REPUBLIQUE DU CAMEROUN REPUBLIC OF CAMEROON

Paix – Travail - Patrie Peace - Work – Fatherland

MINISTÈRE DE L’ENSEIGNEMENT SUPÉRIEUR MINISTRY OF HIGHER

EDUCATION

COMMISSION NATIONALE D’ORGANISATION NATIONAL COMMITTEEE FOR THE ORGANIZATION

DES EXAMENS OF EXAMS

NATIONAL EXAM OF HIGHER NATIONAL DIPLOMA 2023 SESSION

Field Management
Specialty/Option: ACCT, BFI, HUM
Paper: Economic Science
Credit value: 01 Time Allowed: 3hours

Instructions to candidates

This paper carries two sections. You are required to answer all the questions

SECTION A: PROPOSED ANSWERS TO MCQs (1 x 20 = 20 marks)

1 2 3 4 5 6 7 8 9 10 11 1 13 14 1 16 17 18 1 20
2 5 9
B B D C D B A C C C D C C B B C A A C B

SECTION B: PROPOSED SOLUTIONS PROBLEM SOLVING ESSAY WRITING

(80Marks)

Question 1 (5marks)

1*Explain the form of the consumption function.

Consumption function refers to the standard equation of consumption which defines the
relationship between consumption and income where consumption value can be derived at
each level with the use of income value. C= c+ bY where c=autonomous consumption, b=
marginal propensity to consume, and Y= income.

*How is the number 200 interpreted?

The number 200 represent autonomous consumption which is the expenditures that
consumers must make even when they have no disposable income.
*What is the marginal propensity consumed and what does it represent?

The marginal propensity to consume is 0.6 and in economics, the marginal propensity to
consume (MPC) is defined as the proportion of an aggregate raise in pay that a consumer
spends on the consumption of goods and services, as opposed to saving it.

* Represent the consumption function in a 45° diagram.

C 45°

C = 200 + 0.6Y

200

0 Y

2- The level of Investment is fixed at 150 regardless of the level of production. (5marks)

*Comment on this assumption and represent Investment in the diagram.

The Autonomous Investment is the capital investment which is independent of the economy
shifts. This means, any change in the cost of raw material or any change in the salary and
wages of labor etc. has no effect on the autonomous investment.

150 I

0 Y
*Calculate the aggregate demand function and represent it graphically.

ADD = C + I

ADD = 0.6Y + 200 + 150

ADD = 0.6Y + 350

C 45°

C = 350 + 0.6Y

200

0 Y

3- Algebraically determine the level of Equilibrium. (5marks)

At Equilibrium,

ASS = ADD

Y=C+I

Y = C0 + bY + I0

Y - bY = C0 + I0

Y(1 - b) = C0 + I0

1
Y= (C + I )
1−b 0 0

1
Y= (200+150)
1−0.6

1
Y= (350)
0.4

Y =875
4- *Determination of the savings function. (5marks)

We recall that at Equilibrium;

ASS = ADD

And since in a two sector economy, consumers either consume or save their income, we will
have;

Y=C+S

Y–C=S

S=Y–C

S = Y – [0.6Y + 200]

S = Y – 0.6Y - 200

S = –200 + (Y - 0.6Y)

S = –200 + 0.4Y

*Representation of the saving function in the diagram and Compare the savings and
investment curves to Equilibrium.

C 45°

C = 200 + 0.6Y

200

0 Y
875

S = -200 + 0.4Y

150 I

0 Y
875

-200
* What can we deduce from this?

We can deduced that at the income level of 875, investment equals to savings and at that
same point in the aggregate supply/aggregate demand diagram, the aggregate demand line
cuts the 45° line.

Question 2

Given the demand function of a firm: Q = 100 – 2P and the cost function

TC = 50 + 20Q + Q2

(i) The price function

Given

Q = 100 – 2P

2P = 100 – Q (2mark)

100−Q
P=
2

100 Q
P= −
2 2

P=50−0.5 Q (1mark)

(ii) The Total Revenue (TR) Function

We know that

TR = P x Q (1marks)

TR = [50 – 0.5Q] x Q (1mark)

TR = 50Q – 0.5Q2 (1mark)

(iii) The MR and MC functions

We recall that
 Change∈Total Revenue
Marginal Revenue( MR)=
Change∈Quantity

δTR
MR=
δQ

OR

The derivative of total revenue TR’

TR = 50Q – 0.5Q2

MR=50−Q (2marks)

Change∈Total Cost
Marginal Cost ( MC)=
Change∈Quantity

δTC
MC=
δQ

OR

The derivative of total revenue TC’

TC = 50 + 20Q + Q2

MC = 20 + 2Q (2marks)

(iv) Determination of profit maximization output and price?

