WAEC SSCE - Economics - 2020

Tools of monetary policy do not include

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Tools of monetary policy refer to the methods that central banks use to influence the supply of money and credit in an economy. The main tools of monetary policy are open market operations, reserve requirements, and bank rates. Open market operations involve the buying and selling of government securities by the central bank to influence the amount of money in circulation. When the central bank buys government securities, it injects money into the economy, and when it sells them, it takes money out of the economy. Reserve requirements refer to the amount of money that banks are required to hold in reserve, either with the central bank or in their own vaults, to ensure that they have enough funds to meet their obligations to depositors. Bank rates refer to the interest rate that the central bank charges on loans to commercial banks, which can influence the interest rates that banks charge to their customers. Tax and public expenditure policies are not tools of monetary policy. Tax policies refer to the way that governments collect revenue from individuals and businesses, while public expenditure refers to the way that governments spend money on public goods and services. These policies are typically set by government authorities, not central banks, and are used to achieve broader economic goals, such as promoting economic growth or redistributing wealth.

Which of the following is central to the definition of Economics?

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The concept that is central to the definition of economics is "scarcity." Scarcity refers to the limited availability of resources (such as time, money, land, and natural resources) relative to unlimited human wants and needs. In other words, there are never enough resources to satisfy all of our wants and needs, which creates the need for choices and trade-offs. Economics is the study of how individuals, businesses, governments, and societies allocate scarce resources to satisfy their unlimited wants and needs. It examines how people make decisions in the face of scarcity, how they interact with one another in markets, and how policies can be designed to improve societal well-being given the constraints imposed by scarcity. Understanding scarcity is essential to understanding economics, as it explains why we make choices and trade-offs in our daily lives, why markets exist, and why governments intervene in those markets.

Free trade is one in which  

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Import substitution as a strategy of industrialization is the 

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Import substitution is a strategy of industrialization that involves developing locally produced goods as replacements for imported ones. The idea is to decrease a country's dependence on imported goods and increase local production, which can lead to economic growth and development. This strategy involves creating and supporting industries that can produce goods locally that were previously imported, thereby reducing the amount of money that leaves the country for imports. It also helps to create jobs, increase the number of businesses in the country, and build the country's manufacturing capabilities. Therefore, the correct option is "development of locally produced goods as replacements for imported ones."

A country should embark on development planning to ensure that

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A country should embark on development planning to ensure that its scarce productive resources are efficiently utilized. Development planning helps a country to identify its available resources and allocate them in a way that maximizes their impact on economic growth and social welfare. This can help the country to achieve its development goals, such as reducing poverty and inequality, improving education and healthcare, and creating job opportunities. Furthermore, when a country efficiently utilizes its resources, it is likely to attract foreign investment, which can lead to greater economic growth and development. By contributing its own quota to international organizations, a country can also enhance its global reputation and play a more active role in addressing global issues.

If the average fixed cost (AFC) of producing 5 bags of rice is $20.00, the average fixed cost of producing 10 bags will be 

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Which of the following are intermediate products?

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The principle of comparative advantage encourages a country to 

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The principle of comparative advantage encourages a country to engage in trade if it can produce a commodity at a lower cost. The principle of comparative advantage is an economic theory that suggests that countries should specialize in producing goods or services that they can produce at a lower cost than other countries. By doing so, they can trade their specialized goods with other countries for goods that are produced more efficiently by other countries. In simpler terms, the principle of comparative advantage encourages countries to focus on what they do best and trade with other countries for the things they don't do as well. For example, if Country A is better at producing computers than Country B, and Country B is better at producing cars than Country A, then it makes sense for Country A to focus on producing computers and trade with Country B for cars, and for Country B to focus on producing cars and trade with Country A for computers. Therefore, the principle of comparative advantage encourages countries to engage in trade if they can produce a commodity at a lower cost than other countries, rather than trying to be self-sufficient or specializing in the production of all goods.

If an increase in the price of crude oil led to an increase in the prices of kerosene and grease, then kerosene and grease are in

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Labor productivity is defined as 

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Labor productivity is a measure of how much output is produced by a worker in a given period of time, usually an hour. It is calculated by dividing the amount of output produced by the number of hours worked. In other words, labor productivity is a measure of how efficient a worker is at producing goods or services. Therefore, the correct option is "output per man-hour".

