6 TIME: 3 HOURS INSTRUCTIONS: Answer four questions in all Section A is compulsory: answers to this section should be concise and precise Answer three questions from section B SECTION A (40 marks) 1. (a) (i) What is meant by opportunity cost. (1mk) (ii) Outline any three merits of opportunity cost concept to the producer .(3mrks) (b) (i) Distinguish between market price and equilibrium price. (2mks) (ii) Give any two uses of price in an economy. (2mks) (c) (i) Distinguish between composite demand and derived demand. (2mks) (ii) Mention any two commodities with composite demand. (d) (i) Distinguish between labour demand and labour efficiency. (2mks) (ii) Mention any two limitations of labour efficiency in an economy.(2mks) (e) (i) Distinguish between vertical merging and horizontal merging of firms. (2mks) (ii) Outline any two limitations of firm merging in an economy. (2mrks) (f) (i) Distinguish between explicit costs and implicit costs. (2mks) (g) Study the table below and answer the questions that follow. Income 10,000 25,000 (i) (ii) Quantity demanded of commodity x 5kgs 2kgs

Calculate income elasticity of demand for commodity x. (2mks) What type of commodity is x and why? (2mks)

(h) (i) What is meant by investment multiplier? (1mk)

(ii) Outline any three limitations of investment multiplier in an economy.(3mks) (i) (i) Distinguish between seasonal and open-urban unemployment. (2mrks) (ii) Give any two causes of seasonal unemployment in an economy. (j) (i) Distinguish between partial planning and comprehensive planning.(2mks) (ii) Outline any two merits of partial planning in an economy. (2mks) SECTION B (60 marks) 2. Explain the merits and demerits of price mechanism in an economy (12mks) (b) How can the defects of price mechanism in an economy. (8mks) 3. (a) Distinguish between price elasticity of demand and income elasticity of demand. (4mrks) (b) Explain the factors influencing price elasticity of demand in an economy. (16 mks) 4. (a) Explain the role of capital in economic development of a country.(10mks) (b) Explain the factors limiting capital accumulation in an economy.(10mks) 5. (a) Account for rise of monopoly power in an economy. (10 mks) (b) What are the implications of monopoly power in an economy? (10 mks) 6. (a) Distinguish between per capital income and personal income. (4mks) (b) What are the limitations of using per capital income as a measure of standard of living in an economy? (16mks)


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