WAEC SSCE - Economics - 1996 (Essay)
Question 1 Report
State any two ways by which monopolistic competition and perfect competition are similar and any three ways in which they are different.
Two ways they are similar
- Both have a large number of buyers and sellers, so no single buyer dominates the market.
- Both allow freedom of entry into and exit from the industry, so in the long run firms earn only normal profit.
Three ways they differ
| Perfect competition | Monopolistic competition |
|---|---|
| Products are homogeneous (identical). | Products are differentiated (close but not identical substitutes). |
| The firm is a price taker with a perfectly elastic (horizontal) demand curve. | The firm has some control over price and faces a downward-sloping demand curve. |
| There is no advertising or selling cost because goods are identical. | Firms advertise and incur selling costs to distinguish their brands. |
A further difference is that buyers and sellers have perfect knowledge of the market under perfect competition, but only imperfect knowledge under monopolistic competition.
Answer Details
Two ways they are similar
- Both have a large number of buyers and sellers, so no single buyer dominates the market.
- Both allow freedom of entry into and exit from the industry, so in the long run firms earn only normal profit.
Three ways they differ
| Perfect competition | Monopolistic competition |
|---|---|
| Products are homogeneous (identical). | Products are differentiated (close but not identical substitutes). |
| The firm is a price taker with a perfectly elastic (horizontal) demand curve. | The firm has some control over price and faces a downward-sloping demand curve. |
| There is no advertising or selling cost because goods are identical. | Firms advertise and incur selling costs to distinguish their brands. |
A further difference is that buyers and sellers have perfect knowledge of the market under perfect competition, but only imperfect knowledge under monopolistic competition.
Question 2 Report
(a) Explain the term economic planning
(b) Outline the problems of development plans in Nigeria.
(a) Economic planning. Economic planning is the deliberate and conscious effort by the government to coordinate economic decision-making over a period, setting definite objectives and directing the nation's scarce resources towards achieving them. It usually takes the form of a development plan covering several years.
(b) Problems of development plans in Nigeria
- Inadequate and unreliable data: shortage of accurate statistics makes realistic target-setting difficult.
- Shortage of skilled manpower: too few trained planners, economists and technicians to design and execute the plans.
- Inadequate finance/capital: insufficient domestic savings and heavy dependence on uncertain oil revenue and foreign aid.
- Corruption and mismanagement: diversion and embezzlement of funds meant for projects.
- Political instability: frequent changes of government lead to abandonment or change of plans midway.
- Over-ambitious and unrealistic targets: plans set goals beyond the country's actual resources and capacity.
- Poor implementation and monitoring: weak execution and lack of continuity in projects.
Answer Details
(a) Economic planning. Economic planning is the deliberate and conscious effort by the government to coordinate economic decision-making over a period, setting definite objectives and directing the nation's scarce resources towards achieving them. It usually takes the form of a development plan covering several years.
(b) Problems of development plans in Nigeria
- Inadequate and unreliable data: shortage of accurate statistics makes realistic target-setting difficult.
- Shortage of skilled manpower: too few trained planners, economists and technicians to design and execute the plans.
- Inadequate finance/capital: insufficient domestic savings and heavy dependence on uncertain oil revenue and foreign aid.
- Corruption and mismanagement: diversion and embezzlement of funds meant for projects.
- Political instability: frequent changes of government lead to abandonment or change of plans midway.
- Over-ambitious and unrealistic targets: plans set goals beyond the country's actual resources and capacity.
- Poor implementation and monitoring: weak execution and lack of continuity in projects.
Question 3 Report
The daily sales of a department store for one week are as follows
| Days | Mon | Tue. | Wed. | Thu. | Fri. | Sat. |
| Sales N | 1750 | 1000 | 3500 | 2250 | 1000 | 2500 |
(a) Present the above data in a bar graph. (The use of graph sheet is essential).
(b) Calculate the average utility curve.
