GCE A-LEVEL ECONOMICS PAPER 3

1.  It is always a difficult problem knowing how best to price a product... When the product is in a new and rapidly evolving industry like the microcomputer industry in the 1980s, the decision id doubly difficult. Was it best to charge a high price and sell a smaller number of disks or charge a lower price and aim for volume? One software producer decided to test the market for its new accounting program at different price. The firm, Noumenon Corporation, raised prices in increments of 2000 FCFA all the way up to 21000 FCFA. It found out that total revenue was maximized at a price of 9000 FCFA. As a result of this experiment, it decided to advertise and market the account program at 8500 FCFA , much lower than the prices of competing software programs.
   
   a) State five factors that may affect the demand for this accounting software.  5mks
   b) If at the price of 9000FCFA, 10000 copies of software were sold.
   i) By how much would sales revenue change if demand rises to 12000 copies due to the fall in price to 8500FCFA? 4mks
   ii) Determine the price elasticity of demand of this software. 6mks
   c) List three negative effects of setting the competitive market price. 3mks
   d) How would you describe the demand the demand for computer software and demand for computer hardware? 
   e) List two importance of balance of payments. 4mks
   
   
   
   
   
   
   
2. Question 2  is based on the following data relating to the national income of a hypôthetical economy. (figure are in million FCFA).
   
   House hold final consumption expenditure
   individual government consumption expenditure                   4700
   Gross domestic fixed capital formation                                   950
                                                     
                                                                                                    1100
   Stocks on December 3 I' 1, 2013                                             800
   Stocks on January 1'1, 2013                                                    1000  
   Net domestic fixed capital formation                                       900
   Trade gap                                                                               -1500
   Property income abroad                                                           1200
                                                                                                     300
   Income tax                                                                                650
   Expenditure taxes                                                                     500
   Unemployment Benefits                                                           700
   
   a) Calculate the value of 
   i) Depreciation.
   ii) Total investment (4mks)
   b) Determine the value of 
   i) Gross domestic product at factor cost. 3mks
   ii) Gross national product at factor cost. 3mks
   iii) National income. 3mks
   iv) Gross Domestic product and National Product. 2mks
   c) List three problems encountered when measuring the national income of a country. 3mks
   d) Enumerate two weakness of using national income statistics in measuring living standards within a country.
3.