WAEC SSCE - Economics - 2014 (Essay)

Détails de la réponse

(a) Four differences between a public and a private limited liability company.

(b) Four advantages of a limited liability company.

• Limited liability. The liability of members is limited to the amount they invested; personal property is protected if the company fails.
• Large capital. A company can raise substantial funds through the sale of shares and debentures.
• Continuity (perpetual succession). The company has a separate legal existence and continues even when owners die or leave.
• Separate legal entity. It can sue, be sued, own property, and enter contracts in its own name.
• Transferability of shares. Shares (especially in a public company) can be transferred, giving investors flexibility.

Examination takeaway. When a comparison is asked, always state each difference on both sides using the same feature, as laid out in the table; a one-sided statement earns half the marks.

Détails de la réponse

(a) The normal chain of distribution. This is the usual channel or route through which goods pass from the producer to the final consumer. In its full form it runs: producer to wholesaler to retailer to consumer.

(b) Three functions of middlemen in the chain of distribution.

• Breaking bulk. Wholesalers buy in large quantities from producers and sell in smaller quantities to retailers, and retailers sell in still smaller units to consumers.
• Storage (warehousing). Middlemen hold stocks of goods, bridging the time gap between production and consumption and ensuring steady supply.
• Transportation. They move goods from producing areas to where consumers are, bridging the place gap.
• Provision of finance and credit. Middlemen pay producers and may extend credit to buyers, easing the flow of goods.
• Provision of information. They pass market information between producers and consumers about tastes, prices, and demand.

(c) Four problems in the distribution of goods in West Africa.

• Poor transport and infrastructure. Bad roads and inadequate railways make the movement of goods slow and costly.
• Inadequate storage facilities. Lack of warehouses and cold storage causes spoilage, especially of perishable produce.
• Too many middlemen. A long chain of intermediaries raises the final price to consumers.
• Poor communication and market information. Producers and traders often lack accurate information on prices and demand.
• Shortage of finance/credit. Distributors may lack capital to hold and move stock efficiently.
• Insecurity and multiple checkpoints. Theft and unofficial levies on the road raise costs and delay delivery.

Examination takeaway. Note the mark weighting: part (c) carries 12 marks for four points, so each distribution problem should be named and briefly explained rather than merely listed.

Détails de la réponse

(a) Balance of trade (visible/merchandise exports minus imports)

\[52{,}000 - 40{,}000 = +\$12{,}000\ \text{(surplus)}\]

(b) Balance on current account (items 1 to 5: visible trade plus services, income and transfers)

Receipts: \(52{,}000 + 4{,}000 + 20{,}000 + 2{,}500 + 22{,}800 = 101{,}300\)

Payments: \(40{,}000 + 8{,}000 + 5{,}000 + 7{,}500 + 7{,}000 = 67{,}500\)

\[101{,}300 - 67{,}500 = +\$33{,}800\ \text{(surplus)}\]

(c) Balance on capital account (items 6 to 8)

Receipts: \(50{,}000 + 254{,}000 + 221{,}000 = 525{,}000\)

Payments: \(26{,}000 + 289{,}000 + 238{,}000 = 553{,}000\)

\[525{,}000 - 553{,}000 = -\$28{,}000\ \text{(deficit)}\]

(d) Balance of payments (current account plus capital account)

\[33{,}800 + (-28{,}000) = +\$5{,}800\]

The overall balance of payments is a surplus of \$5,800.

Détails de la réponse

(a) Price elasticity of supply

When price falls from $20.00 to $18.00, quantity supplied falls from 500 gallons to 400 gallons.

\[\Delta Q_s=500-400=100\text{ gallons}\]

\[\Delta P=20-18=2\]

Using the initial price and quantity, \(P=20\) and \(Q=500\):

\[E_s=\frac{\Delta Q_s}{\Delta P}\times\frac{P}{Q}\]

\[E_s=\frac{100}{2}\times\frac{20}{500}=50\times0.04=2\]

Price elasticity of supply = 2.

(b) Supply is elastic because \(E_s=2\), which is greater than 1. Thus, the percentage change in quantity supplied is greater than the percentage change in price.

(c)(i) Graphical presentation

The increase in the price of the related product shifts the supply curve of palm oil rightward from \(S_1\) to \(S_2\). At the unchanged price of $6.00 per gallon, quantity supplied increases from \(Q_1\) to \(Q_2\).

(c)(ii) The two products are in joint supply. An increase in the price of one jointly produced product encourages producers to increase output of both products.

(d) Reasons for a change in supply

1. Prices of related products: a rise in the price of a jointly supplied product may increase the supply of palm oil.
2. Cost of production: higher costs of labour, transport, machinery or raw materials reduce supply, while lower costs increase supply.
3. Technology: improved production methods increase supply by making production more efficient.
4. Government policy: taxes reduce supply, whereas subsidies may increase supply.
5. Producers' expectations: expected future price increases may cause producers to withhold current supply; expected price falls may increase current supply.
6. Number of producers: entry of more producers increases market supply, while exit of producers reduces it.

Détails de la réponse

(a) Gross national income (GNI). Gross national income is the total money value of all final goods and services produced by the nationals (residents) of a country in a year, including net income earned by its citizens abroad. It equals gross domestic product plus net factor income from abroad.

(b)(i) Personal income and disposable income.

