nAm I 8 I A U n IVERS ITY OF SCIEnCE AnD TECHnOLOGY

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNITNG, ECONOMICS AND FINANCE

QUALIFICATION: BACHELOR OF ECONOMICS

QUALIFICATION CODE: 07BECO LEVEL: 7

COURSE CODE: EOA611S COURSE NAME: ECONOMICS OF AGRICULTURE

SESSION: JULY 2016 PAPER: 1

DURATION: 3 HOURS MARKS: 100

SUPPLEMENTARY/ SECOND OPPORTUNITY EXAMINATION QUESTION PAPER

EXAMINER(S) Mr Eslon Ngeendepi (NUST)

MODERATOR: Dr Cyril Ogbokor

INSTRUCTIONS 1. Answer ALL the questions.

2. Write clearly and neatly.

3. Number the answers clearly.

4. This examination paper is divided into two sections.

PERMISSIBLE MATERIALS 1. Scientific calculator

THIS QUESTION PAPER CONSISTS OF 4 PAGES (Including this front page)

Instructions:

SECTION A

50 MARKS

• Answer all the questions in this section in your examination book.

• Answer each question on a new, clean page.

QUESTION 1 [25 Marks]

1.1 Connie allocates N$200 of her monthly food budget between two goods: meat and potatoes.

a) Suppose meat costs N$4 per Kg and potatoes N$2 per kg. Derive Connie's budget constraint and her

budget line. (6)

b) Suppose also that her utility function is given by the equation u(M,P} =2M+ P. What combination of

the meat and potatoes should she buy to maximize her utility? (Hint: Meat and potatoes are perfect

substitutes). (10)

c) Connie's supermarket is running a special promotion; If she buys 20 pounds of potatoes (N$2 per

kg) . She gets the next 10 kg for free. This offer applies only to the first 20 kg's (excluding bonus

potatoes) are still N$2 per kg. Draw her budget constraint. (4)

d) When an outbreak of potato rot raises the price of potatoes to N$4 per kg, the supermarket ends its

promotion. What does Connie's budget constraint look like now? What combination of meat and

potatoes will maximize her utility? (5)

QUESTION 2 [15 Marks]

2.1 Suppose that the demand function for beef in Namibia in 2006 is given as follow:

Demand:~= 10900 -130P

Price is calculated in N$ per kilogram and quantities in millions kilograms per year. The supply

function for the beef in that specific year is given as follows:

S-upply: 0s = 900 + 120P

a) Determine the new equilibrium market price of beef.

b) Determine the market equilibrium quantity.

2

(4)

(2)

2.2 From the information given in question 2.1 above, suppose a drought shift the supply curve to the

left and price increases to N$60.00 per Kg.

a) Determine the new equilibrium quantity. (3)

b) What is the price elasticity from the above information, and identify the type of elasticity? (6)

QUESITON 3 [10 Marks]

3.1 This information given at the end of the financial year of 2014 from XYZ farm. This farm has sold six

weavers at N$5000 each per year. The costs were given as follow.

Supplements (Licks) N$516 per head

Marketing Costs N$384 per head

Vaccines N$71 per head

Power N$1,000 per month

Labour Costs N$850 per month

From the above information you are required to calculate the farmers:

i. Profit

ii. Average Variable Cost

iii. Average Fixed Cost

3

(6)

(2)

(2)

Instructions:

SECTION B

50 MARKS

• Answer all the questions in this section in your examination book.

• Answer each question on a new, clean page.

QUESTION 1 [20 MARKS]

"The Namibian Development Corporation (NDC) is one of only a handful of state-owned enterprises that has

embraced the green revolution after it spent N$940 000 to install a solar photovoltaic system at its

premises".

1.1 Define the term green revolution. (2)

1.2 What are some of the key factors behind Green Revolution? (3)

1.3 What are the benefits of green revolution in agricultural development in Namibia? (6)

1.4 List three major challenges of green revolution. (3)

1.5 Define the term Agricultural extension services. (3)

1.6 Explain the role of government in institution support. (3)

QUESTION 2 [14 MARKS]

2.1 Why is agricultural credit important to agricultural development? (4)

2.2 Use the discount method to calculate the (a) the amount the borrower receives, (b) the periodic

payment, on N$500,000 loan that is payable in 2 years if the initial rate is 10 percent? Show all

your calculations and formula. (10)

QUESTION 3 [16 MARKS]

3.1 How can an urban industrial economy contribute to rapid development of the agriculture sector? (6)

3.2 Do you support the idea of government intervention in the agriculture sector? Justify your answer.

TOTAL MARKS 100

4

(10)