(a) Bar graph of daily sales
Using a vertical scale of ₦500 per major division, plot the days on the horizontal axis and daily sales on the vertical axis. The completed bar graph is:
| Day | Monday | Tuesday | Wednesday | Thursday | Friday | Saturday |
|---|---|---|---|---|---|---|
| Sales (₦) | 1,750 | 1,000 | 3,500 | 2,250 | 1,000 | 2,500 |
(b) Average daily sales
\[\text{Total sales}=₦1,750+₦1,000+₦3,500+₦2,250+₦1,000+₦2,500=₦12,000\]
\[\text{Average daily sales}=\frac{₦12,000}{6}=₦2,000\]
Therefore, the average daily sales for the week is ₦2,000.
Answer Details
(a) Bar graph of daily sales
Using a vertical scale of ₦500 per major division, plot the days on the horizontal axis and daily sales on the vertical axis. The completed bar graph is:
| Day | Monday | Tuesday | Wednesday | Thursday | Friday | Saturday |
|---|---|---|---|---|---|---|
| Sales (₦) | 1,750 | 1,000 | 3,500 | 2,250 | 1,000 | 2,500 |
(b) Average daily sales
\[\text{Total sales}=₦1,750+₦1,000+₦3,500+₦2,250+₦1,000+₦2,500=₦12,000\]
\[\text{Average daily sales}=\frac{₦12,000}{6}=₦2,000\]
Therefore, the average daily sales for the week is ₦2,000.
Question 4 Report
(a) Explain the methods of measuring the national income of a country
(b) State any three problems associated with measuring national income.
(a) Methods of measuring national income. There are three approaches, all of which should give the same total because one person's expenditure is another's income which arises from output.
- Income approach: add up all the incomes earned by the factors of production in a year, that is wages and salaries, rent, interest and profit. Transfer payments such as pensions and gifts are excluded to avoid double counting.
- Output (product) approach: add up the money value of all final goods and services produced in the country, or sum the value added at each stage of production. Only final goods, or values added, are counted to avoid double counting.
- Expenditure approach: add up all spending on final goods and services, namely consumption (C), investment (I), government spending (G) and net exports (X - M): \( Y = C + I + G + (X - M) \).
(b) Three problems of measuring national income
- Double counting: the risk of counting the value of a good more than once at different stages of production.
- Unpaid and subsistence services: goods produced and consumed at home (for example a farmer's own food) are hard to value and are often omitted.
- Inadequate and unreliable data: poor record keeping and illiteracy in developing countries make accurate statistics difficult to obtain.
Answer Details
(a) Methods of measuring national income. There are three approaches, all of which should give the same total because one person's expenditure is another's income which arises from output.
- Income approach: add up all the incomes earned by the factors of production in a year, that is wages and salaries, rent, interest and profit. Transfer payments such as pensions and gifts are excluded to avoid double counting.
- Output (product) approach: add up the money value of all final goods and services produced in the country, or sum the value added at each stage of production. Only final goods, or values added, are counted to avoid double counting.
- Expenditure approach: add up all spending on final goods and services, namely consumption (C), investment (I), government spending (G) and net exports (X - M): \( Y = C + I + G + (X - M) \).
(b) Three problems of measuring national income
- Double counting: the risk of counting the value of a good more than once at different stages of production.
- Unpaid and subsistence services: goods produced and consumed at home (for example a farmer's own food) are hard to value and are often omitted.
- Inadequate and unreliable data: poor record keeping and illiteracy in developing countries make accurate statistics difficult to obtain.
Question 5 Report
(a) What is meant by devaluation?
(b) Explain the measures by which a country can correct its balance of payments deficit.
(a) Meaning of devaluation. Devaluation is the deliberate official reduction in the exchange value of a country's currency relative to other currencies (or to gold) under a fixed exchange rate system. It makes the country's exports cheaper to foreigners and its imports more expensive, and is used mainly to correct a persistent balance of payments deficit.
(b) Measures to correct a balance of payments deficit
- Devaluation: lowering the currency's value makes exports cheaper and imports dearer, encouraging exports and discouraging imports.
- Deflationary (contractionary) policies: reducing government spending and money supply lowers domestic incomes and demand, thereby cutting spending on imports.
- Import restrictions: imposing tariffs, quotas and outright bans reduces the volume and value of imports.
