QUESTION ONE a). Discuss the long-term objectives of demand forecasting to Business Managers. (6 marks) b). Discuss the role of managerial economics in managerial decision-making. (6 marks) c). A firm has the following demand and supply functions: Demand Q=25-0.5P Supply Q=10+1.0P i). Find the equilibrium price and quantity of the firm. (3 marks) ii). What is the firm's supply curve it'the government imposes a specific sales tax of Kshs.3 per unit. (3 marks) tax by the government. iii). Find the equilibrium price and quantity after the imposition of the (4 marks) d). Distinguish between autonomous and derived demand. (4 marks) QUESTION TWO a). Explain the importance of break-even analysis in managerial decision- making. QUESTION THREE (6 marks) b). Kenya Power which sells power to households and industries faces the following total cost function. TC=22,000+100Q The demand for power by the two separable market segments is given by the following demand functions: Industries: P_(1)=300-0.5Q_(1) Households: P_(2)=200-0.5Q_(2) Find: i). The profit-maximizing output for the monopolist, (3 marks) iii). Allocation of output between the two markets. (2 marks) iii). The price charged in each of the two markets. 12 marks iv). The total or maximum profit. (2 marks) a). Explain the term demand forecasting. (3 marks)

QUESTION ONEa) The long-term objectives of demand forecasting for Business Managers include:- Making informed decisions about production, inventory management, and resource allocation.- Identifying market trends and opportunities for growth.- Developing effective marketing strategies and pricing policies.- Enhancing customer satisfaction and loyalty.- Reducing uncertainties and risks in business operations.b) Managerial economics plays a crucial role in managerial decision-making by:- Providing a framework for analyzing economic principles and their application to business problems.- Helping managers understand the impact of economic factors on business operations and decision-making.- Assisting in the formulation of strategies and policies that optimize resource allocation and maximize profitability.- Facilitating the evaluation of alternative courses of action and their potential outcomes.- Enhancing the overall effectiveness and efficiency of managerial decision-making processes.c) i) To find the equilibrium price and quantity, set the demand function equal to the supply function: Solving for P, we get . Substituting into either the demand or supply function, we get .Therefore, the equilibrium price is and the equilibrium quantity is .ii) If the government imposes a specific sales tax of Kshs 3 per unit, the supply curve shifts upward by 3 units. The new supply function becomes .iii) To find the new equilibrium price and quantity after the imposition of the tax, set the new supply function equal to the demand function: Solving for P, we get . Substituting into either the demand or supply function, we get .Therefore, the new equilibrium price is and the new equilibrium quantity is .d) Autonomous demand refers to the demand for goods and services that is not influenced by changes in price, such as the demand for basic necessities like food and shelter. Derived demand, on the other hand, refers to the demand for goods and services that arises as a result of the demand for another product or service, such as the demand for raw materials in response to the demand for finished goods.QUESTION TWOa) Break-even analysis is important in managerial decision-making because it helps managers determine the level of sales or revenue required to cover all costs and achieve a zero-profit position. By analyzing the break-even point, managers can make informed decisions about pricing, production levels, and resource allocation. It also helps in evaluating the feasibility of new projects or investments and assessing the impact of changes in market conditions on profitability.QUESTION THREEa) Demand forecasting is the process of predicting future demand for a product or service based on historical data, market trends, and other relevant factors. It involves analyzing past demand patterns, considering factors such as economic indicators, consumer behavior, and external influences, and using statistical models to estimate future demand. Demand forecasting is crucial for businesses to make informed decisions about production, inventory management, pricing, and resource allocation, ensuring that they meet customer needs while maximizing profitability.b) i) To find the profit-maximizing output for the monopolist, we need to set the marginal revenue equal to the marginal cost. The marginal revenue is the additional revenue generated by selling one more unit of output, while the marginal cost is the additional cost incurred by producing one more unit of output.ii) The allocation of output between the two markets can be determined by setting the marginal revenue in each market equal to the marginal cost and solving for the quantities demanded in each market.iii) The price charged in each of the two markets can be determined by substituting the quantities demanded in each market into the demand functions.iv) The total or maximum profit can be calculated by subtracting the total cost from the total revenue generated by selling the quantities determined in part ii) in each market.v) The term "demand forecasting" refers to the process of predicting future demand for a product or service based on historical data, market trends, and other relevant factors. It involves analyzing past demand patterns, considering factors such as economic indicators, consumer behavior, and external influences, and using statistical models to estimate future demand. Demand forecasting is crucial for businesses to make informed decisions about production, inventory management, pricing, and resource allocation, ensuring that they meet customer needs while maximizing profitability.