Profits are maximized where

MR = MC

50 – Q = 20 + 2Q

50 – 20 = Q + 2Q

30 = 3Q

Q = 10 (2marks)

And

P = 50 – 0.5Q

P = 50 – 0.5(10)
 P = 50 – 5

P = 45 (2marks)

(v) Determination of Total Revenue and Total profit.

Total Revenue (TR) = Price x Quantity (1mark)

Implies

TR = 45 X 10

TR = 450 (1mark)

Profit (π) = TR – TC

But

TC = 50 +20Q + Q2

TC = 50 + 20(10) + (102)

TC = 50 + 200 + 100

TC = 350 (1mark)

Therefore,

Profit (π) = TR – TC

Profit (π) = 450 – 350

Profit (π) = 100 (1mark)

(vi) Under which market system is this firm operating? Explain your answer in one
sentence

* Monopoly (1mark)

* Higher prices higher than all competitive price P > MR = MC (1mark)

Question 3: (20marks)
a) Trade deficit is the amount by which the value of visible import exceed visible export
while current account deficit is the amount both visible and invisible import exceed visible
and invisible export. (5 marks)

b) what is the possible causes of a trade deficit. (5 marks)

The fundamental cause of a trade deficit is an imbalance between a country's savings and
investment rates. As Harvard's Martin Feldstein explains, the reason for the deficit can be
boiled down to the United States as a whole spending more money than it makes, which
results in a current account deficit.

c) Enumerate four reasons why Cameroon should choose protectionism as a way of

correcting her trade deficit. (5 marks)

1. Protect sunrise industries

2. Protect non-renewable resources
3. Protect strategic industries
4. Deter unfair competition
5. Save jobs
6. Help the environment
7. Limit over-specialisation

d) State any three basis of international trade. (5 marks)

Reasons for international will include any three of the following:
1. Differences in Technology
Advantageous trade can occur between countries if the countries differ in their technological
abilities to produce goods and services. Technology refers to the techniques used to turn
resources (labor, capital, land) into outputs (goods and services).
2. Differences in Resource Endowments
Advantageous trade can occur between countries if the countries differ in their endowments
of resources. Resource endowments refer to the skills and abilities of a country’s workforce,
the natural resources available within its borders (minerals, farmland, etc.), and the
sophistication of its capital stock (machinery, infrastructure, communications systems).
3. Differences in Demand
Advantageous trade can occur between countries if demands or preferences differ between
countries. Individuals in different countries may have different preferences or demands for
various products. For example, the Chinese are likely to demand more rice than Americans,
even if consumers face the same price. Canadians may demand more beer, the Dutch more
wooden shoes, and the Japanese more fish than Americans would, even if they all faced the
same prices.
4. Existence of Economies of Scale in Production
The existence of economies of scale in production is sufficient to generate advantageous
trade between two countries. Economies of scale refer to a production process in which
production costs fall as the scale of production rises. This feature of production is also known
as “increasing returns to scale.”
5. Existence of Government Policies
Government tax and subsidy programs alter the prices charged for goods and services. These
changes can be sufficient to generate advantages in production of certain products. In these
circumstances, advantageous trade may arise solely due to differences in government policies
across countries.

Question 4

a. We know that the price elasticity of demand may be calculated using the formula:

∆ Qd
Qd ∆ Qd P
Es= =( )( ) (2marks)
∆P ∆ P Qd
P

With each price increase of 20FCFA, the quantity demanded decreases by 2. Therefore,

( )
∆ Qd −2
∆P
=
20
=−0.1 (2marks)

At P = 80, quantity demanded equals 20 and

80
Ed=
20
=(−0.1 )=−0.4 (1marks)

Similarly, at P = 100, quantity demanded equals 18 and

100
Ed=
18
=(−0.1 )=−0.56 (1marks)

b. The elasticity of supply is given by:

 ∆ Qs
Qs ∆Q s P
Es= =( )( ) (2marks)
∆P ∆ P Qs
P

With each price increase of 20FCFA, quantity supplied increases by 2. Therefore,

( )
∆ Qs
∆P
2
= =0.1
20
(2marks)

At P = 80, quantity supplied equals 16 and

80
Es=
16
=( 0.1 )=0.5 (1marks)

Similarly, at P = 100, quantity supplied equals 18 and

100
Es=
18
= ( 0.1 )=0.56 (1marks)

c. The equilibrium price and quantity are found where the quantity supplied equals the
quantity demanded at the same price. As we see from the table, the equilibrium price is

100FCFA and the equilibrium quantity is 18,000. (4marks)

d. With a price ceiling of 80 FCFA, consumers would like to buy 20,000, but producers will

supply only 16,000. This will result in a shortage of 4,000. (4marks)