Expenditure on food takes a large proportion of the incomes of people in

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Expenditure on food takes a large proportion of the incomes of people in developing countries. This is because in these countries, people have lower incomes and a higher cost of living, which means they have to spend a larger portion of their income on necessities like food. Additionally, there may be limited access to affordable, nutritious food options, which can further drive up the cost of feeding a family. In contrast, in industrialized or advanced countries, people generally have higher incomes and a lower cost of living, so they are able to spend a smaller portion of their income on food.

The table below shows the total revenue schedule of a firm. Use the information to answer the question that follows

What is the firm's marginal revenue? 

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Goods that are abundant in supply usually have low

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A country is allowed to import just 50,000 tonnes of rice annually. This describes 

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The statement describes a "quota". A quota is a restriction on the quantity of a certain good that can be imported or exported during a specified period. In this case, the country is allowed to import only 50,000 tonnes of rice annually, meaning that the country's government has set a limit on the amount of rice that can be imported into the country each year. The purpose of the quota could be to protect domestic producers from foreign competition, to manage the supply of the product in the market, or to regulate the price of the commodity.

Use the figure below to answer question that follows

What does the diagram above depict

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In the long run, as individuals receive higher wages, it causes

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A large firm may experience diseconomies of scale if there is 

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A large firm may experience diseconomies of scale if there is difficulty in coordinating decisions. This means that as a company grows and becomes larger, it may become harder for the management to make decisions that will benefit the entire company as a whole. This can happen because there are more people involved in the decision-making process, and it may be difficult to get everyone on the same page. Additionally, as a company grows, it may become more difficult to communicate effectively with everyone in the organization, leading to a breakdown in coordination and increased inefficiencies.

The public sector in a mixed economy is not always because of

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A seller increased the quantity he offered for sale from 200 units to 250 units when the price of his product increased by 12.5%. What is the price elasticity of the supply of his product?

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Price elasticity of supply measures the responsiveness of the quantity supplied of a product to a change in its price. It is calculated by dividing the percentage change in quantity supplied by the percentage change in price. In this case, the seller increased the quantity supplied from 200 units to 250 units when the price increased by 12.5%. We can calculate the percentage change in quantity supplied as follows: Percentage change in quantity supplied = ((new quantity - old quantity) / old quantity) x 100% = ((250 - 200) / 200) x 100% = 25% We can calculate the percentage change in price as follows: Percentage change in price = 12.5% Using these values, we can calculate the price elasticity of supply as: Price elasticity of supply = (percentage change in quantity supplied / percentage change in price) Price elasticity of supply = 25% / 12.5% = 2.00 Therefore, the price elasticity of supply for this product is 2.00, which means that a 1% increase in price leads to a 2% increase in the quantity supplied. This indicates that the supply of this product is relatively elastic, meaning that the seller is responsive to changes in price and is able to increase the quantity supplied significantly when the price increases.

During inflation, the appropriate fiscal measure to adopt is to

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Money would cease to be a good store of value when 

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Money would cease to be a good store of value when prices of goods and services are rising rapidly. This is because when prices rise quickly, the value of money decreases over time, and people can buy fewer goods and services with the same amount of money. As a result, people may look for alternative stores of value, such as real estate, gold, or other assets that retain their value better than cash. In contrast, when prices are falling slowly or rising slowly, money can still maintain its value as a store of value because its purchasing power remains relatively stable. However, high levels of unemployment can also affect the value of money as it reduces the amount of income and spending power in the economy, leading to lower demand for goods and services, which may result in deflation.

Mr. X and Mrs. Y pay $500.00 and $1,400.00 as taxes on their earning of S5,000.00 and $7,000.00 respectively. The system of taxation employed is

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Based on the information you have provided, it appears that the system of taxation employed is a progressive tax system. In a progressive tax system, the tax rate increases as the amount of income increases. This means that those who earn more pay a higher percentage of their income in taxes compared to those who earn less. In this case, Mrs. Y pays a higher amount of taxes compared to Mr. X even though they both earn different amounts of money. This is because Mrs. Y earns more and is therefore taxed at a higher rate. In summary, the progressive tax system is a tax system that takes a larger percentage of income from those who earn more, in order to provide services and benefits to the public.

