MERU UNIVERSITY OF SCIENCE AND TECHNOLOGY

P.O. Box 972-60200 – Meru-Kenya.

Tel: 020-2069349, 061-2309217. 064-30320 Cell phone: +254 712524293, +254 789151411
Fax: 064-30321
Website: www.must.ac.ke Email: info@must.ac.ke

University Examinations 2015/2016

FIRST YEAR, SPECIAL/SUPPLEMENTARY EXAMINATION FOR THE DEGREE OF

BACHELOR OF COMMERCE

BEC 3102: PRINCIPLES OF MICRO - ECONOMICS

DATE: OCTOBER, 2016 TIME: HOURS

INSTRUCTIONS: Answer question one and any other two questions.

QUESTION ONE (30 MARKS)

a) Using economic theory tools, clearly differentiate between the following terms; (10 Marks)
(i) List of want and scale of preference
(ii) A movement and a shift in the demand curve
(iii)Total utility and marginal utility
(iv) Microeconomics and macroeconomics
(v) Normative and positive economists
b) Discuss the factors that can influence the demand for a commodity in the market.
(10 Marks)
c) With the help of a diagram, explain what happens if the government set prices for a
commodity;
(i) Above the equilibrium price (5 Marks)
(ii) Below the equilibrium price (5 Marks)

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QUESTION TWO (20 MARKS)

a) Given the following;

Demand function ; 𝑄𝑑 = 3550 – 266P

Supply function 𝑄𝑠 = 1526 + 240𝑃

Determine the equilibrium price and quantity. (5 Marks)

b) Discuss the three stages of production. (9 Marks)

c) Explain the short run equilibrium of a firm under perfect competition. Illustrate your
answer. (6 Marks)

QUESTION THREE (20 MARKS)

Given the following information;

Price 10 20 30 40 50 60 70 80 90
Quantity 90 80 70 60 50 40 30 20 10
Demanded

a) Calculate the point elasticity of demand at price Ksh.80 (5 Marks)

b) Calculate arc price elasticity of demand when price rises from Ksh 30 to Ksh 90
(5 Marks)
c) Discuss four differences between perfect competition and monopoly market structures.
(4 Marks)
d) Explain the concept of return to scale. Discuss the three types of returns to scale(6 Marks)

QUESTION FOUR (20 MARKS)

a) Using a well labeled diagram explain the relationship that exist between average total cost,
average variable cost and marginal cost. (12 Marks)
b) Explain the basic assumptions of the ordinal approach consumption theory. (8 Marks)

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QUESTION FIVE (20 MARKS)

a) There exist situations where demand may slope upwards instead of downwards. Give
reasons for the existence of such demand curve. (6 Marks)
b) Using well labeled diagrams derive the demand curve using the indifference curve
approach. (10 Marks)
c) What are the properties of isoquant curves? (4 Marks)

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