QUESTION ONE (a) (i) Distinguish between "gross domestic product" and "gross national product". (4 marks) (ii) Give the reasons for the lower value of the gross national product in the less developing countries. (1 mark) (b) The following data represents economic transactions of a hypothetical economy:(3) Highlight four steps followed in the scientific method used in economics. (4 marks) (b) Enumerate five factors that determine the price elasticity of supply of a commodity. (5 marks) (c) Using indifference curve analysis, derive the Engel's curve of a normal good. (6 marks) (d) Summarise five applications of opportunity cost in decision making. (5 marks) (c) Enumerate five factors that determine the price elasticity of demand of a commodity. (5 marks) (d) Highlight five barriers to occupational mobility of labour. (5 marks) QUESTION ONE (a) Differentiate between "economic resources" and "non economic resources". (1 mark) (b) (i) Explain the term "consumer sovereignty" as used in economics. (1 mark)(a) Explain the following types of development plans: (i) Short term plans. (1 mark) (ii) Medium term plans. (1 mark) (iii) Long term plans. (1 mark) (b) Highlight three exceptions to the law of diminishing marginal utility. (3 marks) (c) Describe four functions of money in an economy. (4 marks) (d) Enumerate five advantages and five disadvantages of a planned economic system. (10 marks) QUESTION ONE (a) Outline four assumptions underlying consumer equilibrium. (4 marks) (b) With the aid of a diagram, explain the production possibility frontier. (5 marks) (c) Summarise five ways through which the government could influence the allocation of resources in a free market economy. (5 marks) (d) Explain how the concept of elasticity of demand guides economic decision making in the following areas: (i) Government tax policy on household consumption. (2 marks) (ii) Devaluation policy. (2 marks) (iii) Price discrimination a monopolist. (2 marks)Use the passage below to complete the exercise that follows. SwissTech Snowboards is a sole proprietorship that manufactures snowboards and snowboarding equipment. In the past, the company has done quite well, and the owner is satisfied with the rate of growth. However, the economy is now going through a period of recession, sales are slower than in previous years, and it is getting more and more difficult to secure much needed credit from the banks. It is the end of the financial year and the controller of the company is concerned that the company will not be able to obtain the credit necessary to continue operations. As he prepares the end-of-year financial statements, the controller decides to record as sales a load of snowboards and bindings that has not yet been shipped to the client. The controller feels that this will improve the company balance sheet and make it easier to obtain credit. However, the better-than- expected numbers surprise the owner who then asks for a bigger loan than previously planned. With the additional money, he plans to pursue new product development and fund a marketing campaign to promote his products to new target markets. Upon receiving SwissTech's loan application, the loan officer asks for audited financial statements. The owner asks an auditing firm to prepare the documents, and it comes up with a much more pessimistic picture of the company's financial position than the one initially presented by the company's controller. Using your knowledge of business, write an essay in which you: . critique the decisions made by the controller and owner of SwissTech in the case study presented above and explain why their actions were problematic; and . identify two alternative steps that the owner and controller could have taken to help the company obtain needed financing and explain why each step would be effective
