sharka - KABARAK UNIVERSITY UNIVERSITY EXAMINATIONS...

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Page 1 of 3 KABARAK UNIVERSITY UNIVERSITY EXAMINATIONS 2013/2014 ACADEMIC YEAR FOR THE DEGREE OF BACHELOR OF EDUCATION ARTS ECON 210: INTERMEDIATE MICROECONOMICS DAY: MONDAY DATE: 11/8/2014 TIME: 4.00 – 6.00 P.M. STREAM: Y2S1 INSTRUCTIONS: ° Answer question one and any other two questions QUESTION ONE a) Explain why consumer’s indifference curves; i) Have negative slope (2mks) ii) Do not intersect (2mks) iii) Are convex to the origin (2mks) b) i) What is a budget line? (1mk) ii) Explain what the intercepts of budget line on the x-axis and y-axis show. (2mks) iii) Explain the effect of increase in income on the budget line (2mks) c) Amit’s budget line relating mangoes and oranges has intercepts of 50 units of mangoes and 20 units of oranges. If the price of mangoes is sh.12, determine;
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Page 2 of 3 i) Amit’s income? (2mks) ii) The price of oranges (2mks) iii) The slope of the budget line. (3mks) d) With the help of indifference curve analysis, show the substitution and income effects for a normal good in case of a price increase. (8mks) e) Identify the reasons why the marginal rate of substitution diminishes.
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