- Export promotion: giving subsidies and incentives to exporters and diversifying exports raises export earnings.
- Exchange control: government rations and controls the use of foreign exchange so that scarce foreign currency is used only for essential imports.
- Import substitution: producing locally the goods formerly imported reduces reliance on imports.
Answer Details
(a) Meaning of devaluation. Devaluation is the deliberate official reduction in the exchange value of a country's currency relative to other currencies (or to gold) under a fixed exchange rate system. It makes the country's exports cheaper to foreigners and its imports more expensive, and is used mainly to correct a persistent balance of payments deficit.
(b) Measures to correct a balance of payments deficit
- Devaluation: lowering the currency's value makes exports cheaper and imports dearer, encouraging exports and discouraging imports.
- Deflationary (contractionary) policies: reducing government spending and money supply lowers domestic incomes and demand, thereby cutting spending on imports.
- Import restrictions: imposing tariffs, quotas and outright bans reduces the volume and value of imports.
- Export promotion: giving subsidies and incentives to exporters and diversifying exports raises export earnings.
- Exchange control: government rations and controls the use of foreign exchange so that scarce foreign currency is used only for essential imports.
- Import substitution: producing locally the goods formerly imported reduces reliance on imports.
Question 6 Report
Explain any three weapons that can be used by a trade union and any two weapons that can be used by an Employers' Association during a trade dispute.
During a trade dispute both sides have industrial weapons they can use to force the other to concede.
Three weapons of a trade union
- Strike action: workers collectively and deliberately withdraw their labour and refuse to work until their demands are met. Because production stops and the employer loses output and revenue, the strike pressures management to negotiate.
- Collective bargaining: the union negotiates jointly on behalf of all members over wages and conditions. Bargaining as one body gives the workers far greater strength than any individual worker negotiating alone.
- Picketing: striking members stand at the entrance of the workplace to persuade other workers and suppliers not to enter or do business with the firm, thereby tightening the effect of the strike.
Other union weapons include the go-slow, work-to-rule, overtime ban and boycott.
Two weapons of an Employers' Association
- Lock-out: the employers shut the workplace and prevent workers from coming in to work, so that the loss of wages pressures the workers to accept the employers' terms.
- Dismissal or replacement of workers: the employers may lay off or sack the agitating workers and hire new hands, or refuse to re-employ ring-leaders (blacklisting), thereby weakening the union.
Answer Details
During a trade dispute both sides have industrial weapons they can use to force the other to concede.
Three weapons of a trade union
- Strike action: workers collectively and deliberately withdraw their labour and refuse to work until their demands are met. Because production stops and the employer loses output and revenue, the strike pressures management to negotiate.
- Collective bargaining: the union negotiates jointly on behalf of all members over wages and conditions. Bargaining as one body gives the workers far greater strength than any individual worker negotiating alone.
- Picketing: striking members stand at the entrance of the workplace to persuade other workers and suppliers not to enter or do business with the firm, thereby tightening the effect of the strike.
Other union weapons include the go-slow, work-to-rule, overtime ban and boycott.
Two weapons of an Employers' Association
- Lock-out: the employers shut the workplace and prevent workers from coming in to work, so that the loss of wages pressures the workers to accept the employers' terms.
- Dismissal or replacement of workers: the employers may lay off or sack the agitating workers and hire new hands, or refuse to re-employ ring-leaders (blacklisting), thereby weakening the union.
Question 7 Report
In what ways can the government improve agricultural production in Nigeria?
The government can improve agricultural production in Nigeria in the following ways:
- Provision of credit facilities: giving farmers loans at low interest through agricultural banks and schemes so they can buy inputs and expand.
- Supply of improved inputs: providing improved seeds, fertilisers, pesticides, and better breeds of livestock at subsidised prices.
- Provision of modern implements/mechanisation: making tractors and other machinery available to raise output and reduce drudgery.
- Agricultural education, research and extension services: training farmers, researching better methods and pests/diseases, and sending extension officers to advise them.
- Guaranteed minimum prices and marketing boards: assuring farmers of stable, remunerative prices to encourage production.
- Provision of infrastructure: building feeder roads, irrigation facilities, dams, storage and processing facilities to reduce losses and ease transport of produce to market.
