Question

QUESTION TWO

1. (a) Discuss any five (5) factors that can cause the supply curve for maize in Zambia to shift to the right.                                                                                                                                             
2. (a) Product A’s price increases from K1,000 per unit to K1,300 per unit whereas quantity demanded for product B increases from 5,000 units to 9,000 units. Answer the following questions;

1. Define the applicable elasticity and state its formula.                                                                           
2. Calculate the elasticity and discuss your answer.                                                                               
3. Explain the relationship between products A and B.                                                                            

(b) State if the following statement is true or false and justify your response:                                                                                                                     Unitary price elasticity of demand is associated with revenue maximisation.                                                

1. When consumers’ average incomes increase from K8,000 to K10,000, demand for insurance service X increases from 240,000 policies to 300,000 policies whereas demand for insurance service Y decreases from 180,000 policies to 130,000 policies. Answer the following questions:

1. Calculate the elasticity pertaining to insurance service X and render the appropriate conclusion to your answer.                                                                                                                        
2. Calculate the elasticity pertaining to insurance service Y and render the appropriate conclusion to your answer.                                                                                                                        
3. Comment on insurance services X and Y.                                                                         

                                                                                                                                                            [Total 25 marks ]

Answer 1

As asked, Q2 is answered below