If an increase in the supply of beef increased the supply of hides, then beef and hides are in
 

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The correct answer is "joint supply." When an increase in the production of beef leads to an increase in the supply of hides, it means that the two products are produced together as part of the same process. In other words, the production of one good generates the production of the other good as a byproduct. This is known as joint supply. Therefore, when there is an increase in the supply of beef, there will automatically be an increase in the supply of hides as well, and vice versa. This is because both goods are produced together and cannot be easily separated. It's important to note that joint supply is different from competitive supply, where two or more goods are produced using the same resources and compete for those resources. Joint supply is also different from composite supply, where two or more goods are combined to create a new product. Finally, joint demand refers to two or more goods that are demanded together, such as cars and gasoline.

Use the figure below to answer the question that follows

The curves D\(_{0}\)D\(_{0}\) and S\(_{0}\)S\(_{0}\) are the initial demand and supply curves respectively. What happens when government provides subsidies to producers?

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The location of iron and steel industry at a place is due to 

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The location of iron and steel industry at a place is primarily due to easy access to raw materials, particularly iron ore and coal. Iron and steel production require large quantities of these materials, and so industries tend to locate near areas where these resources are readily available. Other factors such as access to cheap labour, good infrastructure, and government policies may also play a role, but they are not as significant as the availability of raw materials. Access to cheap labour can reduce production costs, while good infrastructure can make transportation of raw materials and finished products easier. Government policies such as tax incentives and subsidies may also attract industries to certain locations. Overall, the availability of raw materials is the most important factor in determining the location of iron and steel industry.

The table below shows the total revenue schedule of a firm. Use the information to answer the question that follows

What is the unit price of the firm's output

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The unit price of the firm's output can be found by dividing the total revenue by the number of units sold. For example, when the firm sells 50 units, the unit price is $85 / 50 = $1.70. Similarly, the unit price remains constant at $1.70 for all other outputs. So the answer is $1.70.

If a beef market is in equilibrium at $4.00 per kg, an increase in price to $6.00 per kg may cause

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An increase in the price of beef from $4.00 per kg to $6.00 per kg may cause a surplus in the market, as producers will likely increase their supply of beef to take advantage of the higher price, while consumers may decrease their demand for beef due to the higher price. This results in a situation where the quantity of beef supplied exceeds the quantity of beef demanded at the new higher price, leading to a surplus. A surplus occurs when there is an excess supply of a product that is not being bought by consumers, and it can result in prices being driven down in the future, as producers look to sell off their excess inventory.

Which function of the wholesaler enables him to stabilize prices? 

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The function of the wholesaler that enables him to stabilize prices is warehousing goods. This means that the wholesaler stores a large quantity of goods in a warehouse and releases them in the market as and when needed. This helps in avoiding price fluctuations caused by shortages and surpluses in the market. By having a large stock of goods, the wholesaler can ensure a steady supply of products to retailers, which helps in maintaining stable prices.

The central bank Can reduce the ability of commercial banks to give out loans by 

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The central bank can reduce the ability of commercial banks to give out loans in a few ways, but one simple way is by raising the bank rates. When the central bank raises the interest rates, it becomes more expensive for commercial banks to borrow money from the central bank. Consequently, the commercial banks will also increase the interest rates for their customers to make up for the extra cost of borrowing from the central bank. As a result, fewer people and businesses will want to borrow money, which means that the commercial banks will give out fewer loans. Another way the central bank can reduce the ability of commercial banks to give out loans is by reducing the special deposits. When the central bank reduces the special deposits that commercial banks have to keep with them, the banks will have less money to lend out to their customers, which means that they will give out fewer loans. Similarly, the central bank can also reduce the liquidity ratio, which is the percentage of the commercial banks' assets that they have to keep as liquid cash. When the central bank reduces the liquidity ratio, the banks will have to keep less money as liquid cash, which means that they will have less money to lend out to their customers. Issuing more currency, on the other hand, can actually increase the amount of money that commercial banks have available to lend out. Therefore, it would not reduce the ability of commercial banks to give out loans.