- Land reform: making land more easily available to farmers for large-scale farming.
- Subsidies and tax relief: subsidising inputs and reducing taxes on farming to lower costs.
- Establishment of special programmes: such as farm settlements, irrigation projects and river-basin development authorities.
- Control of pests and diseases: organised campaigns to protect crops and livestock.
Answer Details
The government can improve agricultural production in Nigeria in the following ways:
- Provision of credit facilities: giving farmers loans at low interest through agricultural banks and schemes so they can buy inputs and expand.
- Supply of improved inputs: providing improved seeds, fertilisers, pesticides, and better breeds of livestock at subsidised prices.
- Provision of modern implements/mechanisation: making tractors and other machinery available to raise output and reduce drudgery.
- Agricultural education, research and extension services: training farmers, researching better methods and pests/diseases, and sending extension officers to advise them.
- Guaranteed minimum prices and marketing boards: assuring farmers of stable, remunerative prices to encourage production.
- Provision of infrastructure: building feeder roads, irrigation facilities, dams, storage and processing facilities to reduce losses and ease transport of produce to market.
- Land reform: making land more easily available to farmers for large-scale farming.
- Subsidies and tax relief: subsidising inputs and reducing taxes on farming to lower costs.
- Establishment of special programmes: such as farm settlements, irrigation projects and river-basin development authorities.
- Control of pests and diseases: organised campaigns to protect crops and livestock.
Question 8 Report
Define ageing population and explain its effects on an economy.
Ageing population. An ageing population is one in which the proportion of old people (those above the working age, usually 60 or 65 years and over) is rising relative to the rest of the population. It occurs where the birth rate is low and life expectancy is high, so the average age of the population increases and the number of dependent elderly people grows.
Effects on an economy:
- Smaller labour force: fewer people of working age means less labour available for production, which can lower total output.
- Higher dependency burden: the working population must support a large number of retired people through pensions and taxes, reducing funds for investment.
- Increased government spending on the aged: more money is needed for pensions, health care and old-people's welfare, straining the budget.
- Fall in savings and investment: the elderly consume their savings rather than add to them, reducing funds available for capital formation.
- Change in pattern of demand: demand shifts towards goods and services for the old (medicines, health care) and away from those for the young, affecting the structure of production.
- Lower labour mobility and productivity: an older workforce may be less mobile, less adaptable to new technology and less productive.
- Possible labour shortage and reliance on immigration: the economy may need to import labour to fill gaps.
Answer Details
Ageing population. An ageing population is one in which the proportion of old people (those above the working age, usually 60 or 65 years and over) is rising relative to the rest of the population. It occurs where the birth rate is low and life expectancy is high, so the average age of the population increases and the number of dependent elderly people grows.
Effects on an economy:
- Smaller labour force: fewer people of working age means less labour available for production, which can lower total output.
- Higher dependency burden: the working population must support a large number of retired people through pensions and taxes, reducing funds for investment.
- Increased government spending on the aged: more money is needed for pensions, health care and old-people's welfare, straining the budget.
- Fall in savings and investment: the elderly consume their savings rather than add to them, reducing funds available for capital formation.
- Change in pattern of demand: demand shifts towards goods and services for the old (medicines, health care) and away from those for the young, affecting the structure of production.
- Lower labour mobility and productivity: an older workforce may be less mobile, less adaptable to new technology and less productive.
- Possible labour shortage and reliance on immigration: the economy may need to import labour to fill gaps.
Question 9 Report
Utility schedule
| Quantity of goods consumed | Total Utility | Marginal Utility |
| 0 | 0 | 0 |
| 1 | 10 | 10 |
| 2 | 16 | - |
| 3 | - | 4 |
| 4 | - | - |
| 5 | 23 | 1 |
| 6 | 23 | - |
(a) Complete the above utility schedule
(b) Draw the marginal utility curve
C(i) At what quantity does TU equal MU?
(II) What is the value of MU when TU reaches the maximum?
(iii) What happens to the values of TU as the quantity consumed increases?
(iv) What happens to the values of MU as the quantity consumed increases?
