WAEC SSCE - Economics - 2014

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The basic economic problem of any society is resource allocation. This is the problem of how to allocate scarce resources among competing wants and needs of individuals and society. Resources are limited, while human wants and needs are unlimited. Therefore, there is always a problem of choosing which goods and services to produce and how to distribute them among the members of society. The problem of resource allocation is at the heart of economics and it is the reason why choices have to be made on how to allocate resources.

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The price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good or service to a change in its price. In this case, the price of the commodity increased from $10 to $15, and the quantity supplied increased from 10 units to 15 units. PES is calculated as the percentage change in the quantity supplied divided by the percentage change in the price. Using the given values, we can calculate the percentage changes in quantity and price as follows: Percentage change in quantity supplied = (15 - 10) / 10 x 100% = 50% Percentage change in price = (15 - 10) / 10 x 100% = 50% Therefore, PES = 50% / 50% = 1 So, the price elasticity of supply is 1, which means that the percentage change in quantity supplied is equal to the percentage change in price. A PES of 1 indicates that the supply of the commodity is perfectly elastic, meaning that producers can increase their output by any amount without affecting the price.

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A declining population is one in which the population is decreasing over time. This could be due to a variety of factors, such as a low birth rate, high death rate, or high emigration rate. It does not necessarily mean that the population is not producing enough goods or not contributing enough to the national income. In fact, a declining population can have negative effects on economic growth and development, as there may be a shortage of workers and consumers. Additionally, a declining population may be made up of a larger proportion of older individuals, but this is not necessarily the defining characteristic.

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Livestock production in West Africa is hindered mainly by pests and diseases. This is because the region is prone to outbreaks of various diseases such as African swine fever, foot and mouth disease, and Newcastle disease, among others. The prevalence of these diseases poses a significant threat to the livestock industry, resulting in the death of animals and economic losses to farmers. Additionally, the lack of adequate veterinary services and infrastructure to control and manage these diseases exacerbates the problem. Although other factors such as inadequate demand, use of traditional implements, and land tenure system may also have an impact on livestock production, pests and diseases remain the most significant challenge facing the industry in West Africa.

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When a country devalues its currency, it means that the value of its currency has decreased relative to other currencies. This can have several implications, including: 1. Exports become cheaper: Since the value of the currency has decreased, the price of the country's goods and services becomes relatively cheaper for foreign buyers. This can make the country's exports more competitive in the global market, which could lead to an increase in the demand for its goods and services. 2. Importation of goods becomes more expensive: When a country's currency is devalued, it becomes more expensive for the country to import goods and services from other countries. This is because the value of the country's currency has decreased, so it can buy less foreign currency with the same amount of its own currency. As a result, the cost of imported goods and services becomes relatively higher. 3. The value of the country's currency falls: When a country's currency is devalued, it means that its value has decreased compared to other currencies. This can make the country's currency less attractive to foreign investors, which could lead to a decrease in the demand for its currency. 4. Foreign goods become more attractive: When a country's currency is devalued, it becomes relatively cheaper for foreigners to buy goods and services in that country. This can make the country's economy more attractive to foreign tourists, which could lead to an increase in tourism revenue.

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Rapid population growth can hinder economic development. When the population grows quickly, it may outpace the rate of economic growth, making resources scarce and limiting job opportunities. The demand for goods and services may exceed the available supply, leading to inflation, which can reduce people's purchasing power. Moreover, rapid population growth may put pressure on the government to provide essential services such as education, healthcare, and infrastructure, which can be costly and difficult to provide to a large population. All these factors can impede economic development and limit the country's potential for growth.

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Inflation can be defined as a persistent increase in the general level of prices of goods and services in an economy over a period of time, usually measured as an annual percentage change. This means that over time, the purchasing power of a currency decreases as the prices of goods and services increase. Therefore, the correct option is "Persistent increase in prices."

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The components of a three-sector economy are households, firms, and the government. 1. Households: These are people who live in homes and consume goods and services produced by firms. 2. Firms: These are businesses that produce goods and services for households to consume. They hire workers to produce these goods and services, and they sell them in the market for a profit. 3. Government: This is the entity that governs and regulates the economy. It collects taxes from households and firms and spends money on public goods and services such as education, healthcare, and infrastructure. This three-sector model is often used to describe modern economies, where households consume goods and services produced by firms, and the government provides necessary infrastructure and services to support these activities.