Which of the following factors may lead to the underestimation of national income figures?

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Goods are described as inferior if their demand

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Goods are described as inferior if their demand decreases as income increases. In other words, when people's income rises, they tend to buy less of these goods and switch to more expensive alternatives. This is because inferior goods are often considered lower quality or less desirable compared to other options available in the market. For example, let's say that someone's income rises and they can now afford to buy more expensive cuts of meat. They may start to buy less ground beef, which is considered an inferior good, and more expensive cuts like steak. This is because they can now afford to buy better quality meat, which they perceive as more desirable. On the other hand, if the price of a good increases, its demand is likely to decrease regardless of whether it is an inferior or a normal good. This is because as the price of a good goes up, people tend to look for cheaper alternatives or reduce their overall consumption of that good.

Inflation may occur if 

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Increasing returns to scale suggests that 

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Increasing returns to scale suggests that a firm can make more profit by increasing output. This means that if a firm increases all of its inputs, such as labor and capital, by a certain percentage, the output will increase by an even greater percentage. In other words, the firm becomes more efficient as it produces more, resulting in lower costs per unit of output and greater profits. This concept is opposite to the concept of decreasing returns to scale, where increasing all inputs leads to a proportionately smaller increase in output.

In the figure above, YZ represents 

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The exploitation of mineral resources constitutes which form of production?

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The exploitation of mineral resources is a form of primary production. Primary production refers to the extraction and harvesting of raw materials from natural resources, such as agriculture, forestry, fishing, and mining. In the case of mineral resources, primary production involves the extraction of minerals from the ground or from ore deposits using various techniques, such as drilling, blasting, and excavation. Secondary production, on the other hand, refers to the transformation of raw materials into finished products through manufacturing processes. For example, turning iron ore into steel, or refining crude oil into gasoline. Tertiary production is the provision of services, such as healthcare, education, finance, and transportation. Therefore, since the exploitation of mineral resources involves the extraction of raw materials from the ground, it falls under the category of primary production.

 Organization and entrepreneurship are vested in diferrent persons in a

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Governments in West Africa can curtail inflation by 

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Which of the following problem has the least effect on agricultural productivity in West Africa?

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Of the options listed, illiteracy is likely to have the least effect on agricultural productivity in West Africa. Illiteracy refers to the inability to read or write, and while it can be a barrier to accessing information and education, it is not directly related to agricultural productivity. Farmers can still have knowledge of traditional farming methods and local environmental conditions without being able to read or write. In addition, there are many extension services and NGOs working to provide education and training to farmers in West Africa, which can help to overcome the challenges posed by illiteracy. On the other hand, the incidence of pests and diseases, unfavorable weather conditions, and urban-rural migration are all major challenges that can significantly impact agricultural productivity in West Africa. Pests and diseases can destroy crops and reduce yields, unfavorable weather conditions such as droughts and floods can damage crops and cause food shortages, and urban-rural migration can reduce the labor force available for farming and lead to the abandonment of farmland. Therefore, while illiteracy remains a significant issue in West Africa, it is likely to have the least effect on agricultural productivity compared to the other options listed.

How is NNP at factor cost derived from GNP at market prices? 

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NNP at factor cost is derived from GNP at market prices by adjusting for the difference between market prices and factor costs, which is represented by indirect taxes and subsidies. Factor costs refer to the actual cost of producing goods and services, including wages, rent, and interest, while market prices include indirect taxes such as sales tax, excise tax, and customs duty, as well as subsidies, which are payments made by the government to reduce the cost of production or consumption. To calculate NNP at factor cost, we need to subtract the indirect taxes and add the subsidies from GNP at market prices, since these adjustments represent the difference between market prices and factor costs. We also need to subtract depreciation, which refers to the wear and tear of fixed assets over time, to arrive at NNP, which represents the net value of goods and services produced in the economy. Therefore, the correct formula to calculate NNP at factor cost is: NNP at factor cost = GNP at market prices - Depreciation - Indirect taxes + Subsidies

A consumer is in equilibrium when 

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A consumer is in equilibrium when he or she maximizes his or her satisfaction from spending his or her income. This means that the consumer has allocated his or her budget in a way that gives him or her the highest level of satisfaction possible. At this point, the consumer has no desire to change his or her spending choices because any alteration would result in a lower level of satisfaction.

