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AEB 212 Introduction To Agricultural Economics: Test 1 (Total Marks 50 Marks)

This document provides instructions and questions for an exam on agricultural economics. It is divided into two sections worth 25 marks each, for a total of 50 marks. Section A defines key terms like economics, agricultural economics, resources, and utility. It also lists questions that economics seeks to answer and explains the factors of production. Section B states assumptions of cardinal utility, explains properties of indifference curves, and includes supply and demand questions involving graphs and calculations.

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Thabo Chuchu
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198 views5 pages

AEB 212 Introduction To Agricultural Economics: Test 1 (Total Marks 50 Marks)

This document provides instructions and questions for an exam on agricultural economics. It is divided into two sections worth 25 marks each, for a total of 50 marks. Section A defines key terms like economics, agricultural economics, resources, and utility. It also lists questions that economics seeks to answer and explains the factors of production. Section B states assumptions of cardinal utility, explains properties of indifference curves, and includes supply and demand questions involving graphs and calculations.

Uploaded by

Thabo Chuchu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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AEB 212

INTRODUCTION TO AGRICULTURAL ECONOMICS

TEST 1

[TOTAL MARKS = 50 MARKS]

MONDAY, SEPTEMBER 17, 2018


1400 - 1530 HRS

STUDENT NAME AND ID NUMBER

______________________________________________
MARKING KEY

INSTRUCTIONS:

1. PLEASE WRITE NEATLY AND LEGIBLY.

2. ANSWER ALL QUESTIONS IN THE SPACES PROVIDED

1
SECTION A: 25 marks
1. Define the following;
i) Economics (2)
The study of how individuals and societies make decisions about ways to use scarce
resources to fulfil their needs and wants.
Social science that deals with how consumers, producers and society in general choose
among alternative uses of scarce resources with the aim of improving efficiency in
production and consumption and, in satisfying human wants.
ii) Agricultural Economics (2)
Is an applied social science that deals with how human beings choose to use technical
knowledge and scarce production resources such as land, labour, capital and management to
produce food, fibre and distribute it for consumption to various members of the society
iii) Resources (2)
The things used to make other goods. Resources can be: Natural and biological (fresh water,
land and minerals), Human (labour and management or entrepreneurship), Manufactured or
capital (machinery, buildings)
iv) Utility (2)
Refers to want satisfying power of a commodity.
Or
It is the satisfaction which can be actual or expected and is derived from the consumption of a
commodity.

v) Production (2)
Production is basically an activity of transformation, which connects factor inputs and
outputs. It is the process or act of making goods or providing services to satisfy consumer
needs and wants.

2. List and 5 questions that economics tries to answer. (5)

WHAT to produce (make)

HOW MUCH to produce(quantity)

HOW to Produce it(manufacture)

FOR WHOM to Produce(who gets what)

WHERE TO SELL (Market)

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WHO gets to make these decisions?

3. List and explain the factors of production. (8)


LAND – Natural Resources available for production. It includes all the land forms in view as
well as the physical characteristics and the natural influence of the land that may influence its
productivity. Examples are minerals, forests, and groundwater.
LABOR – Labour refers to the physical act of performing a
task i.e. manpower. Payment for labour is wages and salaries. Human capital is
the quality of labour resources that can be improved through investments in
education, training and health.
CAPITAL - Tools, Machinery, Factories, road networks, telecommunications network, ICT
infrastructure etc.
• Refers to investment in goods that can produce other goods in the future.
• Capital therefore refers to manufactured goods which have been produced in order to
produce other goods and services. The reward for capital is interest.
• ENTREPRENEURSHIP- It refers to the ability and the willingness to take risk in the
production process. Reward for Entrepreneurship is Profit/ Loss

4. State the law of demand. (2)

It states that the higher the price of a good, the lower the demand of that good, ceteris
paribus.

SECTION B: 25 marks
1. State any five (5) assumptions of cardinal utility. (5)
- Rationality
- Utility is cardinally measurable
- Constant marginal utility of money
- Diminishing marginal utility
- Independent utilities
- Total utility
2. Explain any two (2) properties of indifference curves. (4)
i)Downward Slopping
ii)Convex to the Origin

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iii) Indifference Curves Never Intersect
iv) The further away from the origin an indifference curve lies, the higher the level of utility
it denotes
3. Suppose Tshidi can afford to buy 50 oranges and 20 apples if she spends her entire
income. The prices of the two goods are P3 and P2 respectively. How much is
Tshidi’s income?
(3)
Assuming good X is Oranges and good Y is apples;
Budget equation: PxX+PyY=I
3*50+2*20= I
150+40=I
I= P190

4. What will happen to the budget line if the price of apples was increased from P2 to
P4? (3)
The budget line will pivot towards the origin. (They can do a graphical representation)

5. Given the following demand schedule;


Unit price Individual demand Market
demand
Daisy Peo Theo Sam
10 0 0 10 35 45
9 0 10 35 50 95
8 4 15 55 60 134
7 8 20 60 75 163
6 13 24 70 90 197

Draw the market demand curve depicting the above demand schedule. (5)
Plot the individual demand curves and the market demand curve.

4
6. With an aid of a diagram, explain market disequilibrium that happens when there is
excess demand. (5)
When price is less than equilibrium price, then quantity demanded exceeds the quantity
supplied. There is excess demand or a shortage. Suppliers will raise the price due to too
many buyers chasing too few goods, thereby moving toward equilibrium

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