QUESTION ONE [25]
List and discuss the two main factors of economic growth in terms of the production possibility frontier. (10)
Evaluate four (4) factors that affect the demand curve according to demand and supply analysis. (8)
Assume there is an increase in the number of sellers in a market for a good or service. Analyse the economic effect on the equilibrium price and quantity using the demand-supply model. (7)

QUESTION TWO [25]
Define the following economic terms according to utility theory. Include in your answer the provision of its formula wherever applicable.
Total utility (3)
Marginal utility (3)
Weighted marginal utility (3)
Assess the consumer equilibrium condition according to utility theory. (4)
Distinguish amongst the three categories of elasticity of demand. Include in your answer a provision of their formula. (12)

QUESTION THREE [25]
Demonstrate the difference between accounting costs and economic costs. (6)
Explain the law of diminishing returns. (4)
Summarise the relationship between the three short-run total cost curves according to the costs and production of a firm. (6)
Discuss the three possible short-run equilibrium positions of a perfectly competitive firm. (9)

QUESTION FOUR [25]
Investigate two (2) reasons for the downward sloping aggregate demand curve. (10)
Discuss how a government can use fiscal policy to stimulate economic growth in an economy. (10)
Explain the meaning of a budget deficit in terms of a government’s fiscal policy. (5)

Answers to Above Questions on Economics

Answer 1: An analysis of the concept of production possibility Frontier indicates about the maximum outputs possible from two goods or services within a specific amount of resources and energy available. The two main factors of economic growth in terms of the production possibility Frontier technological advancement and innovation, and investment in human capital and physical capital.