In a free market economy, resources are allocated through the 

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In a free market economy, resources are allocated through the price mechanism. This means that the prices of goods and services, and the demand for those goods and services, determine how resources are used and distributed. For example, if there is a high demand for a certain product, the price for that product will increase and producers will allocate more resources to producing that product. Conversely, if demand for a product decreases, the price will decrease and producers will allocate fewer resources to producing it. The price mechanism helps to ensure that resources are allocated in the most efficient and effective way possible, based on the wants and needs of consumers.

One feature of the average fixed cost is that it
 

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The feature of the average fixed cost is that it falls continuously but is never equal to zero. This means that as the quantity of production increases, the average fixed cost per unit decreases, but it never reaches zero. This is because fixed costs, such as rent and equipment, are spread out over a larger quantity of goods, resulting in a lower cost per unit. However, even if the quantity of production is zero, fixed costs still exist, so the average fixed cost cannot be zero.

When the production possibility curve shifts outwards, the economy experiences

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Dumping is selling goods in a foreign market at a price 

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Dumping refers to the practice of selling goods in a foreign market at a price that is below what is sold in the home market. This means that the price of the goods in the foreign market is lower than what consumers would pay if they were buying the same goods in the country where the goods were produced. This practice is often used to gain a competitive advantage in a foreign market by undercutting the prices of local producers, which can lead to increased market share and profits for the exporter. However, dumping can also be considered a form of unfair trade practice, as it can harm local industries and disrupt the market by artificially lowering prices.

The figure below shows the change in demand for Commodity X which is a normal good. Use it to answer the question that follows.

Which of the following caused the change in demand from D\(_{1}\) D\(_{1}\) to D\(_{2}\)D\(_{2}\)

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The change in demand from D\(_{1}\)D\(_{1}\) to D\(_{2}\)D\(_{2}\) is caused by a rise in the price of a substitute for commodity X. When the price of a substitute for commodity X increases, consumers tend to switch to commodity X, resulting in an increase in demand for commodity X. Therefore, the demand curve for commodity X shifts to the right from D\(_{1}\)D\(_{1}\) to D\(_{2}\)D\(_{2}\). It is important to note that since commodity X is a normal good, a fall in the income of consumers would cause a leftward shift of the demand curve, not a rightward shift. A rise in the price of a complement or a fall in the supply of commodity X would result in a leftward shift of the demand curve for commodity X.

In order to discourage the importation of manufactured goods, a country should adopt

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If a country wants to discourage the importation of manufactured goods, it should adopt an import substitution strategy. This is a policy where a country seeks to replace imported goods with locally produced goods in order to reduce dependency on foreign goods and to promote domestic industries. This can be done by implementing policies that provide incentives for the development of local industries, such as tax breaks or subsidies, and by imposing restrictions or tariffs on imported goods. By doing so, the cost of imported goods becomes higher, making them less attractive and less competitive compared to the locally produced goods. Therefore, the correct option is "import substitution strategy".

Land as a factor of production is made useful through the 

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Land as a factor of production can be made useful through the application of human effort. This includes activities such as farming, construction, and mining, which involve the use of labor and resources to turn the land into a productive asset. For example, a farmer may use their land to grow crops, which can be sold for profit. A construction company may use their land to build houses or other buildings. The application of human effort makes land a valuable resource that can contribute to economic growth and development.

The foremost objective of the International Bank of Reconstruction and Development (IBRD) is to

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An increase in supply means that

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a. What is money?

b. Explain the following concepts:
i. value of money:
ii. demand for money,

(c) ldentify any four determinants of transaction demand for money

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a. Money is a medium of exchange, a unit of account, and a store of value. It serves as a means to purchase goods and services and to pay debts, as a standard of value for setting prices and as a way to save and transfer wealth.

b. i. The value of money refers to the worth or purchasing power of a currency. It is determined by a number of factors, including inflation, interest rates, and political stability. When the supply of money increases, the value of money decreases, and prices for goods and services rise. When the supply of money decreases, the value of money increases, and prices for goods and services fall.

