STRATHMORE INSTITUTE OF MATHEMATICAL SCIENCES
BACHELOR OF BUSINESS SCIENCE
FINANCIAL ECONOMICS/FINANCIAL ENGINEERING/ACTUARIAL SCIENCE
MAKEUP CAT
BSE 1102 & BSA 1101
DATE: 13th October 2021
Time: 1 Hours
INSTRUCTIONS
1. Answer all Questions(30 MARKS)
2. Indicate on the answer Booklet the CAT you are resitting i.e. CAT 1 or CAT2
a) Pete is a supplier of several items in his neighborhood. These items include milk and
weekend skating shoes for children in the area. Pete gets the milk from reliable suppliers
who are able to adjust the amounts available to Pete on Pete’s request. On the other hand,
the consumers from Pete’s estate fully rely on Pete for their daily milk supply. Pete is not
the only supplier of weekend skating shoes in the estate. The government increases tax on
both milk and skating shoes. Apply the concept of price elasticity and use two different
diagrams to illustrate and explain which of the commodities Pete would easily shift the
tax burden to his consumers.
[8 marks]
b) State and explain any three economies of scale that may accrue to a firm upon its
expansion
[6 marks]
c) Illustrate the case of a binding price ceiling. Further, explain any four consequences that
may arise from binding price ceiling imposed by governments
[8 marks]
d) In four points, argue for or against the statement ‘market economies are more efficient
than command economies’
[8 marks]