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The precautionary motive for holding money is to cover unforeseen events. This means that people hold money not only for their daily and regular transactions but also as a buffer against unexpected or emergency situations such as medical bills or car repairs. The amount of money held for precautionary purposes varies depending on the level of uncertainty and risk associated with the individual's situation.

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The change in the quantity demanded of a given commodity is primarily determined by the price of the commodity. As the price of the commodity changes, the quantity demanded by consumers may increase or decrease, resulting in a movement along the demand curve. Other factors, such as the size of the population, income of the consumer, taste and fashion, can also affect the demand for a commodity, but these factors cause a shift in the demand curve rather than a movement along it.

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When the supply of a product increases, there is a greater quantity of the product available in the market, which will lead to a decrease in the price of the product, assuming that the demand for the product remains constant. This happens because sellers are willing to offer more of the product at a lower price to make sure they can sell it all. As a result, consumers are more willing to buy the product since they can get it at a lower price. Therefore, an increase in supply leads to a fall in price and an increase in quantity bought and sold.

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The rate of increase in utility is referred to as marginal utility. Marginal utility is the additional satisfaction or benefit that a consumer gets from consuming an additional unit of a good or service. It is the change in total utility that results from a one-unit change in the consumption of a good or service. Marginal utility is an important concept in economics because it helps explain how consumers make choices about how much of a particular good or service to consume. As a general rule, consumers will continue to consume additional units of a good or service as long as the marginal utility they receive from each additional unit is greater than or equal to its price.

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International trade is desirable because it provides a foreign market for local goods, allowing countries to specialize in the production of goods that they can produce efficiently and competitively. This, in turn, creates employment opportunities and increases the standard of living for citizens of those countries. Moreover, international trade encourages competition, leading to lower prices and increased quality of goods and services. While there may be some risks associated with international trade, such as over-dependence on other countries or unhealthy competition, the benefits generally outweigh the costs. Therefore, international trade is seen as a positive force for economic growth and development.

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Cyclical unemployment is associated with trade fluctuations. This type of unemployment occurs as a result of changes in the business cycle, where there is a decline in economic activity resulting in decreased demand for labor. During an economic downturn, businesses reduce production and lay off workers, resulting in cyclical unemployment. As the economy recovers, businesses increase production and hire more workers, reducing cyclical unemployment. Thus, cyclical unemployment is closely tied to the ups and downs of the business cycle.

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The feature that is not associated with socialism is "Freedom of enterprise". Socialism advocates for collective ownership of productive resources and production is not driven by the profit motive, but by the goal of maximizing public welfare. Therefore, in a socialist system, the state or community owns and controls the means of production and distribution of goods and services, and there is limited scope for individual entrepreneurship or private ownership of businesses.

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Joint stock banks are banks that are owned by shareholders, who provide capital to the bank in exchange for a share of ownership. The shareholders then receive a portion of the profits earned by the bank. Commercial banks are examples of joint stock banks. They are the most common type of bank and offer a range of services to individuals and businesses, including deposits, loans, and credit cards. Co-operative credit societies are not joint stock banks because they are owned by their members, who are also their customers. Members pool their resources to provide loans and other financial services to each other. Central banks, on the other hand, are not joint stock banks either because they are owned by the government and operate as the bank of the government. They are responsible for regulating the money supply, setting interest rates, and ensuring the stability of the financial system. Development banks are also not joint stock banks because they are owned by the government or other public institutions and are focused on providing long-term financing for projects that promote economic development. In summary, joint stock banks are commercial banks that are owned by shareholders, who receive a portion of the profits earned by the bank. Co-operative credit societies, central banks, and development banks are not joint stock banks because they are owned by different entities and have different objectives.

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The question states that the seller increases the quantity offered for sale due to an increase in price. This situation is known as an expansion in supply. To find the percentage change in quantity supplied, we need to calculate the percentage change in quantity offered for sale. To calculate the percentage change, we use the following formula: Percentage change = ((new value - old value) / old value) x 100% In this case, the old value is 400 units, and we don't know the new value. We know that the seller increased the quantity offered for sale, which means the new value is higher than the old value. Let's assume the new value is 450 units. Percentage change = ((450 - 400) / 400) x 100% Percentage change = (50 / 400) x 100% Percentage change = 0.125 x 100% Percentage change = 12.5% Therefore, the percentage change in quantity supplied is 12.5%. Answer (12.5%) is the correct answer.

