UNIVERSITY EXAMINATION 2017/2018

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

BEC/BECF/BECS/BSFS/BBM/BCOM
VIRTUAL VARSITY

UNIT CODE: BED1101 UNIT TITLE: INTRODUCTION TO MICRO

ECONOMICS

DATE: APRIL 2018 SPECIAL/SUPPLEMENTARY TIME: 2 HOURS

INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO QUESTIONS

1. a) Distinguish between the following commodities giving example of each.

i) Giffen goods and inferior goods (3 Marks)
ii) Complimentary and substitute goods (3 Marks)
iii) Normal goods and necessity goods (3 Marks)

b) Describe 3 features of controlled economy. (3 Marks)

c) Explain the application of equilibrium and disequilibrium analysis. (6 Marks)

d) Using the following information determine the price elasticity of demand and
state which type of elasticity of demand.
Price Quantity
Point A ksh 3.01 4.00
Point B ksh 3.00 4.10 (6 Marks)

e) Give reasons why government may find it necessary to control the prices of
certain goods and services. (6 Marks)

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 2. a) Describe the nature of market equilibrium and disequlibrium (10 Marks)

b) Consider a market described by the following equations;

Demand functions Qd=100-2p
Supply function Qs=4+4p
Required;
Determine the equilibrium quantity demanded and price (10 Marks)

3. a) Explain the slope and relationship between AC, AVC, MC and AFC curves
using relevant diagrams. (10 Marks)
b) Given a demand function P  5  1 4 Q
Required:
Calculate total revenue, marginal revenue and average revenue. (10 Marks)

4. a) Discuss the properties of indifference curve. (8 Marks)

b) State and explain different types of economies of scale. (12 Marks)

5. a) Explain factors affecting price elasticity of demand. (10 Marks)

b) Describe characteristics of monopolistic competition. (10 Marks)

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