(d) Explain, using diagram, how does the hypothesis of diminishing returns (MPP &

APP) influence the behaviour of costs (MC & AC).[5 marks]

(e) Both AC and MC are U shaped curves. Explain the relationship between the AC

and MC Curves.[5 marks]

The following table refers to the demand and supply conditions of beef in a given market

in a given period of time.

Price of beef per kg $ Demand for beef (kg) supply of beef (kg)

1 40 15

2 25 25

3 15 30

4 10 35

5 5 40

(a) Use the information above to plot a fully labeled diagram of demand and supply

curves and clearly indicate the equilibrium price and quantity of beef.(5 marks]

(b) If price increases from $4 to $5, calculate price elasticity of demand.[5 marks]

(c) If demand increases by 15 kg at each price, calculate the new equilibrium price

and quantity of beef.[5 marks]

(d) When income increases by 30%, demand for beef increases by 10%. Moreover,

beef is said to be a "normal good".

(i) What do you understand by Income Elasticity of Demand? [3 marks]

(ii) Use the concept of Income Elasticity of Demand to explain why beef is said

to be a "normal good".[3 marks]

(e) Consumers consider mutton to be a substitute for beef. Describe the relationship

between the price of mutton and demand for beef, and comment on the Cross

Elasticity of Demand for Beef.(4 Marks)

The table below shows labour (L) and total product (TP) for a firm.

L 1 2 3 4 5 6 7

TP 100 300 700 1000 1200 1300 1350

AP

MP

(a) Complete the table for AP (Average product) and MP(Marginal Product)

[3 marks]

(b) Plot a labeled diagram of the short-run Total Product, Average Product, and

Marginal Product Curves for L, and explain briefly the law of diminishing marginal

returns from your computation.(8 marks)

.