Economics of Enterprise Answers

Deregulation within the airline industry was introduced in South Africa in 1991. Before deregulation, South African Airways (SAA) was the only service provider on the main domestic airline routes as well as the international airline routes. The first decade after deregulation resulted in a wave of low cost airline competitions such as Flitestar, Sun Air, Phoenix Air, Nationwide, 1time and Velvet sky entering the domestic market. 

There are several factors in the business world that apply pressure on a modern-day organisation such as SAA. Which one of these factors is depicted in the mini-case study above?

a.   Profitability

b.   Corporate Social Investment

c.   Environmental change

d.   Consumerism

After an alien invasion, Earth has to resort to the extreme protection of its resources in order to survive. A global government is elected with the mandate to control all the resources, which remain to humanity. The global government serves as a centrally directed economic system and has assumed complete responsibility for producing and distributing products and services. Which one of the following best describes the main economic system used in this new world order?

a.   The market economy

b.   The command economy

c.   Mixed economies

d.   Free-market economy

C=q^3+1.5q^2+9q......

Find AC .....

MC

AVC

AFC..?

Where would an REA diagram for the production cycle depict the list of ingredients for making a product?

A. In the bill of materials table

B. In the raw materials table

C. In the work in process table

D. In the finished goods table

Compare and contrast the permanent income hypothesis and the relative income hypothesis in explaining consumption behavior in a modern developing country such as Kenya. (8marks)

b) Explain why a little inflation is always necessary so as to grease the wheels of the

economy (4marks)

c) Discuss the key assumptions of the Mundell - Fleming model ( 5marks)

d) Explain five indicators of a developing country (5 marks)

e) Demonstrate your understanding of the concepts of inflationary gap and deflationary

gap and show how they can be corrected (6 marks)

The commodity and money markets of Juja farm, a hypothetical economy are as

given below:

Commodity Market

Y = C + I

C = 1000 + 0.8Y

I = 2000 – 0.75r

Money Market

Lt = 0.25Y (Transactions and precautionary demand for money function)

Ls = 1000 – 0.5r (Speculative demand for money function)

Ms = 3200 (Money supply function)

Required:

i) Mathematically derive both IS and LM curves. (6 marks)

ii) Derive the equilibrium level of Income and rate of interest.

(4 marks)

iii) If the money supply is increased by 80, what would be the effect on the equilibrium level of income and rate of interest in Juja farm economy?

Explain in appropriate detail, the different ways in which law can respond to economic demands and problems.

Illustrate the importance of the distribution of decision making power within an organisation.

compare the t statics in making inferences to the use of p values