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Economics Paper 2, May/June 2009  
Questions: 1 2 3 4 5 6 7 8 9 10 11 12 Main
General Comments
Weakness/Remedies
Strength






















Question 10

(a) With the aid of a diagram, explain the effects of fixing price

(i) above the equilibrium price

(ii) below the equilibrium price.

(b) (i) What is an abnormal demand?

(ii) Give two reasons for its occurrence.

_____________________________________________________________________________________________________
Observation

This question was not popular with the candidates as it was avoided by many.  It was evident that candidates demonstrated high level of phobia for questions that revolved around price control.  The diagrams and explanations required on the equilibrium price (both above and below) were not done by candidates.  Almost  all the candidates abandoned this part of the question and they only answered the ‘b’ part of it on abnormal demand.  In order to score good marks in the question, candidates were expected to give some of the following answers.

 (a)  (i)   Above Equilibrium    -   PA

  1. increase in price;
  2. reduced quantity demanded;
  3. increase quantity supplied;
  4. excess supply or surplus;

      (ii)    Below Equilibrium    -   PB

  1. decrease in price;
  2. increase in quantity demanded;
  3. reduced quantity supplied;
  4. shortage in the market or excess demand;
  5. emergence of a black market.

 (b)(i)   This is demand which does not obey the law of demand.  e.g  Abnormal demand arises when consumers demand more at higher prices.

    (ii) Reasons for the occurrence of abnormal demand

    1. when prices are expected to rise further;
    2. purchases of rare commodities;
    3. giffen goods;
    4. articles of ostentation;                                              
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