QUESTION ONE

A research was interested in find out how the price in the market for the good and services were determined and from one of his researches; he found out that the marketing manager of one of the mobile phone companies in Rwanda estimated the demand and supply functions for mobile phones as follows: Q_{d =}2000 - 20P and Q_s= 1200 + 10P respectively.

1. Determine the equilibrium price and quantity of the mobile phones (7marks)
2. If government sets a fixed price for the mobile phones at P = 500 UGX, what is nature and amount of market imbalance is created in the market? Hence state the price policy that government has applied in this case. (8marks)

QUESTION TWO

Economics as a discipline or a subject can be classified as a social science. Like political science, sociology and geography, it concerns people's attempts to organise the environment to satisfy their needs. Economics concentrates on satisfying material needs such as needs for food and shelter. Specifically it concerns production, distribution and consumption of goods and services.

1. Using the transformation curve, illustrate how production decisions are made to maximize output when resources are fully utilized at constant technology. (6 marks)
2. With the aid of diagrams, show how the Production Possibility Frontier explains the concepts of; (i) Opportunity cost (ii) Scarcity (iii) Choice (iv) Economic growth and (v) Efficiency in production.

(9marks)