Y7

a. What is price elasticity of demand? (2 marks) b. Differentiate between price elasticity of demand and cross price elasticity of demand. (4 marks) c. How does the availability of substitutes affect the elasticity of demand for a good? (3 marks) d. How does advertisement affect the elasticity of demand for a good? (4 marks) e Differentiate between substitute and complements using the concept of elasticity. (4 marks) f. As a manager of a firm producing a good which has an clastic demand, what would you do to increase revenue and profit of your firm? (5 marks) g. Explain 4 conditions that will make the demand for a good elastic. (8 marks) OR QUESTION 2 a. Explain the following in not more than half a page (6 marks - 2 each) i. Opportunity cost. (2 marks) ii. Production possibility frontier. (2 marks) ili. scarcity (2 marks) b. Explain the difference between positive and normative economics (2 marks) c. Using an appropriate diagram, explain how the production possibility frontier becomes a model of scarcity. choice and opportunity cost (6marks). d. Use a production possibilities frontier to describe the idea of Efficiency and Inefficiency (6 marks) C. Explain the law of diminishing marginal returns (2 marks) f. Illustrate and explain the stages of production (10 marks)