Advanced level 2026 South West mock Economics 3

This final image contains data-response and calculation-based questions for Economics, focusing on market equilibrium, international trade, and investment appraisal (NPV).

Here is the extracted text:

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QUESTION 1

1) In a certain market of fairly used Mercedes Benz cars, there are 75 buyers each having an identical individual demand function given as: $Q_d = 52 – 2P$ and 10 sellers each with an identical individual supply function given as: $Q_s = 15 + 10P$ where $Q_d$ is quantity demanded, $Q_s$ is quantity supplied and $P$ is price.

• a) Determine the market demand and supply functions for fairly used Mercedes cars. (4 Marks)

• b) Complete the market demand and supply schedule of fairly used Mercedes cars below. (4 Marks)

Price (FCFA)	5	10	15	20
Quantity demanded (units)
Quantity supplied (units)

• c) Using the market demand and supply functions obtained in a) above, determine:

  • i) The equilibrium price (2 Marks)

  • ii) The equilibrium quantity (2 Marks)

• d) If the government fixes a minimum price of 20 FCFA for these cars, how much will it cost her to maintain the Price? (4 Marks)

• e) Calculate the elasticity of demand as price changes from equilibrium to the minimum price. (4 Marks)

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QUESTION 2

2) Read the following passage carefully and answer the questions that follow:

“…the opening up of trade between countries leads to a greater production of traded goods and economic welfare. Conversely, any measure which inhibits trade between nations may be expected to reduce the volume of output and the level of economic welfare. Despite this, every government takes steps to control the volume of imports entering its country. This is done for a variety of reasons and invites retaliation from its trading partners. There are a number of ways of protecting the home economy from overseas competition.”

Source: Success in Economics; Chris Nuttall and Derek Lobley, 4th edition page 388.

• a) Apart from those mentioned in the passage, list four other benefits a country gets from trade with other countries. (4 Marks)

• b) Enumerate four disadvantages a country may suffer from trade with other nations. (4 Marks)

• c) List four reasons why a government controls the volume of imports into its country. (4 Marks)

• d) Give four ways a government can protect the home economy from foreign competition. (4 Marks)

• e) State four bases of international trade. (4 Marks)

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QUESTION 3

3) A civil servant upon retirement decides to invest in a taxi business. The Market price of the taxi is estimated at 2,600,000 FCFA. Conducting a proper market research, he found that this taxi would yield him an annual net return of 1,320,000 FCFA in the first year, 968,000 FCFA in the second year and 532,400 in the third year. The taxi is estimated to last for 3 years and there are no other related costs with a market rate of interest of 10%.

• a) Calculate the net present value of the project and state whether it is worthwhile investing in this project. Justify your answer. (8 Marks)

• b) If at the end of the final year, the taxi had a scrap value of 465,850 FCFA. Explain how this will affect your answer in a) above. (6 Marks)

• c) State the nature of the relationship between Net Present Value (NPV) and the discount rate. (2 Marks)

• d) Define the term scrap value. (2 Marks)

• e) Apart from the method used in this question, state one other approach of investment appraisal. (2 Marks)

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Would you like me to walk through the calculations for the Market Functions in Question 1 or the Net Present Value in Question 3?