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Co-operative societies formed to market the output of their members are called marketing co-operative societies. These societies are established by small producers who cannot individually bear the costs of marketing their products. By forming a marketing co-operative society, they can pool their resources and market their products collectively, which can help them obtain better prices for their products and reduce the costs of marketing. The society sells the products on behalf of its members and then distributes the profits among them. This type of co-operative society is often seen in the agricultural sector, where small farmers come together to market their crops.

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The profit of a producer is the difference between total revenue and total cost. In simpler terms, profit is the amount of money a producer makes after subtracting all the costs associated with producing and selling a product from the total revenue earned from selling that product. Total revenue is the amount of money a producer receives from selling all the units of a product, while total cost includes all the expenses incurred in producing and selling those units. Therefore, by subtracting total cost from total revenue, a producer can determine their profit. It is important to note that a producer's profit can be positive, negative, or zero, depending on whether their revenue is greater than, less than, or equal to their total cost.

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In a centrally planned economy, what to produce is the responsibility of the state's bureaucrats. This means that the government makes all the decisions about what goods and services are produced, how much they cost, and who gets them. The government also decides what resources will be allocated to each sector of the economy, such as agriculture, manufacturing, and services. The goal is usually to achieve certain social and economic objectives, such as providing equal access to goods and services, promoting economic growth, and reducing income inequality.

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Changes in plant size refer to the expansion or contraction of a company's production facilities, such as factories or equipment. The time frame in which this change takes place is important in determining how the supply of the company's products will be affected. In the short run, a company cannot easily change its plant size, so an increase in supply due to changes in plant size is unlikely to occur during this period. In the market period, which is an even shorter time frame than the short run, supply is fixed and cannot be adjusted, so an increase in supply due to changes in plant size is also unlikely. In the normal time frame, a company has more flexibility to adjust its plant size, but changes in supply may not happen immediately as it may take time to build or expand facilities. The long run is the time frame in which a company can adjust all of its production inputs, including plant size. In this period, a company can build new factories, expand existing ones, or purchase new equipment to increase production. Therefore, an increase in supply due to changes in plant size will take place only in the long run. In summary, changes in plant size can affect the supply of a company's products, but the time frame in which this occurs depends on the company's ability to adjust its production inputs. An increase in supply due to changes in plant size will only take place in the long run.

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Goods consumed out of habit have inelastic demand. Inelastic demand means that the quantity demanded is not very responsive to changes in price. When a good is consumed out of habit, people tend to be less sensitive to changes in price because their consumption habits are not easily altered. For example, if someone always buys a particular brand of coffee, they may continue to buy that brand even if the price increases because they are used to it and enjoy it. This means that the quantity demanded will not decrease significantly in response to a price increase. Conversely, if the price of the good decreases, the quantity demanded will not increase significantly because people are already consuming the good out of habit. Thus, goods consumed out of habit have inelastic demand, meaning that changes in price have little effect on the quantity demanded.

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If the coefficient of price elasticity of demand is 0.1, then the demand is inelastic. This means that the percentage change in quantity demanded is less than the percentage change in price. In other words, a small change in price would lead to a proportionally smaller change in quantity demanded. This suggests that the demand for the product is relatively insensitive to changes in price. When the coefficient of price elasticity of demand is less than 1, demand is considered to be inelastic.

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The concentration of many firms of a particular industry in a particular area is known as localization of industries. This phenomenon occurs when many companies in the same industry choose to locate their factories or production facilities in the same area. The companies in the area may benefit from access to similar resources or infrastructure, such as skilled labor, transportation, and raw materials. This can lead to economies of scale, as companies can share resources and reduce costs. The concentration of companies in the same area can also encourage competition, innovation and specialization, which can benefit the industry as a whole.

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The function of money that is mostly affected during inflation is the store of value. Inflation reduces the purchasing power of money over time, making it less valuable as a store of value. This means that the amount of goods and services that can be purchased with a certain amount of money decreases as inflation increases. As a result, people tend to prefer holding assets that retain their value better during inflation, such as real estate or commodities, rather than money.

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To control inflation, the central bank of a country may adopt a restrictive monetary policy. This involves the reduction of the money supply in the economy, which in turn increases interest rates, making borrowing more expensive. This makes it more difficult for businesses and consumers to borrow money, reducing the demand for goods and services, which in turn reduces the upward pressure on prices. By increasing the cost of borrowing, the central bank can reduce spending and investment, and limit the amount of money in circulation, thus controlling inflation.

