WAEC SSCE - Economics - 1995

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The decision on what to produce is a problem in all economic systems. It is one of the fundamental questions of economics and refers to the allocation of scarce resources to the production of different goods and services. In a market economy, this decision is made by the interaction of supply and demand, while in a planned economy, it is made by central planning authorities. In a mixed economy, the decision is a combination of market forces and government intervention. Therefore, the problem of what to produce exists in all economic systems.

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Effective demand in economics refers to the desire or willingness of consumers to buy goods and services, coupled with the ability to actually purchase them, i.e. backed by sufficient purchasing power. It is the combination of two factors - the willingness to buy and the ability to pay. Therefore, effective demand can be understood as the amount of a particular product or service that consumers are both willing and able to purchase at a given price level.

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In economics, production refers to the process of creating goods and services that have value and utility for consumers. It involves using various inputs such as labor, capital, and natural resources to produce a final product that can be sold in the market. The ultimate goal of production is to satisfy the needs and wants of consumers by creating goods and services that they are willing and able to buy. Therefore, production involves the use of resources to create value and utility, which is an essential component of economic growth and development.

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International trade takes place because of differences in production cost between countries. Each country has its own resources, labor, and technology that influence the cost of producing goods and services. Some countries may have lower production costs for certain goods or services than others, making it more cost-effective to import those goods or services from another country rather than producing them locally. This creates a demand for international trade as countries seek to take advantage of these differences and increase their economic welfare.

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The law of demand states that as the price of a good or service falls, the quantity demanded of that good or service will increase, and conversely, as the price of a good or service rises, the quantity demanded of that good or service will decrease. This means that there is an inverse relationship between the price of a good or service and the quantity demanded of it. In simpler terms, people tend to buy more of a product when it is cheaper, and buy less of it when it is more expensive.

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A tax whose rate increases as income increases is called a progressive tax. This means that the more income an individual or entity earns, the higher the percentage of their income they are required to pay in taxes. The aim of a progressive tax system is to ensure that those who can afford to pay more contribute a larger share of their income to fund government services and programs, while those with lower incomes pay a smaller share. The opposite of a progressive tax is a regressive tax, where the tax rate decreases as income increases.

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Preferential treatment is not a feature of a perfect market. A perfect market is characterized by a large number of buyers and sellers, homogeneity of products, absence of transport costs, and perfect knowledge of market situation. In a perfect market, all buyers and sellers have equal access to information and no one is given preferential treatment over another. This ensures that prices are determined solely by supply and demand, without any outside influences. Therefore, preferential treatment would disrupt the balance of the perfect market and make it imperfect.

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Balance of trade refers to the difference between the value of a country's imports and the value of its exports over a specific period, usually a year. In other words, it is a measure of the net inflow or outflow of goods and services in and out of a country. If the value of exports is greater than the value of imports, the balance of trade is said to be positive, indicating a trade surplus. Conversely, if the value of imports is greater than the value of exports, the balance of trade is negative, indicating a trade deficit.

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Economics is a social science that studies how scarce resources are allocated to satisfy human wants. It focuses on understanding how people make decisions to allocate resources, such as time, money, and labor, to achieve their desired outcomes. Economics also examines how markets operate and how the interactions between buyers and sellers affect the prices of goods and services. In addition, it analyzes the role of governments and other institutions in regulating and influencing economic activity. The ultimate goal of economics is to improve the well-being of individuals and societies by promoting efficient and effective allocation of resources.

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In economics, scarcity means that the resources available to produce goods and services are limited while the demand for these goods and services is unlimited. This means that the supply of goods and services is limited, and this limited supply cannot meet the unlimited wants of individuals. As a result, scarcity forces individuals, businesses, and governments to make choices about what to produce and how to allocate resources. Therefore, scarcity implies that we must choose between alternative uses of our limited resources.

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Under the socialist economy, the decision on what to produce is determined by the Government. In a socialist economy, the Government owns and controls the means of production, and therefore, the Government decides what goods and services are produced and how they are distributed among the people. The decision is not based on the expected profit or price or preference of consumers, but rather on the needs and priorities of the society as a whole. The goal of a socialist economy is to ensure that everyone's basic needs are met, and resources are allocated in a way that benefits society as a whole, rather than just a few individuals or corporations.

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Political instability does not encourage the location of industries. Political instability can create an uncertain and unstable environment for businesses, which can make it difficult for industries to operate smoothly. In such an environment, there may be frequent changes in government policies, disruptions in supply chains, and a general lack of security, which can make it difficult for industries to operate efficiently and profitably. As a result, political instability can discourage the location of industries in a particular area.