ii. Demand for money refers to the amount of money that individuals and businesses want to hold for transactions, savings, and other uses. The demand for money is influenced by a variety of factors, including the level of income, interest rates, and the price level. When people earn more, they tend to want to hold more money, and when interest rates are high, they may choose to hold their money in interest-bearing accounts instead of spending it.

c. The four determinants of transaction demand for money are:

1. Level of income: As people's income increases, they tend to want to hold more money to be able to purchase more goods and services.
2. Prices: When prices of goods and services rise, people tend to want to hold more money to be able to purchase the same amount of goods and services as before.
3. Interest rates: When interest rates are high, people may choose to hold their money in interest-bearing accounts instead of spending it, which decreases the transaction demand for money.
4. Number of transactions: The more transactions people make, the more money they will want to hold for these transactions.

The figure represents the production possibility curve of a nation, Use it to answer the questions that follow

(a) What is the opportunity cost of:
i. producing 30 units of cocoa;
ii. increasing textile production from 30 to 40 bales?

(b) interpret the following points as found in the graph:
i. point Y
ii. point G
iii. point X

(c) List three conditions that can enable the nation to produce at point X.

(d) State two basic economic concepts illustrated in the diagram above.

(e) i. Define production possibility curve
ii. What does the slope of the production possibility curve Indicate?

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(a)

1. To produce 30 units of cocoa, the opportunity cost is 20 bales of textile.
2. To increase textile production from 30 to 40 bales, the opportunity cost is 10 units of cocoa.

(b)

1. Point Y represents a point of inefficient production where resources are not fully utilized, and the nation can produce more of both goods without giving up any of the other.
2. Point G represents a point of maximum production capacity, where the nation is producing the maximum output of both goods given its resources and technology.
3. Point X represents a point of inefficient production, where the nation is not utilizing all its resources and can produce more of both goods.

(c) Three conditions that can enable the nation to produce at point X are:

1. Increase its resource base by expanding its labor force, capital stock, or natural resources.
2. Adopt new technology or better production techniques that increase efficiency and productivity.
3. Reallocation of resources from one sector to another to optimize production.

(d) Two basic economic concepts illustrated in the diagram are scarcity, which means that the nation has limited resources, and trade-offs, which means that to produce more of one good, the nation must give up some of the other good.

(e)

1. Production Possibility Curve (PPC) is a graphical representation of the maximum amount of two goods that a nation can produce given its resources and technology, assuming all resources are fully utilized.
2. The slope of the PPC indicates the opportunity cost of producing one good in terms of the other good. The steeper the slope, the higher the opportunity cost of producing one good, which means that the nation must give up more of the other good to produce it. Conversely, the flatter the slope, the lower the opportunity cost of producing one good, which means that the nation can produce more of both goods without giving up much of the other good.

The table below shows the workers engaged by an agricultural firm over a period of time. Study it and answer the questions that follow;

(a) Calculate the values of X, Y, and Z.

(b) At what level of employment of labour does the firm experience:

i. increasing returns 
ii. decreasing returns 
ii. negative returns

(c) State the law of diminishing returns

(d) i. On a graph sheet, draw the total product and marginal product curves.

ii. State any two relationships between the two curves in (d)(i) above

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a) To find the missing values:

Z = (Total Product of 2 workers - Total Product of 1 worker) / (2 - 1) = (50 - 20) / (2 - 1) = 30

Y = (Total Product of 4 workers - Total Product of 3 workers) / (4 - 3) = (80 - 70) / (4 - 3) = 10

X = Total Product of 6 workers = 80 - 9.8 - 16 - 11.7 = 42.5

b)

i. Increasing returns occur between 0 and 2 workers, where each additional worker increases the total product by a greater amount than the previous worker.

ii. Decreasing returns occur between 3 and 5 workers, where each additional worker increases the total product by a smaller amount than the previous worker.

iii. Negative returns occur at 6 workers, where the total product decreases with each additional worker.

c) The law of diminishing returns states that as more units of a variable input (such as labor) are added to a fixed input (such as land or capital), after a certain point, the marginal product of the variable input will eventually decrease, assuming all other inputs remain constant.

d)

i. Please see the graph sheet attached.

ii. The marginal product curve intersects the average product curve at the maximum point of the average product curve. Also, the marginal product curve intersects the total product curve at the maximum point of the total product curve. This is because the marginal product is the rate of change of total product and the average product is the total product per unit of input, so the maximum of the average product curve occurs where the marginal product curve intersects it, and the maximum of the total product curve occurs where the marginal product is zero.

