P220

Economics
Paper 1 & 2
3 Hours Economics Examination
Topic: Price Theory
Instructions
Answer five questions only.
Section A is compulsory. Answers to section A should be concise.
Answer four questions in section B.
All questions in section B carry equal marks.
Credit will be given for the use of relevant diagrams where necessary.
For Examiners’ use only
Question Answered Marks Examiners’ initials
1

TOTAL

© Economics Department
 SECTION A (20 MARKS)
Answer all parts of this question
1. (a) (i) Distinguish between resale price maintenance and reserve price. (02 marks)
(ii) Give two uses of price in Uganda. (02 marks)
(b) (i) Given that the price of a commodity Y decreased from shs. 15,000 to
Shs. 10, 000 and quantity demanded of a related commodity Z increased from
200,000 kg to 600,000 kg; calculate the cross elasticity of demand for
commodity Z. (02 marks)
(ii) State the relationship between commodities Y and Z. (02 marks)
(c) (i) Distinguish between income elasticity of demand and price elasticity
of demand. (02 marks)
(ii) What is the importance of income elasticity of demand in Uganda?
(02 marks)
(d) (i) State the law of demand and supply. (02 marks)
(ii) Give two regressive cases to the law of demand. (02 marks)
(e) (i) Distinguish between producer’s surplus and consumer’s surplus. (02 marks)
(ii) Given that the market price of a commodity is shs. 65,000; calculate the
producer’s surplus in the table below. (02 marks)
Price 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000
Supply 1 2 3 4 5 6 7 8

SECTION B (80 MARKS)

Answer four questions from this section
2. (a) Discuss the implications of relying on the price mechanism in the
allocation of resources. (14 marks)
(b) What are the limitations of price mechanism in allocation of resources?
(06 marks)
3. (a) Why do prices of agricultural products fluctuate? (12 marks)
(b) What are the effects of agricultural price fluctuations in Uganda?
(08 marks)
4. (a) Distinguish between a change in demand and a change in quantity
demanded. (04 marks)
(b) Explain the causes of change in demand for a commodity in an economy
(16 marks)
5. (a) Distinguish between competitive supply and joint supply. (04 marks)
(b) Explain the conditions that may lead to a decrease in supply of a commodity in
Uganda. (16 marks)
6. (a) Why may government impose price controls in an economy? (08 marks)
(b) Assess the consequences of price controls in an economy. (12 marks)
7. (a) Distinguish between elasticity of demand and elasticity. (04 marks)
(b) Examine the factors that influence elasticity of demand. (16 marks)

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