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Marginal cost refers to the additional cost incurred in producing one more unit of a good or service. It is the extra cost that arises from increasing the output of a production process by one unit. This includes both the variable costs, such as the cost of raw materials and labor, as well as any additional fixed costs that are incurred, such as the cost of equipment or facilities. The formula for calculating marginal cost is the change in total cost divided by the change in quantity produced.

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Terms of trade refer to the ratio between the price of a country's exports and the price of its imports. It measures how much of a country's imports can be exchanged for a unit of its exports. For example, if a country exports crude oil for $100 per barrel and imports wheat for $200 per ton, the terms of trade would be 0.5 barrels of oil per ton of wheat. Generally, a higher ratio indicates that a country can purchase more imports for a given amount of exports, which is considered favorable for its economy.

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A point along a consumer's indifference curve shows a combination of two commodities from which the consumer derives the same level of satisfaction or utility. The consumer is indifferent between any points on the same indifference curve, as they provide the same level of utility. The indifference curve represents the different combinations of two goods that a consumer can choose to consume, while remaining indifferent or having the same level of satisfaction. Each point on the curve represents a different combination of the two goods, but with the same level of satisfaction or utility for the consumer. Therefore, a consumer's choice among different points on an indifference curve depends on his/her budget constraint or the price of the goods.

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Government can influence aggregate demand through various measures such as reducing personal income tax, creating employment opportunities, and increasing workers' fringe benefits. However, retiring a director-general in the public service or making compulsory deductions from salaries of all categories of workers are not measures that can directly influence aggregate demand. Therefore, the correct answer is: "Retirement of director-general in the public service" and "Compulsory deduction from salaries of all categories of workers."

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The option that is not a function of an insurance company is "Collection of deposits from the public". Insurance companies do not collect deposits like banks, they collect premiums from policyholders. Insurance companies use the premiums collected to mobilize funds, encourage savings habits through life assurances, grant loans on a long-term basis for investment, and encourage investment by security of capital. However, they do not collect deposits from the public.

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Net National Product (NNP) is the total value of goods and services produced by a country's residents and businesses in a given period, minus the depreciation of capital goods. In other words, NNP represents the total income earned by a country's citizens and businesses in a given period, after accounting for the wear and tear of equipment, buildings, and other capital assets used in the production process. Therefore, the correct option is: Gross National Product (GNP) less depreciation.

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The greatest foreign exchange earner for Nigeria before the advent of petroleum was agriculture. Agriculture was a major source of revenue for Nigeria, and the country was a leading exporter of crops such as cocoa, rubber, palm oil, groundnut, and cotton. These cash crops were exported to countries like Britain, the United States, and other European countries. Agriculture was the mainstay of the Nigerian economy and played a significant role in the country's economic development until the discovery of oil in the late 1950s.

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The headquarters of the African Development Bank (ADB) is located in Abidjan, which is the economic capital of Côte d'Ivoire, a country in West Africa.

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Giffen commodities are those commodities for which demand increases as price increases. This is contrary to the law of demand which states that as the price of a good increases, the quantity demanded decreases. Giffen goods are usually inferior goods that are consumed out of necessity and have no close substitutes. As the price of the Giffen good increases, consumers have less income to spend on other goods, so they end up buying more of the Giffen good despite the higher price. This is because the income effect of the higher price outweighs the substitution effect.

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A monopolist is a sole supplier of a particular good or service with no close substitutes, and therefore, has the power to influence market prices. To maximize profit, the monopolist should attempt to equate marginal cost to marginal revenue. Marginal cost refers to the cost of producing one additional unit of output, while marginal revenue is the revenue generated by selling one additional unit of output. At the point where marginal cost equals marginal revenue, the monopolist is producing the optimal level of output that maximizes profit. If marginal revenue is greater than marginal cost, the monopolist can increase profit by producing more output. On the other hand, if marginal cost is greater than marginal revenue, the monopolist can increase profit by reducing output. Equating average cost to average revenue or fixing price and output may not result in maximizing profit, as it does not consider the marginal costs and revenues associated with each unit of output. Equating price to total cost is not a viable strategy as it would lead to losses.

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When a commodity has elastic demand, it means that consumers are sensitive to changes in its price. Therefore, an increase in the price of the commodity will lead to a decrease in the demand for the commodity. This is because consumers will be discouraged from buying the commodity due to the high price. Conversely, if the price of the commodity decreases, the demand for it will increase as consumers will be attracted to buy it due to the lower price. Therefore, the effect of an increase in price on the demand for a commodity with elastic demand will be a decrease in the demand for the commodity.