Note: As an AI language model, I am unable to create graphs or upload images.

(a) Define tariff.

(b) State the following laws:
i. The law of absolute cost advantage:
ii. The law of comparative cost advantage.

(c) Outline any four assumptions behind the law of comparative cost advantage

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(a) A tariff is a tax imposed by a government on goods that are imported into a country from other countries. The purpose of a tariff is to protect domestic industries by making foreign goods more expensive and less competitive in the local market.

(b)

1. The law of absolute cost advantage states that a country can produce a particular good more efficiently than any other country. Therefore, it should specialize in the production of that good and trade it for other goods that other countries produce more efficiently.

2. The law of comparative cost advantage states that even if a country is less efficient at producing all goods, it should still specialize in producing and exporting the goods in which it has a comparative advantage (i.e., it has a lower opportunity cost of producing that good compared to other goods it could produce). By doing so, it can benefit from trade with other countries that have different comparative advantages.

(c)

The four assumptions behind the law of comparative cost advantage are:

1. The law assumes that there are two countries and two goods. This simplification allows for a clear comparison of the opportunity costs of producing each good in each country.

2. The law assumes that resources are perfectly mobile within each country, but not between countries. This means that labor and capital can move freely within a country, but cannot move between countries.

3. The law assumes that there are no transportation costs or trade barriers, such as tariffs or quotas, that would hinder trade between countries. This allows for the assumption of perfect competition in the global market.

4. The law assumes that there are no externalities or spillover effects from the production of each good. This means that the production of one good does not affect the production or consumption of other goods or impact the environment or society in any way.

(a) Differentiate between subsistence farming and commercial farming.

(b) State four features of subsistence farming.

(c) Outlines two positive and two negative effects of mining on the economy of West African countries

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a. Subsistence farming and commercial farming are two different types of agriculture, with different goals and methods. Subsistence farming is focused on growing enough food to meet the needs of the farmer's household, with any surplus being sold or traded locally. Commercial farming, on the other hand, is focused on producing crops or livestock for sale on a larger scale, with the goal of making a profit.

b. Four features of subsistence farming include:

1. Small scale: Subsistence farms are typically small, with the farmer and their family being the main labor force.
2. Self-sufficiency: The goal of subsistence farming is to produce enough food to meet the needs of the farmer's household, with minimal reliance on outside resources.
3. Limited use of technology: Subsistence farmers may use simple tools and techniques, and may not have access to modern technologies such as tractors or irrigation systems.
4. Diversified crops and livestock: Subsistence farmers often grow a variety of crops and raise a variety of livestock to ensure food security and minimize risk.

c. Two positive effects of mining on the economy of West African countries are:

1. Revenue generation: Mining can generate significant revenue for West African countries through the sale of minerals, which can be used to fund development projects and improve the standard of living.
2. Job creation: Mining can create jobs in the extractive industry, as well as in related industries such as transportation and construction.

Two negative effects of mining on the economy of West African countries are:

1. Environmental degradation: Mining can cause environmental damage, such as deforestation, soil erosion, and water pollution, which can have long-term impacts on the local ecosystem and the health of the local population.
2. Dependence on extractive industry: Over-reliance on the extractive industry can create a situation in which the economy is highly vulnerable to fluctuations in the global demand for minerals, leading to economic instability and a lack of diversification.

(a) Define consumer goods.

(b) Explain the following forms of capital with an example each:
i. fixed capital
ii. social capital
iii. circulating capital

(c) Outline three reasons for the low level of savings in a country

Answer Details

(a) Consumer goods are products that are used by individuals for their own consumption or use. They are often classified as durable goods, such as cars and appliances, or non-durable goods, such as food and personal care products.

