EXAM

Term 1, August - December 2022

Subject : 0455 Economics (Paper 2)

Level : Year 10

Duration : 1 hour 30 minutes

Date : 24 Nov 2022

Day : Thursday

Instructions :

Answer all questions.

Write in dark blue or black pen.

You may use a pencil for diagrams or graphs.

Only begin and turn to the next page after instructions are given.

Additional instructions : N/A

Name : ____________________________________________________________

Score : ____________________________________________________________

Honour Pledge

I affirm that I will not give or receive any unauthorised help and that all work is my own.

Signature : ____________________________________________________________
Remarks by Teacher :

_______________________________________________________________________

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Section A: Case Study

Read the source material carefully before answering Question 1.

Source material: Kenya’s flower industry

Kenya fact file 2014 2015

Population 45 million 47 million
Labour force 16 million 18 million
Unemployment rate 12% 10%
GDP per head $3 000 $3 200

Kenya has a growing global reputation for high quality flowers and is the world’s third largest
producer of flowers. Production of flowers contributes to employment and to Kenya’s gross
domestic product (GDP) which increased in 2015. Most of the flowers are grown in an area that
has the right conditions for growing flowers. It has a ready supply of water, fertile soil, warm days
and cool nights, and is close to the capital’s airport in Nairobi. Kenya’s exports of flowers
increased significantly between 1990 and 2015, and flowers are now the country’s second biggest
export earner after tea. Many of Kenya’s flowers are sold to the UK, US and Russia for special
occasions including Mother’s Day, Thanksgiving and Women’s Day. On these days, demand not
only increases but also becomes more price-inelastic.

Kenya’s flower industry faces a number of challenges. A change in temperature can slow down
production so that producers can fail to deliver their flowers on time, for example to Russia in time
for Women’s Day. This can result in demand exceeding supply and shortages occurring. At other
times there is a surplus of supply with some flowers remaining unsold.

The main cut flowers grown in Kenya are roses, carnations, and Alstromeria. Other flowers
cultivated include, Gypsophilla, Lilies Eryngiums, arabicum, hypericum, Statice, a range of
summer flowers amongst many others.

The industry continues to attract investors due to solid infrastructure, favourable climate, global-
positioning of Kenya and a productive workforce. It comprises large, medium and small scale
producers who have attained high management standards and have invested heavily in value
addition through adoption of modern technology in production, precision farming and marketing.

The farmers utilize technologies some of which includes drip irrigation, fertigation systems,
greenhouse ventilation systems, net shading, pre-cooling, cold storage facilities, grading,
bouqueting, fertilizer recycling systems to prevent wastage, wetlands for waste water treatment,
artificial lighting to increase day length, grading or packaging sheds, and refrigerated trucks.

On the global front, a growth of 5% is anticipated every year over the next five years. To be a part
of this opportunity, Kenya is going to continue investing and expansion in growth rate than
previous years.

Fig.1 The news reports that the flower industry at Kenya is growing and offering the most
job opportunities for the locals and Africa Continents; especially women in the country.
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Answer all parts of Question 1. Refer to the source material in your answers.

1. (a) What is meant by ‘surplus of supply’?

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(b) State two positive impacts of Kenya’s flower industry if the tax has been reduced.

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(c) Explain the effect that a rise in the price of flowers on Women’s Day in Russia would be
likely to have on flower producers’ revenue.

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(d) Analyse the evidence that shows the market for flowers is sometimes in disequilibrium.

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(e) Analyse how a subsidy to farmers may affect the market for Kenyan flowers.

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(f) Discuss whether or not an increase in wages will always attract more people to work in
Kenya’s flower industry.

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Section B: Short Essay Questions

Answer all questions.

Each question is introduced by stimulus material. In your answer you may refer to this material
and/or to other examples that you have studies.

2. Many governments seek to discourage people from smoking cigarettes and vapes, whilst
encouraging them to eat more fruit, including bananas and apples. The government’s ability to
influence people’s consumption is determined, in part, by the price elasticity of supply and the
price elasticity of demand of the products, and by changes in market conditions. Besides
that, the governments also imposing tax on cigarettes and vapes which causing low supply
and demand. However, all these interventions do not eliminate the markets of cigarettes
and vapes.

(a) Define ‘demand’.

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(b) The opportunity costs for a farmer in terms of apple and banana are shown in the
following table.

Banana production Apple production

(‘000 units) (‘000 units)
72 Plus 36
60 Plus 42
48 Plus 48
36 Plus 54
24 Plus 60

What is the opportunity cost for the manufacturer producing 1000 units of apple?

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(c) Explain three reasons why the supply of banana may decrease.

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3. Economic decisions involve an opportunity cost. This can clearly be seen in a production
possibility curve. The management of ABC International School is allocating the teachers’
teaching workload and timetable based on the preferences and choices made by the
students and deemed suitability program of the school. The subject with higher choices
and preferences voted by students, ceteris paribus, will be mostly included in the teachers’
teaching workload and timetable. However, there are certain subjects with less choices
and preferences chosen by students is introduced into the school’s program and timetable.

Diagram below shows the subjects offered in ABC International School with the total
number of 130 students enrolled in specific streams with indication of elective subjects
chosen by students and deemed suitability of the school’s program.

Subjects: Student No. Stream: Enrolled Condition:

Business Studies 30 Commerce Commerce stream students able to
Economics 40 choose Artistic or Pure Science
Accounting 20 subjects as their electives
Enterprise 10
Sociology 10 Social Science Social Science stream students
History 5 able to choose Pure Science or
Geography 7 Artistic subjects as their electives
Global Perspectives 8
Biology 37 Pure Science Pure Science stream students able
Chemistry 36 to choose Commerce or Social
Physics 40 Science subjects as their electives
Design Technology 6 Artistic Artistic stream students able to
Music 2 choose Social Science or
Art 9 Commerce subjects as their
electives

(a) What does ‘ceteris paribus’ mean?

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(b) ABC International School has categorised the classrooms according to 4 main streams
shown in the diagram above. State the opportunity costs for Pure Science stream
students who chose Commerce subjects as their electives.

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(c) Most international schools are facing low enrolment on Artistic stream due to uncertain
career path and parental influences. Using a supply and demand curve, explain how it
can show the rightward shift of the demand for Artistic stream offered by the
international schools.

Supply and Demand Curve:

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THE END