(a) Completed utility schedule
| Quantity of goods consumed (Q) | Total Utility (TU) | Marginal Utility (MU) |
|---|---|---|
| 0 | 0 | 0 |
| 1 | 10 | 10 |
| 2 | 16 | 6 |
| 3 | 20 | 4 |
| 4 | 22 | 2 |
| 5 | 23 | 1 |
| 6 | 23 | 0 |
Using \(MU_n = TU_n - TU_{n-1}\):
\(MU_2=16-10=6\); \(TU_3=16+4=20\); \(TU_4=23-1=22\); \(MU_4=22-20=2\); \(MU_6=23-23=0\).
(b) Marginal utility curve
(c)(i) TU equals MU at 0 unit, where both are 0, and at 1 unit, where both are 10.
(ii) TU is at its maximum value of 23 units from the 5th unit onward. MU is 1 at the 5th unit and becomes 0 at the 6th unit, when TU no longer increases.
(iii) As quantity consumed increases, TU increases at a decreasing rate and finally remains constant at 23 units.
(iv) As quantity consumed increases, MU diminishes, falling from 10 to 0.
Answer Details
(a) Completed utility schedule
| Quantity of goods consumed (Q) | Total Utility (TU) | Marginal Utility (MU) |
|---|---|---|
| 0 | 0 | 0 |
| 1 | 10 | 10 |
| 2 | 16 | 6 |
| 3 | 20 | 4 |
| 4 | 22 | 2 |
| 5 | 23 | 1 |
| 6 | 23 | 0 |
Using \(MU_n = TU_n - TU_{n-1}\):
\(MU_2=16-10=6\); \(TU_3=16+4=20\); \(TU_4=23-1=22\); \(MU_4=22-20=2\); \(MU_6=23-23=0\).
(b) Marginal utility curve
(c)(i) TU equals MU at 0 unit, where both are 0, and at 1 unit, where both are 10.
(ii) TU is at its maximum value of 23 units from the 5th unit onward. MU is 1 at the 5th unit and becomes 0 at the 6th unit, when TU no longer increases.
(iii) As quantity consumed increases, TU increases at a decreasing rate and finally remains constant at 23 units.
(iv) As quantity consumed increases, MU diminishes, falling from 10 to 0.
Question 10 Report
Explain five sources of finance that are available to a Public Limited Company.
A Public Limited Company (PLC) is a large joint-stock company that can raise capital from the general public. Its main sources of finance are:
- Ordinary (equity) shares: the company sells ordinary shares to the public; shareholders become part owners and are paid dividends out of profit. This provides permanent capital that need not be repaid.
- Preference shares: shares that carry a fixed rate of dividend paid before ordinary shareholders. They attract investors who want a steadier, more secure return.
- Debentures (loan stock): long-term loans raised from the public on which the company pays a fixed rate of interest whether or not it makes profit; the debenture holders are creditors, not owners.
- Bank loans and overdrafts: medium and short-term borrowing from commercial banks to finance expansion or working capital, repaid with interest.
- Retained (ploughed-back) profits: part of the company's profit that is not distributed as dividend but re-invested in the business, providing a cheap internal source of finance.
Other sources include mortgages on landed property and trade credit from suppliers.
Answer Details
A Public Limited Company (PLC) is a large joint-stock company that can raise capital from the general public. Its main sources of finance are:
- Ordinary (equity) shares: the company sells ordinary shares to the public; shareholders become part owners and are paid dividends out of profit. This provides permanent capital that need not be repaid.
- Preference shares: shares that carry a fixed rate of dividend paid before ordinary shareholders. They attract investors who want a steadier, more secure return.
- Debentures (loan stock): long-term loans raised from the public on which the company pays a fixed rate of interest whether or not it makes profit; the debenture holders are creditors, not owners.
- Bank loans and overdrafts: medium and short-term borrowing from commercial banks to finance expansion or working capital, repaid with interest.
- Retained (ploughed-back) profits: part of the company's profit that is not distributed as dividend but re-invested in the business, providing a cheap internal source of finance.
Other sources include mortgages on landed property and trade credit from suppliers.
