Economics

Standard Level
Model Paper 3 Paper 1
Monday, 4 May, 2015 (afternoon)
1 hour 30 minutes
___________________________________________________________________________
Instructions to candidates:
Use of calculator is not allowed
You will be given 5 minutes of reading time
Diagrams if used, should be fully labelled diagrams
Answer any 1 question form Section A
Answer any 1 question form section B

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Section A
Answer any one question form this section
Microeconomics
1.

a.

Explain the main determinants of price elasticity of supply.

[10marks]

b.

Examine the implications for producers and for the economy experiencing
different YEDs for primary products, manufactured products and services.
[15 marks]

2.

a.

Using diagram, explain how governmnet provides price support in labour

market by introducing minimum wages.

b.

[10mar ks]

Discuss the consequences of providing price support to labourers under

minimum wages act on an economy.

[15 marks]

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Section B
Answer any one question form this section
Macroeconomics
3.

a.

Using diagram, differentiate between aggregate supply curve according to

neo-classical model and Keynesian model.

b.

[10 marks]

In contrast to the new classical model, the economy can remain stuck in a
deflationary (recessionary) gap in the Keynesian model for an extended
period of time, comment.

4.

a.

Distinguish between progressive, regressive and proportional taxation with

examples.

b.

[15 marks]

[10 marks]

Evaluate the role of taxation in promoting greater income equality in

distribution of income/output.

[15 marks]

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