Theories of demand and supply questions | form five Economics

1. Outline five limitations of the theory of price mechanism
2. With the aid of diagrams, explain the following cases of elasticity

1. Inelastic supply
2. Elastic supply
3. Unitary elasticity of supply
4. Perfectly elastic supply
5. Perfectly inelastic supply

Explain the importance and limitations of price mechanisms

The following table shows demand of Juma and Kassim for a product.

1. On the same set of axes draw the demand curve for Juma(QJ) , demand curve for Kassim (QK) and the aggregate demand curve
2. What do you think might have caused the differences in demand by Juma and Kassim?
3. Whose demand is more elastic? Give reasons for your answer.

1. Explain four types of price discrimination.
2. How can monopoly be controlled? (give six points).

Use the demand function (P​1​) and the supply function (P​2​) given below to answer the questions that follow.

Where: P = Price
Q = Quantity
Graphically solve for:

1. Equilibrium price and quantity.
2. Surplus and shortage when equilibrium price rise and fall by two (2).

Outline four factors affecting supply.

1. Describe five factors, other than price, which affect the supply of a commodity to change.
2. Analyse five importance of the concept of price elasticity of demand in the economy.

1. The following table shows the production of commodity A, B, C and D. Study it and answer the questions that follow:

1. Calculate income elasticity of demand for each commodity
2. Give classification of each type of commodity

Analyse four practical applications of elasticity of supply.

The manager of a hotel used to sell 100 units of commodity X per day when price was 400/= per unit. When price of the commodity X rises from 400/= to 800/= per unit , the sales for commodity Y increases to 200 units per day.

1. Calculate cross elasticity of demand.
2. Interpret your answer in (i).