THE UNIVERSITY OF ZAMBIA
SCHOOL OF HUMANITIES AND SOCIAL SCIENCES
DEPARTMENT OF ECONOMICS
MICROECONOMICS (ECN 1115)
TUTOR: M. WAKUMELO
1. Outline the two main approaches employed in the analysis of consumer
behaviour? Explain how equilibrium is attained in each approach?
2. Distinguish between total utility and marginal utility and explain the principle of
diminishing marginal utility?
3. Explain the difference between demands, demand schedule and demand curve.
4. Given the table below showing Thenjiwe’s schedule of total utilities derived from
two goods that she purchases from PEP at east park, generate the marginal
utilities for the goods and use the cardinal utility approach to ascertain how
much of each good the consumer must consume given that the prices of the two
goods are K2 and K3 for good X and Y respectively and the consumer has an
income of K24?
Number of Units Consumed
Total Utility for Good X
Total Utility for Good Y
1
20
24
2
38
45
3
54
63
4
68
78
5
80
87
6
90
90
5. Define an Indifference curve and explain the properties of indifference curves?
What does the slope of the indifference curve intell?
6. With a well labelled diagram, show how equilibrium is attained under the ordinal
approach?
7. With aid of a well labelled diagram, explain the relationship between total utility
and marginal utility, clearly indicating what happens to total utility at each of the
following points?
a) Marginal Utility is zero at the initial point
b) Marginal Utility is increasing
c) Marginal Utility is at Maximum
d) Marginal Utility is decreasing but positive
e) Marginal Utility is zero at the second point
f) Marginal Utility is negative
8. With the aid of suitable diagrams, explain how the following would affect the
demand for maize in Zambia:
(a) Increase in the price of maize from k50 per bag to k70 per bag.
(b) Reduction in the price of fertilizer.
(c) Increase in the price of Cassava.
(d) News that consumption of maize increases the probability of getting cancer.
9. Using the demand and supply model, explain how equilibrium in the market can
be restored after the following:
(a) Imposing a price above the equilibrium price
(b) Imposing a price below the equilibrium price
(c) An increase in the price of a complement good
(d) A decrease in the cost of raw materials.
(e) An improvement in technology.
10. Use the table below to draw a production possibility frontier and answer the
questions which follow:
(a)
(b)
(c)
(d)
Point
Eggs
Chickens
A
0
5
B
10
4
C
15
3
D
18
2
E
20
0
Is it possible to produce 15 eggs and 4 chickens?
If the 10 eggs are produces with 3 chickens, would you say that
production is efficient?
What is the opportunity cost of producing 2 extra chickens at point E?
What is the opportunity cost of producing an extra egg at point B?