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CPA Economics – Pilot December 2021 Past Paper & Answers

Unit: Economics

17 Questions

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Questions

Download CPA Economics Pilot December 2021 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

Access the full paper online, download the PDF, or study offline. Each question includes step-by-step solutions to help you understand key concepts in Economics.

Other Economics Past Papers

1a
Demand, supply and determination of equilibrium
​ ​​(i) Explain the concept of “consumer sovereignty” as applied in economic analysis. 

(ii) Highlight five factors that limit consumer sovereignty. 

(iii) ABC limited has been incurring losses over the last few years despite its monopolparastatal status. 
     Using a well-illustrated diagram, demonstrate how a monopolist can make losses in the short-run.
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1b
Economic growth, economic development and economic planning
​ ​​Discuss the four main goals of macroeconomic policy in developing countries.
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2a
Demand, supply and determination of equilibrium
​​Highlight the characteristics of public goods.
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2b
Demand, supply and determination of equilibrium
​ ​ ​ ​​The following economic functions have been derived from the Kenya Coffee Millers Limited:

Qa​=3p2−4p

 and

Qb​=24−p2

 where p represents price and Q is quantity

Required:

(i) Which of the two functions represents a demand curve and supply curve. Cite relevant economic reasons.

(ii) Determine the equilibrium price and quantity in the market

(iii) Explain, with the aid of a diagram, the effect on the demand and supply functions indicated in (a) above of

a simultaneous decrease in cost of inputs and a decrease in the price of a substitute good. 

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3a
Demand, supply and determination of equilibrium
​​Explain the term ‘Price control’.
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3b
Demand, supply and determination of equilibrium
​ ​ ​ ​​Explain the circumstances under which price control is considered necessary.

The utility total function and other relevant variables related to a consumer are given as follows:

U=20X−4Z2+40Z−X2

Income Y = Kshs. 48

Price of X (Px) = Kshs.2

Price of Z(Pz) = Kshs.4

Required:

(i) Determine the equilibrium quantities of commodities x and z using the cardinalist approach to consumer

behavior.

(ii) Outline the axioms of the cadinalist approach to consumer behavior.

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4a
Demand, supply and determination of equilibrium
​​Explain the importance of elasticity of supply in decision making.
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4b
Money and banking
​ ​​Examine five factors that limit the effectiveness of the monetary policies in developing countries.
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4c
National income
​ ​ ​​You are given the following information about the commodity and Money markets of a closed economy without

government intervention:

The commodity market Consumption function:

C = 50 + 2/5Y

Investment function:

I = 790 – 21r

The Money Market:

Precautionary and Transactions demand for money MDT = 1/6 Y

Speculative demand for money MDS = 1200 -18r

Money supply MS = 1250

Required:

(i) Determine the equilibrium levels of income and interest rate for this economy.

(ii) Using a well labeled diagram, illustrate the equilibrium condition in part (i) above. 

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5a
Demand, supply and determination of equilibrium
​​Explain the meaning of mobility of factors of production and highlight the significance of factor mobility.
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5b
National income
​ ​ ​​Outline the economic policy recommendations that would reduce regional development imbalances developing countries. 

 The table below represents economic transactions for country XYZ in billions of shillings:

Total output
Intermediate purchases 
Agriculture
130
110
Manufacturing
170
145
Services
150
125

Required: 
(i) Calculate the Gross National Product of this economy using the value added approach. 

(ii) If depreciation and indirect taxes equal 8 billion and 7 billion shillings respectively, find the Net Domestic Product both at Market prices and at factor cost. 
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6a
Demand, supply and determination of equilibrium
​​Explain the term ‘Oligopoly’?
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6b
Demand, supply and determination of equilibrium
​​Analyse the challenges facing the formation of “cartels” in the oligopoly market structure.
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6c
Inflation and unemployment
​​Citing reasons, suggest why rising inflation is a major cause of concern in developing countries.
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7a
Inflation and unemployment
​​Outline the main causes for the rise in the unemployment levels in developing countries.
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7b
Inflation and unemployment
​​Suggest the possible remedy measures to contain unemployment crisis in developing countries.
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7c
Money and banking
​​Explain the likely challenges facing currency demonetization in your country.
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