FACULTY OF

NAMIBIA UNIVERSITYOF SCIENCE AND TECHNOLOGY

SCIENCESMANANGEMENT

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUALIFICATION: BACHELOR OF ECONOMICS

QUALIFICATION CODE:

07BECO LEVEL: 7

COURSE NAME:INTERMEDIATECOURSE CODE:IMI611S MICROECONOMICS

SESSION: JULY 2018 PAPER: THEORY

DURATION: 3 HOURS MARKS:100

SECOND OPPORTUNITY EXAMINATION QUESTION PAPER

EXAMINER(S) MR. PINEHAS NANGULA

MS. KALILA MACKENZIEMS KASNATH KAVEZERI

MODERATOR: ESLON NGEENDEPI

INSTRUCTIONS

1. Answer ALL the questions in section A and B.

2. Write clearly and neatly.

3. Numberthe answersclearly.

PERMISSIBLE MATERIALS

1. Scientific calculator

2. Pen and Pencil

3. Ruler

THIS QUESTION PAPER CONSISTS OF 3__ PAGES(Including this front page)

QUESTION ONE [20 MARKS]

a) Given the following demand (Qd = 180 —2P + 2Y) and supply function (Qs = 100 + 4P -

6Ph).

i. Calculate price elasticity of demandat equilibrium when Y =20 and Ph=10 _—_[5 marks]

ii. Use information in part a) to calculate incomeelasticity ofdemand when P= 10 [5 marks]

b) Explain how you can use the knowledge ofprice elasticity of demand to maximize your

profit [10 marks]

QUESTION TWO [30 MARKS]

a) Explain three properties of consumer preferences [6 marks]

b) Discuss three impossible indifferent curves [6 marks]

c) Use the followingutility function [ U(Z,B) = 4Z°°B°] to fill the table below and draw

all the possible indifference curves from thetable. [12 marks]

Pizza 1 2 3 4

Burritos I

d) Giventhe followingutility function U(Z, B) = AZ*B®, calculate MRS [6 marks]

QUESTION THREE [20 MARKS]

Explain each of the following market structures and provide an example of each in the Namibian

economy.Explain your example.

a) Monopoly [5 marks]

b) Oligopoly [5 marks]

c) Perfect competition [5 marks]

d) Monopolistic competition [5 marks]

QUESTION FOUR [20 MARKS]a) Explain how information on prices of goodsin the market will affect market demand for a

good? Provide an example [5 marks]

b) Explain howsales tax on the price of a good affects the market demand for a good?Provide an example [5 marks]

c) Explain how expectationsofthe future price of a good affect the market supply of agood? Provide an example [5 marks]

d) Explain how an import quota on a good will affect domestic supply ofa good? Provide anexample [5 marks]

QUESTION FIVE [10 MARKS]

Consider the marketfor soft drinks thatis initially in equilibrium with a market price ofP1 and

a market quantity of Q1. Suppose there is a successful campaign to educate the public about

the caloric values in soft drinks and their contribution to obesity. At the same time supposethat

the price of corn syrup, a key ingredient in many soft drinks, rises. Draw a graphillustrating

the initial equilibrium and the new equilibrium after these described changes. Provide a verbal

description ofthe outcomein this market due to these changes

All the best