• Personal income is the total income actually received by individuals and households from all sources (wages, rent, interest, profit, and transfer payments) before direct taxes are paid. Example: a worker earning \$1,000 in salary plus \$200 from rent has a personal income of \$1,200.
• Disposable income is the income that remains for spending and saving after direct (personal) taxes have been deducted. Using the example, if \$200 is paid as income tax, disposable income is \$1,000.

\[ \text{Disposable income} = \text{Personal income} - \text{Direct taxes} \]

(b)(ii) Nominal income and real income.

• Nominal (money) income is income measured in current money terms, at the prices ruling at the time. Example: a salary of \$500 per month.
• Real income is income measured by the quantity of goods and services it can actually buy, that is, nominal income adjusted for changes in the price level. If prices double while the \$500 salary is unchanged, real income has halved even though nominal income is the same.

\[ \text{Real income} = \frac{\text{Nominal income}}{\text{Price index}}\times 100 \]

(c) Three uses of national income statistics.

• Measuring economic performance. They show whether the economy is growing or declining over time.
• Comparing standards of living. Per capita income allows comparison between countries and across years.
• Aid to planning and policy. Governments use them to allocate resources and formulate economic policy.
• Measuring income distribution. They reveal how income is shared among sectors and groups.

Examination takeaway. Keep the deductions in order: national income leads to personal income, then to disposable income after direct tax; and always distinguish money (nominal) values from purchasing power (real) values.

Détails de la réponse

(a) Specific tax. A specific tax is an indirect tax levied as a fixed amount of money per unit of a commodity (for example \$2 per kilogram), regardless of the price of the good. It shifts the supply curve vertically upward by the amount of the tax.

(b) Effects of a specific tax on incidence, by elasticity of demand. The incidence (burden) of the tax is shared between producer and consumer according to the relative elasticities of demand and supply.

(b)(i) Perfectly elastic demand. The demand curve is horizontal, so the consumer will not pay any price above the ruling market price. When the tax shifts supply up, the price to the consumer cannot rise. Therefore the whole burden of the tax falls on the producer; the market price stays the same and the quantity sold falls sharply. On the diagram, draw a horizontal demand curve; the supply curve shifts up by the tax, quantity falls, but the price paid by consumers is unchanged.

(b)(ii) Perfectly inelastic demand. The demand curve is vertical, so the same quantity is bought whatever the price. When supply shifts up by the tax, the price rises by the full amount of the tax and quantity is unchanged. Therefore the whole burden falls on the consumer. On the diagram, draw a vertical demand curve; the supply curve shifts up by the tax, the price rises by exactly the tax, and quantity is unchanged.

(c) Two differences between direct tax and indirect tax.

Examination takeaway. The general rule of tax incidence is that the burden falls more heavily on the side of the market that is less elastic; the two extreme cases here (perfectly elastic and perfectly inelastic demand) show the burden falling entirely on the producer and entirely on the consumer respectively.

Détails de la réponse

(a) Crop farming. Crop farming is the branch of agriculture concerned with the cultivation of plants (crops) such as maize, rice, cassava, yam, cocoa, and cotton for food, raw materials, or sale.

(b) Four measures to increase crop production.

• Provision of credit facilities. Making loans available at low interest allows farmers to buy inputs and expand output.
• Use of improved inputs. Supplying high-yielding seeds, fertilisers, and pesticides raises yield per hectare.
• Mechanisation. Using tractors and modern equipment increases the area cultivated and reduces drudgery.
• Irrigation and water control. Providing irrigation reduces dependence on rainfall and allows all-year farming.
• Extension services and education. Training farmers in modern techniques improves practices and productivity.
• Provision of infrastructure and markets. Good roads, storage, and stable prices encourage farmers to produce more.

(c) Two contributions of the industrial sector to agriculture.

• Supply of farm inputs and machinery. Industry manufactures tractors, fertilisers, pesticides, and tools that raise farm output.
• Processing and market for produce. Agro-based industries buy and process raw farm produce, giving farmers a ready market and adding value.
• Provision of storage and packaging materials. Industry supplies sacks, cans, and preservation facilities that reduce post-harvest losses.

Examination takeaway. In part (b) each measure should be a distinct action a government or farmer can take; briefly explaining how it raises output earns the fuller marks rather than a bare list.

Détails de la réponse

(a) Occupational mobility of labour. This is the ease with which a worker can move from one occupation, trade, or type of job to another. High occupational mobility means workers can readily change the kind of work they do; low mobility means they are tied to one occupation.

(b) Four barriers to occupational mobility of labour.

• Lack of required skills or training. Many jobs demand specialised skills or qualifications a worker does not possess, so movement into them is blocked.
• Cost and length of training. Retraining for a new profession (for example medicine or law) is expensive and time-consuming, discouraging change.
• Natural or physical ability. Some occupations require particular aptitude, strength, or talent that not everyone has, limiting entry.
• Ignorance of available opportunities. Workers may not know that vacancies or alternative careers exist because of poor information.
• Professional and trade barriers. Restrictive entry rules, licensing, or membership requirements of professional bodies and trade unions keep outsiders out.
• Age and health. Older or unhealthy workers find it hard to retrain or meet the demands of new occupations.

(c) Two factors that make labour efficient.

• Education and training. A well-educated and skilled workforce performs tasks faster, more accurately, and with less waste.
• Good working conditions and adequate wages. Fair pay, incentives, and a safe, healthy environment raise motivation and productivity.
• Good health and nutrition. Healthy, well-fed workers have the energy and concentration to work efficiently.

Examination takeaway. Do not confuse occupational mobility (changing the type of job) with geographical mobility (changing the location of work); this question asks only about occupational mobility.