S.5 & 6 Econonic New Vision 16 May 2020 Caltec S.5

SATURDAYVISION Saturday, May 16, 2020 ii▼▼▼▼Pass A’level ECONOMICS PAPER 1 ANSWERS ECONOMICS TEACHERS ▼▼▼▼ PAul KAlINdI, ugANdA MAR tyRS SS NAMugONgORONAld JA ggWE, tRINIty C OllEgE, NAbbINgO1. (a) (i) Opportunity cost refers to the second best alternative foregone when choice is made. (ii) Uses of opportunity cost l It guides producers in resource allocation/making production decisions. l It helps consumers in making consumption decisions. l It is used in pricing factors of production. l It is used for specialisation in international trade. l It is a basis for economic planning. l It helps workers to make employment decisions. (b) (i) A mixed economy is one where resources are owned, allocated and distributed by both the state and the private individuals (market forces of demand and supply). while A laissez-faire economy is one where resources are owned, allocated and distributed by private individuals through market forces of demand and supply with little or no government intervention. (ii) The following qualify Uganda to be a mixed economy. In Uganda; l Resource ownership is both by the state and private individuals. l Economic decisions are made by both the government and private individuals. l Resource allocation is by both the market forces of demand and supply and the central planning authority. l There is coexistence of both the private and public sector. l There is existence of indicative planning.l There is regulated competition in production and consumption. (c) Cross Elasticity of Demand = percentage change in quantity X percentage change in price of Y Percentage change in price = change in price original price = 160,000-200,000 200,000 = -20% Cross Elasticity of Demand = 50 = 2.5 20 (ii) Since CED is positive, the two commodities are substitutes/competitively demanded. (d) (i) Quasi rent refers to the extra payment to a factor of production …