G.C.E A/L ECONOMICS 2017 PAPER 3
One and Three quarter hours
Answer ANY THREE questions. All questions carry equal marks.
1 “In some markets it is relatively easy to separate customers into groups by identifying which buyers have elastic
demands and which buyers have inelastic demands. For example, in the case of movie tickets, working adults tend
to have the less elastic demand for many reasons, including higher incomes and less time available to go to the
movies. It is easy to separate movie goers into groups simply by looking at their identities: children, students and
senior students can be identified and then qualified for the discounted ticket price.
The firm that price discriminates must also be able to prevent the lower price group from buying low and reselling
to the higher price group at less than the price the firm will charge. Ideally, a firm would like to charge the highest
price each buyer is willing and able to pay for each unit of the output”.
Source: Microeconomics Workbook: Principles and Practice by Kari L. Battagalia Dadres, and Susan L Stipes Publishing, 2005. (page 220)
(a) (i) Define price discrimination. (2 marks)
(ii) What technical term is used to define the underlined phrase? (2 marks)
(b) (i) List two circumstances that will likely make price discrimination profitable. (4 marks)
(ii) Enumerate three types of price discrimination. (3 marks)
(c)(i) Outline two benefits of price discrimination to consumers.(2 marks)
(ii) State two harmful effects of price discrimination to society.(2 marks)
(d) Identify the type of price discrimination mentioned in the last sentence of the passage and illustrate with a
diagram how it can profitably be used by a loss-making firm. (5 marks)
There are a variety of economic systems operating in the world. These can be categorized into command
economies, laissez-faire economies and a combination of the two, mixed economies.”
Source: Adapted from Stanlake’s Introductory Economics, S. J. Grant, 7th Edition, (page 20)
(a) Enumerate three features each of:
(i) the Laissez-faire economy. (3 marks)
(ii) the command economy. (3 marks)
(i) three benefits of the laissez-faire economy.(6 marks)
(ii) three disadvantages of the command economy. (6 marks)
(c) Give one example of a command economy in the world today. (2 marks)
3. Table 1 shows the output of cocoa and wool in the two countries, A and B. Before specialization and trade, the countries
have the same amount of resources.
(a) (i) With the aid of a table show how the world output has increased after specialization(6 marks)
(ii) From your answer to (i) above, deduce three disadvantages of specialization (3 marks)
(b) Now, the situation of country A before and after specialization is presented in the figure below.
(c) (i) Determine the terms of trade between A and B. (4 marks)
(ii) What does the area VZX represent? (1 mark)
(iii) After specialization and trade, what is the level of consumption, exports and imports in country A? (6 marks)
4. The budget set by the Cameroon government for the financial year 2016 is very ambitious. The government is targeting
a 6% economic growth rate for this year, some of the main sources of her income will be taxes, the sale of national
resources and raising the national debt. After all the government has a Marshal] plan for Cameroon as the economy is expected to become an emerging one by the year 2035.
Source: Adapted from Marketing Essentials by Lois Schneider Farese, Grady Kimbrell Sand Carl A.
Define the terms;
(a) (i) The budget. (2 marks)
(ii) Economic growth. (2 marks)
(b) List four advantages of economic growth. (4 marks)
(c) The national debt can be used for reproductive purposes or it can be dead weight. Explain.(4 marks)
(d) Define the term the burden of the national debt and list two ways in which this burden can be reduced. (4 marks)
(e) List 4 other sources of government revenue not mentioned in the passage.(4 marks)
5. Table 2 below presents hypothetical figures on a given economy for a period of four years.
|Year||National Income (million FCFA)||Price index||Population (million)|
(a). For all the years, calculate;
(i) the per capita national income.(4 marks)
(ii) the real national income.(4 marks)
(iii) the per capita real national income.(4 marks)
(b) What do you understand by
(i) money national income? (1 mark)
(ii) real national income? (1 mark)
(c) (i) Give five reasons why money national income is not a good indicator of social wellbeing of the population.(5 marks)
(ii) What then can we use to indicate the social welfare of the population? (1 mark)