1. The information provided below represent the demand and supply functions of a product.

Use it to
answer the questions that follow:
Qs = 4P Qd = 42 – 3P
(a) Calculate the quantities demanded and supplied in kg at the following prices:
(i) 10.00; (iii) $13.00.

(b) Determine the equilibrium price and quantity of the product in the market.
(c) Suppose the demand function changed to Qd = 50 – 3P
(i) Using the equilibrium price obtained in (b) calculate the quantity demanded.
(ii) Using your answer in c (i), explain whether the function represents an increase or decrease
in demand.
(d) Suggest two reasons that might have caused such a change in (c).
2. A dealer in deep freezers increased the price of his product from $450 to $500 and sales dropped from
800 units to 600 units a week.
Use the information above to answer the questions that follow.
(a)(i) Calculate the price elasticity of demand
(ii) What type of elasticity is it? Explain your answer
(b)Calculate the
(i) total revenue of the company before and after price increase; (ii) change in total revenue.
(c) What is the effect of the increase in price on the total revenue?
(d)State two factors influencing the price elasticity of demand.
3. The market for apples is represented by the following demand and supply functions:
Qd = 30 – p; Qs = 15 + 2p.
(a) Prepare a demand and supply schedule for the market, given the prices $2.00, $4.00, and $7.00.
(b) (i) Determine the equilibrium price and equilibrium quantity of apples in the market.
(ii) If the price of an apple is fixed at $3.00, what will be the excess demand or excess supply?
(c) Suppose the demand function changed to Qd = 40 – p. Using the prices in (a) above:(i) prepare a new
demand schedule;
(ii) does it represent an increase or a decrease in demand? (iii) explain your answer in (c) (ii) above.
4. The tables below show the budget of a country in 2010. Study it and answer the questions that follow:
Table 1.0 Table 2.0
Revenue $ million
Expenditure $ million
Company tax 60
Workers’ salaries 150
Excise duties 35
Electrification Project 120
Taxes on exports 90
Fuel and Maintenance of official 80
Fines and licences 15 vehicles
Income tax 50 General Administration 75
Import duties 10 Construction of new stadium 100
Royalties 20
(a) How much did the country collect as:
(i) indirect tax; (ii) direct tax; (iii) non-tax revenue?
(b) Calculate the:
(i) recurrent expenditure; (ii) capital expenditure; (iii) budget surplus or deficit for the year
 (c) Explain two effects of either the budget surplus or the budget deficit identified in (b)(iii) above.

5. The utility schedule of a consumer for a brand of ice cream is shown in the table below. Use the
information to answer the questions that follow:
Units consumed Total utility (TU) Marginal utility
(MU)
0 0 —
1 10 10
2 19 R
3 P 6
4 30 5
5 31 S
6 Q 0
7 29 -2

(a) Calculate the values of P, Q, and S.

(b) Given that the price of ice cream is $ 1.00 per unit, at what level of consumption is the consumer in
equilibrium? Explain your answer.
(c) Use a graph sheet, draw the marginal utility curve.
(d) State the law of diminishing marginal utility.

6. The diagram below illustrates the short run equilibrium position of a perfect competitor. Use it to answer
the questions that follow:

a. (i) At what point does the perfect competition maximize profit?

Give a reason for your answer. [4 marks]
(ii) What does the rectangle PMNC represent in the diagram? [2 marks] (iii) What happens to the rectangle
PMNC in the long run?
Give a reason for your answer. [4 marks]
(iv) What does the curves X and Y represent in the diagram? [2 marks]
(v) Which of the diagram represent the total revenue of the perfect competitor? [2 marks]

b. calculate the profit of the perfect competitor if price is $9.00, output is 80kg and cost per unit is $5.00.
7. Table 1 below shows the distribution of the population of a country in various occupations. Study it and
answer the questions that follow.
Table 1
 Occupation Total
Shoe Production 30 Million
Banking 37 Million
Fish Processing 19 Million
Warehousing 12.2 Million
Mining 16.1 Million
Fish Farming 10.8 Million
Food Crop Production 15.6 Million
Baking 19 Million
Laundry 10.3 Million
(a) Calculate the size of the entire labour force in the country.

(b) What percentage of the labour force is engaged in the:

(i) Primary sector; (ii) Secondary sector; (iii) Tertiary sector?

(c) Calculate the ratio of the workers in mining to the workers in shoe production.

(d) Calculate the percentage of the people engaged in warehousing.

(e) (i) Identify the type of economy depicted in the table. (ii) Give a reason for your answer in e(i).
8. Table 2 below shows the unit prices and quantities of hats produced by a firm. Study it and answer the
questions that follow.
Table 2

Quantity Unit Price ($) Total Revenue Marginal Average

Revenue Revenue
10 180 1,800 – 180
20 150 3,000 120 X
30 U 3,600 60 120
40 100 V W Y
50 80 4,000 0 80
60 60 3,600 -40 60
(a) Compute the values of U, V, W, X and Y.

(b) In what type of market is the firm operating? Explain your answer.

(c) If the firm’s marginal cost is $60.00 at all levels of output, at what level of output will it be in
equilibrium? Explain your answer.

(d) If a total cost of $600.00 is incurred when 50 units of hats are produced, determine the margin of profit or
loss made.

(e) What is another name for marginal cost?

 9. The table below shows the composition of exports and imports in a hypothetical country. Use the
information in the table to answer the questions that follow.
Exports Amount $ Imports Amount $

Crude oil 120,000,000 Rice and flour 140,000,000

Groundnuts 40,000,000 Petroleum product 30,000,000

Tourism 45,000,000 Vehicles/accessories 50,000,000

Shipping and 60,000,000 Banking services 60,000,000

insurance
Bauxite 80,000,000 Freight/insurance 40,000,000
(a) Calculate the value of visible exports.
(b) Calculate the balance of trade for the country.
(c) List the items of invisible exports and imports.
(d) Calculate the current account balance of the country.
(e) Is the country developed or developing? Give one reason for your answer.

10. The cost and output schedule of a firm are shown in the table below.
Output (kg) 6 15 35 60 85

Variable cost ($) 0 30 55 75 90

Total cost ($) 15 45 70 90 105

Total revenue 0 30 70 120 170

($)
(a) Using the data in the table, at each level of output, calculate the firm’s
(i) marginal revenue (ii) marginal cost.
(b) At what output level did the firm:
(i) break even (ii) make the highest profit (iii) attain equilibrium
(c) Identify the market structure in which the firm operates

11. Figure below represents the production possibility curve of a nation.

Use it to answer the questions that follow.
(a) What is the opportunity cost of:
(i) producing 30 units of cocoa. (ii) Increasing textile production from 30 to 40 bales?
(b) Interpret the following points as found in the graph:
(i)Point Y (ii) Point G (iii) Point X
(c) List three conditions that can enable the nation to produce at point X.
(d)State two basic economic concepts illustrated in the diagram above.
(e) (i) Define production possibility curve

12. The diagram below represents the equilibrium position of a firm in a

perfectly competitive industry. Study it and answer the questions that
follow.

(a) (i)At what level of output and price is the firm in equilibrium?
(ii)Calculate the firm's profit in equilibrium.
(iii) What type of profit is it? Explain your answer.
(b) Why is the average revenue (AR) function horizontal?
(c) State any two ways in which marginal cost (MC) and average total cost (ATC) are related.