(a) ''Production involves the use of factors of production (resources). In relation to these resources, all business organisations face what is known as the basic economic problem''.

Identify and explain the three questions that arise while making choices about the use of scarce resources. [7 Marks]

(b) ''The recent foot and mouth disease also known as '' fivre Aphteuse'' outbreak in Rodrigues has quickly found its way to Mauritius. While local breeders welcome the measures taken by the Ministry of Agriculture to counter the disease, the breeders in Rodrigues are expecting some kind of compensation from the government following heavy losses of stock. The authorities immediately took necessary measures to contain the disease and prevent it from spreading further. It was decided to cull the worst affected animals. As such there is now a temporary ban on the import of animals and of meat from Rodrigues because it has been established that the outbreak in Mauritius originates from Rodrigues''

Use appropriate supply and demand diagrams to analyse the effects on the market equilibrium price and quantity traded of beef, following:

i) A fall in the price of fish. [6 marks]

ii) An outbreak of ''fivre Aphteuse'' resulting in the slaughtering and disposal of a large number of infected cattle heads. [6 marks]

iii) The government decide to grant subsidies as compensation to vulnerable breeders. [6 marks]

(c) Using appropriate examples, explain the concepts of price elasticity, income elasticity and cross elasticity of demand. [10 marks]

(d) Discuss how knowledge of price elasticity, income elasticity, and cross elasticity might be of practical use to a firm dealing in sales of smart phones. [15 marks]

QUESTION 2 The demand and supply functions of an agricultural product (call it 'good X') are given by:

Qd = 60 3P Qs = 2P 10,

Where P is price (in Rs.) per unit, and Qd and Qs are quantities demanded and sold, respectively, in thousands of units.

a) Find the equilibrium price and quantity good X. Using a demand and supply diagram, show how you will represent the above information. In your answer, clearly label your axes, prices and quantities and the equilibrium price. [5 marks]

(b) Due to unfavorable climatic conditions such as heavy rainfall events leading to flooding that wipe out entire crops over wide areas, reduced plant growth and increase the cost of living of farmers, the Mauritian government contemplates to set the price of good X at Rs 16 per unit.

(i) Is there a shortage or surplus at this price? [1 mark]

ii) Calculate the resulting shortage or surplus at this price. [4 marks]

(c) Starting at the initial equilibrium, suppose a sales tax of Rs. 3 is now imposed on each unit of good X.

(i) Calculate the new equilibrium price and quantity. [6 marks]

(ii) Explain how the burden of the tax is shared between consumers and the seller of good X. [5 marks]

(iii) How does the price elasticity of demand for good X affect the incidence of the tax? [4 marks] Page 4 of 5 QUESTION 3 [25 MARKS]

(a) Explain the difference between fixed costs and variable costs? Give an example of each that an insurance company is likely to incur. [6 Marks]

(b) Table 1.0 shows the hypothetical response of the output of the potato (Y) to increasing inputs of fertilizer.

m OUbs00 X 4 GMT202 x m Course: | X BUSINES X M Inbox - | x Homewc X BUSINES X y! notes or X y! you tube x "Introdu x + V X -> C D @ File | C:/Users/user/Downloads/BUSINESS%20ECONOMICS%20(2).pdf Update Netflix M Gmail ) Mail - Kaizy Celesti... & MNS 3 World Check Docusign Login - E... t MT_Selfcare Z Sanne Group - Man... SANNE Alto - Remo.. My Sage People \\ Halogen BUSINESS ECONOMICS (2).pdf 4 / 5 100% + Table 1.0 Response Of Potato to the fertilizer Fertilizer (X) Potato Y APP MPP Bags/hectare Tonne/hectare 0 0 7.6 2 16.2 wo 25.4 A 34.7 5 43.8 6 52.1 59.3 8 65.0 9 68.7 10 70.9 11 67.5 (i) Calculate the values of APP (Average Physical Product) and MPP (Marginal Physical Product) at different levels of the fertilizer use (X). Type here to search O T 23.C Mostly cloudy ~ { ()) 0 ENG 16:43 11/06/2022