JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

Introduction to microeconomics
CAT 1
INSTRUCTIONS
ATTEMPT ANY THREE QUESTIONS
TOTAL MARKS 60 MARKS
DUE ON 1ST SEPTEMBER 2020

QUESTION ONE
a) Clearly explain the distinction between supply, demand and equilibrium price. (8 marks)
b) State and briefly explain any four main factors that may cause a fall in the supply of a good in the
market. (4 marks)
c) The table below shows the demand and supply schedules for a product.

Price (Sh. Per Kg.) Demand (Kg) Supply

(Kg.)
10 100 20
20 85 36
30 70 53
40 55 70
50 40 87
60 25 103
70 10 120

Required:

Plot the demand and supply curves and determine the equilibrium price and quantity (8 marks)
(Total: 20 marks)

QUESTION TWO
a) Distinguish between own-price elasticity of demand and cross- elasticity of demand
(10 marks)
b) Briefly discuss the factors which affect the own price elasticity of demand
(4 marks)
c) Discuss the usefulness of these parameters in management and economic policy decision-
making.
(6 marks)
QUESTION THREE

a) Define elasticity of supply and briefly explain any five factors that influence the elasticity of
supply. (10
marks)
b) Explain why elasticity of supply for agricultural commodities is low. (6
marks)
c) The demand for a commodity is twenty units when the prevailing market price equals eighty
shillings per unit. However, when the price per unit rises to one hundred shillings, the quantity
demanded rises to thirty units.
Required:
Calculate both arc and point elasticities of this commodity (4 marks

QUESTION FOUR
(a) Define marginal utility and clearly explain the oxiom of diminishing marginal utility.(6 marks)
(b) Illustrate and explain the following:
(i) Consumer equilibrium under the cardinalist approach (7 marks)
(ii) Consumer equilibrium under the ordinalist approach (7 marks)

(Total: 20 marks)

QUESTION FIVE

(a) (i) State the law of variable proportions (2 marks)

(ii) What key assumptions underlie this law? (6 marks)
(b) Discuss fully the three main stages associated with the law (12 marks)
(Total: 20 marks