EXAMINATION NO.____________________
2014 EXAMINATIONS ING TECHNICIAN PROGRAMME PAPER TC5: ECONOMICS THURSDAY 4 DECEMBER 2014
TIME ALLOWED : 3 HOURS 2.00 - 5.00 PM
INSTRUCTIONS 1
Number of questions on paper – 7.
2
The paper is divided into sections A and B.
3
FIVE questions ONLY to be answered; TWO from Section A and THREE from Section B.
4
Each question carries 20 marks.
5
Begin each answer on a fresh page.
6
DO NOT OPEN THIS PAPER UNTIL YOU ARE INSTRUCTED BY THE INVIGILATOR.
This question paper contains 6 pages This question paper must not be removed from the examination hall
1
SECTION A Ans wer two questions only from this section. 1.
Carefully study the table below and answer the questions that follow it. Number of labourers
Number of bricks made per hour
Average product of labour
Marginal product of labour
20
A
30.5
-
21
651
B
41
22
726
33
C
23
D
35
79
24
768
E
-37
25
750
30
F
Required: (a)
Define the following : (i)
Average product of labour
2 Marks
(ii)
Marginal product of labour
2 Marks
(b)
Compute the values shown by points A, B, C, D, E and F.
3 Marks
(c)
Name and explain two ‘laws’ that may be associated with what is happening to the number of bricks made per hour and marginal productivity of labour as the number of labourers increases from 24 to 25. 4 Marks
(d)
Assume that the table above represents a small firm with a huge potential to grow.
Required: (i)
State three reasons why a firm may want to grow.
3 Marks
(ii)
Name and explain any two ways in which a firm can experience external growth. 6 Marks (TOTAL: 20 MARKS) Continued/……
2
2.
(a)
With the aid of a clearly labelled graph, explain the difference between change in quantity supplied and change in supply. 4 Marks
(b)
Assume that the market for thobwa can be represented in the competitive market model. Required: Illustrate and explain what will happen to the equilibrium price and quantity in the following situations:
3.
(i)
A record breaking heat wave hits Malawi during summer.
(ii)
Intermittent electricity supply causes fire that destroys several thobwa factories. 4 Marks
(iii)
Maize crop failure raises the price of maize flour which is a key ingredient in the production of thobwa. 4 Marks
4 Marks
(c)
List (without explaining) four factors that would influence the demand for thobwa in the urban centres of Malawi. 4 Marks (TOTAL: 20 MARKS)
(a)
State any two ways in which: (i)
Perfect competition is similar to monopolistic competition. 2 Marks
(ii)
Perfect competition is different from monopolistic competition. 2 Marks
(b)
State the difference between homogeneous products and heterogeneous products. 2 Marks
(c)
Can a firm in a perfectly competitive industry earn an economic profit in the long-run? Clearly explain your answer. 3 Marks
Continued/……
3
(d)
The table below shows the quantity and price of a product sold by a monopolist. Carefully study the table and answer the questions that follow it. Quantity
Price
Total Revenue
1
30
A
2
25
B
3
20
C
4
15
D
5
10
E
6
5
F
Required: (i)
Calculate the values shown by points A, B, C, D, E and F.
3 Marks
(ii)
With a clearly labelled graph, sketch the total revenue curve.
4 Marks
(iii)
If the table above was for a perfectly competitive firm, using a clearly labelled graph, illustrate what its total revenue curve would look like. 4 Marks (TOTAL: 20 MARKS)
Continued/……
4
SECTION B Ans wer three questions only from this section. 4.
The figure below shows a five sector circular flow of income. Carefully study it and answer the questions that follow it. Economic resources (land, labour, capital & enterprise)
A
Households Households
Firms B
Payments for goods and services
C D
Financial Sector
Investment
Taxation
Government Sector
E
F
Overseas Sector
Exports
Required: (a)
Name the sector(s) and flows indicated as A, B, C, D, E and F.
(b)
What is the collective term for the following flows:
(c)
3 Marks
(i)
D, Taxation and F;
1 Mark
(ii)
Investment, E and Exports?
1 Mark
Assume that E is greater than Taxation. (i)
What term is used to describe this situation?
1 Mark
(ii)
What will be the overall impact on the circular flow of income? 2 Marks Continued/……
5
(d)
The above figure forms the basis for measuring Gross Domestic Product (GDP) and Gross National Product (GNP). (i)
What is meant by GDP and how does it differ from GNP? 3 Marks
(ii)
5.
6.
Explain three ways in which GDP can be measured. 9 Marks (TOTAL: 20 MARKS)
(a)
State four reasons why Malawi is involved in international trade. 4 Marks
(b)
Name and clearly explain two trade barriers used in Malawi.
(c)
State five arguments for and five arguments against protectionism. 10 Marks (TOTAL: 20 MARKS)
(a)
State four key roles played by the Reserve Bank of Malawi.
4 Marks
(b)
What does the term ‘monetary policy’ stand for?
2 Marks
(c)
State any two objectives of the monetary policy in Malawi.
2 Marks
(d)
The monetary policy transmission mechanism explains how changes in interest rates are transmitted through the financial system and the economy, and the impact on areas such as inflation and unemployment.
6 Marks
Required: Clearly explain the following transmission mechanisms when tight monetary policy is pursued in a country such as Malawi.
(e)
(i)
Savings and investment behaviour
2 Marks
(ii)
Cash flow
2 Marks
(iii)
Money and credit
2 Marks
(iv)
Asset prices
2 Marks
Explain two main weaknesses of fiscal policy in an economy. 4 Marks (TOTAL: 20 MARKS Continued/……
6
7.
The table below shows the cost of maize per 50kg bag and the consumer price index (I) for the years 2010 to 2013. Year
Price of maize per 50kg bag
Cons umer price index (I)
2010
MK1000
100
2011
MK1500
110
2012
MK2000
115
2013
MK3000
118
Required: (a)
State the function of the Consumer Price Index (I).
(b)
Calculate inflation rates for the following years:
(c)
2 Marks
(i)
2011
2 Marks
(ii)
2012
2 Marks
(iii)
2013
2 Marks
Compute the real maize prices (2010 prices) for the following years. (i)
2011
2 Marks
(ii)
2012
2 Marks
(iii)
2013
2 Marks
(d)
State four problems that would be encountered if maize was sold under the barter trade system. 4 Marks
(e)
State two functions of money.
END
2 Marks (TOTAL: 20 MARKS)