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A normal supply curve has a positive slope which indicates that sellers are willing to sell more at a higher price. This means that as the price of a good or service increases, sellers are willing to supply more of that good or service to the market. Conversely, as the price of a good or service decreases, sellers are willing to supply less of that good or service to the market. The positive slope of the supply curve reflects the basic principle of supply and demand, where the price of a good or service serves as a signal to producers about the level of demand in the market, and producers respond by adjusting their output accordingly.

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Human wants are unlimited because new wants and desires are constantly emerging, and people always seek to satisfy these wants. For example, a person who has just bought a car may want to upgrade to a better model or buy a second car. This insatiable desire for more and better goods and services cannot be satisfied because resources are limited, while the wants are infinite. Additionally, resources have alternative uses, which means that when resources are used to satisfy one want, they cannot be used to satisfy another. Therefore, even if production were to increase, it would still be insufficient to meet all human wants. Ultimately, human wants will always exceed the available resources.

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The effect of the discovery of mineral resources in an area can lead to an increase in wealth as more jobs are created, and there is an increase in economic activities. This often results in overcrowding as more people flock to the area in search of opportunities. Additionally, an increase in wealth can lead to an increase in the crime rate as people become more desperate to protect their newfound riches or to acquire them through criminal means. However, under-population is not an effect of the discovery of mineral resources. Instead, the discovery of mineral resources often leads to an increase in population as people move into the area in search of employment and economic opportunities.

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West African countries are experiencing worsening terms of trade primarily because they are primarily producers of raw materials such as oil, cocoa, and minerals. This means that they are heavily reliant on exporting these commodities to other countries, but the prices they receive for these exports have been declining over time. Additionally, the currencies of many West African countries have been overvalued, which means that their exports are more expensive for other countries to purchase. This makes it harder for them to compete with other countries that produce similar goods. Furthermore, West African countries tend to import more machinery and manufactured goods than they export. This means that they are spending more money on imports, which can further weaken their economy. Overall, these factors contribute to the worsening terms of trade for West African countries, making it harder for them to generate income and improve their economic conditions.

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Households make economic decisions because they want to maximize their satisfaction. This means that households make choices that they believe will make them better off and increase their well-being. These choices can include what to buy, where to work, how much to save, and how much to spend. The goal of these decisions is to achieve the highest level of satisfaction possible, given their resources and constraints. Economic decisions are not always solely driven by financial gain or the desire to increase purchases, but rather by the desire to maximize overall satisfaction.

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Taking over of all forms of industries by the government will not encourage industrialization in West Africa. When the government takes over all forms of industries, it may not have the required expertise, resources, and motivation to run them effectively. This may lead to inefficiencies and lack of competitiveness, which are not favorable for industrialization. Also, government control of industries can discourage private investment, which is essential for industrialization. On the other hand, providing social infrastructure such as good roads, stable power supply, and water supply can create a conducive environment for industrialization. Tax incentives can encourage entrepreneurs to invest in industries, and tariffs can protect infant industries from foreign competition, allowing them to grow and become competitive.

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Countries do not import goods because of "the love for other nations." Countries import goods to satisfy their needs and wants that they cannot produce efficiently or effectively themselves. The other options are valid reasons for countries to import goods. The law of absolute advantage refers to a situation where a country can produce a good at a lower cost than another country, and differences in natural endowments and tastes refer to the differences in resources and preferences that exist between countries.

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A financial institution established for the purpose of providing specialized services like acceptance of bills of exchange and equipment leasing is known as a Merchant Bank. Merchant banks are financial institutions that specialize in trade and commercial finance. They provide services such as corporate finance, project appraisal, investment advisory, and underwriting of securities. They also offer specialized financial services such as bill discounting, acceptance of bills of exchange, equipment leasing, and project counseling.

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The provision of short-term loans to solve balance of payments problems is done by the International Monetary Fund (IMF). Balance of payments refers to the difference between a country's earnings from exports and its payments for imports. When a country experiences a deficit in its balance of payments, it means that it is importing more goods and services than it is exporting. This can lead to a shortage of foreign exchange, making it difficult for the country to pay for essential imports, such as fuel or medicines. The IMF provides short-term loans to countries facing balance of payments problems. These loans are intended to help countries stabilize their economies and address the underlying causes of the balance of payments deficit. The loans come with conditions, such as implementing economic reforms and reducing government spending, to ensure that the country can repay the loan and achieve long-term economic stability. The IMF is a specialized agency of the United Nations, established in 1944 to promote international monetary cooperation and exchange rate stability. It has 190 member countries and works to ensure the stability of the international monetary system, facilitate international trade, and reduce poverty.

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