Turn over © 2013 The Kenya National Examinations Council

Candidates should check the question paper to ascertain that all the pages are printed as indicated and that no questions are missing.

This paper consists of 16 printed pages.

Question 1 2 3 4 5 6 7 TOTAL

Mat ks

For Examiner's Use Only

Write your name and index number in the spaces provided above. Sign and write the date of the examination in the spaces provided above. This paper consists of SEVEN questions. Answer any FIVE questions in the spaces provided in this question paper. All questions carry equal marks. Candidates should answer the questions in English.

INSTRUCTIONS TO CANDIDATES

ECONOMICS

3 hours

DIPLOMA IN SECRETARIAL STUDIES DIPLOMAINSALESANDMARKETING

DIPLOMA IN SUPPLY CHAIN MAN ~HJ~t.(\}f C'.29

DIPLOMA IN BUSINESS MAN AG ~. cen: oDIPLOMA IN ROAD TRANSPORT AGE~S

MODULE I

THE KENYA NATIONAL EXAMINATIONS COUNCIL

I

Date: ------------

Candidate's Signature: _

2901/104 2902/105, 2903/105 2906/105, 2909/105 ECONOMICS July 2013 Time: 3 hours

Name:----------------- Index No: --------el _

• .J ,-

2

Outline the disadvantages of the market economic system in allocating resources in a country. (8 marks)

(8 marks) Interpret the elasticity calculated in (i) above. (ii)

(i) Calculate the cross elasticity of demand for Y when price of X changes from Ksh 80 to Ksh 100. (2 marks)

Required:

100 50

80 30

Price ofX (Ksh) Demand for Y (units in millions)

The information below relates to the demand for tea relative to changes in the price of coffee

Country X has been experiencing a relatively high rate of inflation for the past one year. Explain the possible adverse effects of such inflation on the economy of the country.

(8 marks)

(a) 6.

With the aid of a diagram, explain the way in which price is determined by the forces of demand and supply. (12 marks)

2901/104, 2902/105, 2903/105, 2906/105, 2909/105

(a) 5.

(b) One of the categories of costs incurred in the production process are the marginal costs Describe the nature of these costs. (8 marks)

Explain the conditions that are necessary for perfect competition in an industry. (12 marks)

(a) 4.

(b) Highlight the assumptions underlying the Law of diminishing returns to scale. (8 marks)

(a) 3.

(b) Explain the factors that a government should consider when choosing between internal and external borrowing as a way of raising finance. (8 marks)

I

There are certain aspects of expenditure that are considered when measuring the national income of a country through the expenditure approach. Outline these aspects of expenditure. (12 marks)

Highlight the assumptions underlying the theory of comparative advantage in international trade. (12 marks)

(8 marks)

(a) 2.

(b) One of the factors that determine the supply of a commodity is government policy. Outline such government policy measures that may affect the supply.

Describe the characteristics that are necessary for a commodity to serve as money. (12 marks)

(a) I.

;,

Turn over 3 2901/104, 2902/105, 2903/105, 2906/105, 2909/105

(10 marks)

(b) A certain country has been over burdened by an ageing population. Explain the adverse economic consequences of such an ageing population to the country.

(10 marks) Highlight the indicators of economic development in a country. . (a) 7.