(b)

1. i. Fixed capital refers to long-term assets that are used in the production of goods and services. Examples of fixed capital include buildings, machinery, and equipment. For instance, a construction company would need fixed capital in the form of bulldozers, cranes, and other heavy equipment to carry out its operations.
2. ii. Social capital refers to the relationships and networks that individuals and organizations have with each other. These networks can be used to access information, resources, and support. An example of social capital would be a group of entrepreneurs who share information and ideas, and help each other to find new business opportunities.
3. iii. Circulating capital refers to assets that are used up or transformed in the production process, such as raw materials, inventory, and cash. For example, a bakery would need to purchase flour, sugar, and other ingredients as circulating capital to produce its baked goods.

(c) There are several reasons why the level of savings may be low in a country:

1. Low income: If individuals have low incomes, they may struggle to save money as they need to use their income to cover their basic needs such as food, housing, and healthcare.
2. Lack of financial literacy: Many people may not understand the importance of saving, or how to save effectively. This can lead to a lack of motivation or the use of ineffective saving strategies.
3. High debt levels: If individuals have high levels of debt, such as credit card debt or loans, they may struggle to save as they need to use their income to pay off their debt. This can be a vicious cycle, as high debt levels can lead to financial stress, making it harder to save.

(a) Distinguish between competitive demand and joint demand.

(b) Using diagrams, explain how the following factors will affect the equilibrium price and quantity of commodity R in the market
i. an increase in the price of the Complement of commodity R:
ii.  an increase in the price of a substitute of commodity R
iii. imposition of an indirect tax on commodity

Answer Details

(a) Competitive demand refers to the demand for goods that can be used as alternatives to each other, such as coffee and tea. An increase in the price of one good (e.g., coffee) can lead to an increase in the demand for the other good (e.g., tea), as consumers switch to the cheaper alternative. Joint demand, on the other hand, refers to the demand for goods that are typically consumed together, such as cars and gasoline. An increase in the demand for one good (e.g., cars) will lead to an increase in the demand for the other good (e.g., gasoline).

(b)

i. An increase in the price of a complement of commodity R, such as a rise in the price of petrol, would lead to a decrease in the demand for commodity R. This would result in a leftward shift in the demand curve for commodity R, leading to a new equilibrium point with a lower price and quantity.

ii. An increase in the price of a substitute of commodity R, such as a rise in the price of commodity S, would lead to an increase in the demand for commodity R. This would result in a rightward shift in the demand curve for commodity R, leading to a new equilibrium point with a higher price and quantity.

iii. The imposition of an indirect tax on commodity R would increase the cost of production and decrease the supply of commodity R, resulting in a leftward shift in the supply curve. This would lead to a new equilibrium point with a higher price and a lower quantity. The burden of the tax may also be shared by consumers in the form of a higher price.

(a) Distinguish between the following pairs of terms:
i. capital expenditure and recurrent expenditure:
ii. fiscal policy and monetary policy.

b. Explain four reasons why the government of a country imposes taxes.

Answer Details

(a)

i. Capital expenditure refers to spending on assets that have a long-term useful life, such as building or infrastructure, while recurrent expenditure refers to spending on items that are consumed within a short period, such as salaries, utilities, or office supplies.

ii. Fiscal policy is the use of government spending and taxation to influence the economy's performance, while monetary policy is the use of the central bank's tools, such as interest rates and money supply, to control inflation, unemployment, and economic growth.

(b) The government of a country imposes taxes for various reasons, such as:

i. To raise revenue: Taxes are a significant source of revenue for governments to finance public goods and services, such as healthcare, education, defense, and infrastructure.

ii. To redistribute income: Progressive taxation can help reduce income inequality by taxing the rich at a higher rate and using the revenue to fund social programs that benefit the poor.

iii. To discourage consumption of harmful goods: The government can use taxes to discourage the consumption of goods that are harmful to health, such as tobacco, alcohol, and sugary drinks.

iv. To correct market failures: Taxes can be used to correct market failures, such as externalities, where the private cost of production or consumption does not reflect the social cost or benefit, by imposing taxes or subsidies to internalize the externality.

Overall, taxes are an essential tool for the government to finance public goods, redistribute income, correct market failures, and promote social welfare.