of demand for goods and services in Basket 1 and Basket 2. (4 marks) b) i) Sketch the demand curve to show the elasticity of demand for goods and services in Basket 2 (1 mark) ii) Discuss two (2) factors that influence its elasticity. (4 marks) c) Using a diagram explain the effect of a decrease in income on the market for new car. (4 marks) d) If price of fresh fish keeps on increasing in the market, discuss the type of price control that the government can use to control the increasing price of fresh fish. (5 marks) (© Hak Cipta Universiti Teknologi MARA. CONFIDENTIALCONFIDENTIAL 3 BM/JUL 2017/ECO415 QUESTION 2 Malaysia inflation rate to remain manageable this year KUALA LUMPUR (Bernama) - The headline infiation rate is expected to remain manageable at between 2.0 and 2.5 per cent level for this year compared to 2.1 per cent in 2015 on weak pressure to inflation. RHB Research Institute said the pressure would likely be mitigated by the continued low energy and commodity prices, coupled with a slowdown in domestic demand. “Slower consumer spending, a downturn in the property sector and elevated household debt, will likely place a lid on inflation pressure going forward,” the research house said in a note. RHB Research expects the adjustments in administered prices and the weaker ringgit exchange rate to likely push up prices of imported goods and exert some upward pressure on inflation this year. The end of a moratorium on profit margins following the implementation of the Goods and Services Tax would likely exert some price pressure on goods and services in the second half of 2016 as well. Since end-2015, domestic retail fuel prices have seen a sharp reduction of about between 18 and 29 per cent in the first quarter of this year (1Q16). But, a subsequent recovery in global oil prices to above $40 per barrel has resulted in a 5.1-14.8 per cent hike in domestic fuel prices in April Last Friday, the Statistics Department announced that the Consumer Price Index (CPI), used to gauge inflation, improved from 2.6 per cent year-on-year in March to 2.1 per cent in April, the slowest yearly increase since May last year. Source: Bernama, 24" May 2016 a) _ Define inflation and explain the importance of Consumer Price Index. (4 marks) b) Briefly explain what would happen to the value of money when price level increases. (2 marks) c) Identify and discuss the types of inflation that may occur when imported raw material and fuel prices increase. (4 marks) d) Government can obtain revenue from many sources. Explain the important source of government revenue mentioned in the above article. ( marks) €) __ Discuss two (2) monetary tools Bank Negara Malaysia can use to control the effect of inflation. (5 marks) (© Hak Cipta Universiti Teknolog! MARA, CONFIDENTIALCONFIDENTIAL 4 BMIJUL 2017/ECO415 PARTB QUESTION 1 ) Define economics and discuss the four (4) main factors of production. (10 marks) b) Explain four (4) factors that influence price elasticity of supply (10 marks) QUESTION 2 a) With an illustration, discuss the average cost, average fixed cost, average variable cost and marginal cost curves in a production. (12 marks) b) —i)_~—_Explain how the market equilibrium is determined, (4 marks) ji) If the market is not at equilibrium briefly elaborate the two (2) problems that the market may experience. (4 marks) QUESTION 3 8) Using appropriate diagrams explain the differences between the demand curve of a monopolist and monopolistic competition. (10 marks) b) Discuss the appropriate type of monetary and fiscal policy to reduce unemployment in the economy. (10 marks) QUESTION 4 a) Despite several problems, Gross Domestic Product (GDP) is among the most popular indicator to measure the state of an economy. 1) Define Gross Domestic Product. (2 marks) li) Discuss any three (3) shortcomings related to GDP. (9 marks) b) Elaborate three (3) reasons why countries trade with one another. (9 marks) END OF QUESTION PAPER (© Hak Cipta Universiti Teknolog! MARA CONFIDENTIAL,