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Malthus observed in his theory that population was growing in geometrical progression. This means that the population was increasing exponentially, with each generation having more children than the previous one. For example, if a population starts with 100 people and grows at a rate of 2% per year, after 10 years it will have increased to 122 people, but after 20 years it will have increased to 149 people, and after 30 years it will have increased to 181 people, and so on. Malthus believed that this exponential growth in population would eventually outstrip the resources available to support it, leading to poverty, famine, and other forms of social and economic unrest.

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At optimum population level, a country has its highest output per head. Optimum population level refers to the size of population that can be supported by the available resources in a country without putting undue strain on the resources. When a country reaches its optimum population level, the available resources are utilized efficiently, resulting in higher productivity and output per capita. This means that each individual is able to produce more goods and services, which translates to higher standards of living for the population as a whole.

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In perfect competition, the marginal cost (MC) curve represents the additional cost incurred by the firm for producing one more unit of output. The average cost (AC) curve represents the cost per unit of output, obtained by dividing the total cost by the quantity produced. When the MC curve intersects the AC curve, it indicates that the firm is producing at the lowest possible cost. If the MC curve intersects the AC curve from below at its lowest point, it means that the cost of producing an additional unit is less than the average cost of all the units produced. This situation is ideal for the firm since it is producing at the lowest possible cost and maximizing its profits.

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The objective of the Indigenisation policy in Nigeria was to reduce foreign dominance of the Nigerian economy by increasing Nigerian participation, protecting the national interest and security, and preventing foreign monopoly of the economy. The policy did not aim to eliminate foreign participation in the Nigerian economy. Therefore, the option "eliminate foreign participation in the Nigerian economy" is the correct answer.

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The correct answer is "market size". Division of labor is a system of organizing work in which tasks are divided among workers to increase efficiency. However, for division of labor to work effectively, there must be a large enough market to accommodate the increased production that results from specialization. If the market is too small, there may not be enough demand for the increased production, and specialization may not be worthwhile. Therefore, market size is an important limiting factor in the application of division of labor.

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The option that does not require the use of information from a census is "Controlling geographical mobility of labour among the states or regions". This is because controlling geographical mobility of labour involves policies and regulations to restrict or encourage the movement of people between regions or states, and it does not necessarily require census data to be effective. The other options such as allocating central government revenue, planning for development, demarcating constituencies, and providing social amenities all require census data to accurately assess the population, demographics, and needs of the states or regions in question.

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The economic system currently in operation in Nigeria is a mixed economy. This means that the economy combines elements of both capitalism and socialism, with both private and public sectors playing important roles in the economy. In Nigeria, the private sector is dominant in areas such as agriculture, manufacturing, and services, while the government plays a major role in the oil and gas industry, as well as in providing social services such as healthcare and education. The mixed economy model allows for some level of government intervention in the economy, while still allowing private businesses to operate and compete in the market.

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The multiplier is the ratio of change in income to the expenditure that brought it about. In other words, it is the amount by which an initial change in expenditure, such as an increase in government spending or investment, will increase the total income in an economy. The multiplier effect occurs when the initial change in spending leads to an increase in income, which in turn leads to additional spending and further increases in income. The size of the multiplier depends on the marginal propensity to consume, which is the fraction of additional income that is spent on consumption. The higher the marginal propensity to consume, the larger the multiplier will be.

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The real value of money refers to what it can buy at a particular time, in terms of goods and services. It is determined by the purchasing power of the currency, which is the amount of goods or services that can be bought with a unit of currency. The purchasing power of money can change over time due to inflation or deflation, which can affect the value of money in terms of what it can buy. Therefore, the real value of money is not fixed and can vary depending on various economic factors.

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Oil was first discovered in commercial quantities in Nigeria in Oloibiri, a small community located in present-day Bayelsa State. The discovery was made on Sunday, January 15, 1956, by a team of Shell British Petroleum (now Shell Petroleum Development Company) led by a geologist, Mr. L.A.K. Jones. The discovery of oil in Oloibiri marked the beginning of Nigeria's oil industry, which has become the country's main source of revenue and foreign exchange.

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A budget is a summary of expected income and expenditure. It is a financial plan that outlines how much money an individual or organization expects to earn and spend over a given period, typically one year. A budget can be used by individuals, businesses, and governments to manage their finances, make informed financial decisions, and ensure that they are living within their means. The budget will show the expected income, such as salaries or revenues, and the expected expenses, such as rent, utilities, and other bills. By comparing the income and expenses, individuals and organizations can identify areas where they may need to reduce spending or increase income to balance the budget.

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