Principles of Microeconomics (ECNC2101)
Higher Institute of Commerce and Management (HICM)
Semester: First Semester
Level: 200
Year: 2016
THE UNIVERSITY OF BAMENDA
Higher Institute of Commerce and Management
(HICM Level 1)
First Semester CA 2016/2017
Principles of Microeconomics, Time Allowed: 1” 30 minutes
Examiner: Dr NDAMSA / Mm MASANGA
Instructions: answer the questions in the sequence they appear
Question 1: (all the questions carry a mark each, except questions 3 and 7 with two marks each)
1) What is the basic concept that underlines the existence of economics? (at most two words)
2) ) What makes economics "an unfinished science’’? (a sentence)
3) What type of economy characterizes most developing countries? (at most two words)
4) Why do economists say price elasticity of demand reflects movements along a demand curve?
(a sentence)
5) How do you determine whether or not a good is a luxury?(a sentence)
6) What is another name for indifference curves? (at most three words)
7) Why does an indifference curve slope downwards from left to right?(a sentence)
1) (a)A consumer in the "Food Market" has three goods X, Y and Z to consume. If the prices of
these goods are given, how would the consumer determine his equilibrium in the consumption
of the three goods? (a mathematical expression)
(b) If the income is given as 1, state the second order condition for consumer’s equilibrium,
(a mathematical expression)
2) Under what condition is market equilibrium unstable? (a sentence)
Question 2 (15 marks)
In a given market, the demand for commodity X is given byQ
= 450 - 10P
x
+ 2Py + 0.70I
where P
x
is the price of good X, P
y
the price of some other good Y, and / is consumer income.
Assume that Px is currently 10 Fcfa, is currently 5 Fcfa, and is currently 200 Fcfa.
a) What is the elasticity of demand for good X with respect to the price of good X nt the
current situation? Interpret your result (4 marks)
b) What is the cross-price elasticity of the demand for good X with respect to the price of
good Y at the current situation? Use your result to determine the nature of the two goods.
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(4 marks)
c) What is the income elasticity of demand for good X at the current situation? What type of
good is good X? (4 marks)
d) What advice, based on the elasticity coefficient, can you give to the producer of good X.
(3 marks)
Question 3 (5 marks)Explain using a real life example (Cameroon-based) when .he following
government policies can be used:
(maximum of 5 lines for each)
a) Minimum price policy
b) Maximum price policy
GOOD LUCK
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