The effect of an increase in demand for a commodity accompanied by a decrease in supply will be to?

• A. raise the price of the commodity and affect the quantity in an indeterminate way
• B. decrease the equilibrium quantity and affect the price in an intermediate way
• C. raise its price as well as the equilibrium quantity
• D. lower it price while affecting the equilibrium quantity in an interminate way

The profit of a producer is the difference between

• A. total cost and marginal cost
• B. total revenue and total cost
• C. average cost and total cost
• D. price and total cost

Demand-pull inflation results when there is

• A. inadequate improvement in the wage rate of workers
• B. execessive demand due to high purchasing power
• C. excessive supply of raw materials for production
• D. rise in productivity of the factors of production

(a) With the aid of a diagram, explain the effects of fixing a price (i) above the equilibrium price,

(ii) below the equilibrium price [5 marks each]

(b) (i) What is an abnormal demand? [4 marks] (ii) Give two reasons for its occurrence [6 marks]

A major function of the price mechanism is that it determines the

• A. allocation of resources
• B. amount of national savings
• C. population of the country
• D. number of goods to be taxed

A government that wants to get more revenue will increase the tax on commodities with a

• A. high price elasticity of demand
• B. low price elasticity of demand
• C. high income elasticity of demand
• D. low income elasticity of demand

Scarcity in economics means?

• A. human wants are limitless
• B. the economy has very few resources
• C. the economy can scarcely produce anything
• D. resources are limited in relation to wants

The effect of an increase in price on the demand for a commodity with elastic demand will be

• A. an increase in the demand for the commodity
• B. a decrease in the demand for the commodity
• C. a further increase in the price of the commodity
• D. reduction in the number of the distributors of the commodity

Fiscal policy is the government's plan to control aggregate demand by manipulating

• A. the demand and supply of money
• B. revenue and expenditure
• C. tastes and preferences of consumers
• D. the structure of production and employment

Which of the following is applicable to a monopolistic firm operating at the output where marginal cost equals marginal revenue?

• A. Cost of production is at a medium
• B. The plant is of optimum size
• C. Price is above marginal revenue
• D. Average variable cost is at a minimum