WAEC SSCE - Economics - 1988

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In economics, 'ends' refers to human wants or desires. These are the things that people seek to satisfy or fulfill through their economic activities. Human wants are unlimited, but the resources available to satisfy them are limited. Therefore, individuals have to make choices about which wants to satisfy with the limited resources available to them. Economics is the study of how people make these choices and allocate their scarce resources to satisfy their unlimited wants.

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The condition which adversely affects the expansion of production is the limited size of the market. When the market size is limited, it means that there is a small number of potential customers for the products produced. This limits the demand for the goods or services, which makes it difficult for the producers to increase their production levels. In such a scenario, even if the producer has enough funds, has effective management and the prospect of increased profits, they may still not be able to expand their production. This is because there is a limited demand for their products, which means that any increase in production will not be met with a corresponding increase in sales. As a result, the producer will be forced to operate below their potential capacity, which will adversely affect their ability to expand their business. Therefore, the limited size of the market is a major factor that can limit the growth and expansion of production.

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In a Free Market economy, the consumer is often referred to as "The King". This is because in a free market economy, the consumers play a crucial role in determining the supply and demand of goods and services. Since the consumers have the power to choose what to buy and what not to buy, they indirectly control the production and distribution of goods and services. Therefore, producers try to cater to the needs and wants of consumers to attract them to buy their products, leading to competition, innovation and efficiency in the economy. Hence, the saying "The customer is always right" and consumers are often referred to as "The King".

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The option that does not relate to the law of comparative advantage is "In order to specialize, a country must have absolute advantage". Explanation: The law of comparative advantage states that countries should specialize in producing goods and services that they can produce at a lower opportunity cost than other countries. It does not require a country to have an absolute advantage in the production of any good or service. In fact, a country may have a comparative advantage in producing a good even if it is less efficient in producing that good than other countries. Therefore, the statement that "In order to specialize, a country must have absolute advantage" is incorrect as a country can specialize in producing goods and services based on their comparative advantage even if they don't have an absolute advantage.

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A demand schedule is a table showing the relationship between the price of a good and the quantity of that good that consumers are willing and able to buy. It lists the various prices of a good and the corresponding quantity demanded by consumers at each price. Essentially, it shows the demand curve for a particular product, which reflects the law of demand, stating that as the price of a good increases, the quantity demanded by consumers decreases, all other factors being equal. Therefore, a demand schedule is a useful tool for businesses to understand how changes in price affect the quantity of goods they can sell, and for economists to analyze consumer behavior and market trends.

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The factor that does not affect revenue allocation in Nigeria is the number of industries and land areas. Revenue allocation is the process of distributing revenue generated by the federal government among the various tiers of government and the states in Nigeria. The revenue allocation formula is based on several factors such as population, landmass, revenue generation, and the development needs of the country. The needs of an area, size of the population of an area, revenue derivable from an area, and the development needs of the country are the factors that determine the revenue allocation in Nigeria. The number of industries and land areas is not a determining factor in revenue allocation in Nigeria.

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If an increase in the price of commodity A leads to a decrease in the demand for commodity B, then A and B are complementary goods. Complementary goods are those that are typically consumed together. When the price of one of the goods goes up, it becomes more expensive to consume both goods, leading to a decrease in the demand for the other. For example, if the price of gasoline (commodity A) goes up, people may reduce their driving, leading to a decrease in the demand for cars (commodity B).

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The feature that is not associated with Sole Proprietorship is: "Decision can be taken only by ten people". Sole Proprietorship is a type of business ownership where a single individual is the owner of the business. The proprietor provides the capital to start the business and is in charge of managing the business. In Sole Proprietorship, there is unlimited liability, which means the owner is personally liable for the debts and obligations of the business. Continuity is also doubtful at the death of the proprietor since the business is not a separate legal entity. The proprietor has complete autonomy to make decisions regarding the business without any interference from others. Therefore, the statement that "Decision can be taken only by ten people" does not apply to Sole Proprietorship.

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The Nigerian indigenization decree was promulgated in 1972 with the aim of allowing indigenous Nigerians to have full participation in the economic activities of the country. The decree required foreign investors to sell at least 60% of their shares to Nigerians and allow them to participate in the management of the company. This was a way of empowering Nigerian citizens and reducing the economic dominance of foreigners in the country. The decree helped to create more job opportunities for Nigerians, promote local entrepreneurship, and encourage the growth of Nigerian-owned businesses. Overall, the indigenization decree was an important step towards economic independence and development in Nigeria.

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Malthusian theory of population is best explained by the option: "The population increase faster than food supply". Malthusian theory of population was propounded by Thomas Malthus in the 18th century. According to him, population growth is geometric while food supply growth is arithmetic. This implies that while population grows at an exponential rate, food production only grows linearly. Malthus argued that population growth would eventually outstrip the ability of the earth to provide food, leading to widespread famine, disease, and death. Thus, he advocated for policies such as family planning to control population growth and prevent the negative consequences of overpopulation.

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External economies refer to the benefits that firms in a particular industry or location enjoy due to the presence of other firms in the same industry or location. Specifically, external economies occur when firms in an industry or location experience cost savings or increased efficiency as a result of factors outside of their control, such as a concentration of skilled labor, specialized suppliers, or infrastructure. Therefore, of the given options, external economies occur when firms compromising an industry are concentrated in one area.

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The International Monetary Fund (IMF) would be classified as a Financial organization. This is because it is an international organization that is focused on promoting international monetary cooperation, exchange stability, and providing resources to help countries in need of financial assistance. The IMF provides financial assistance to member countries experiencing balance of payments problems and helps to promote economic growth and stability through policy advice, technical assistance, and training. The organization plays a crucial role in the global financial system and is considered one of the key institutions in international finance.

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The major currency used for granting credits to member countries of the International Monetary Fund (IMF) is the US dollars. The US dollar is the most widely used currency in international transactions and is considered as the world's reserve currency. Since the IMF was established to promote international monetary cooperation and exchange rate stability, it uses the US dollar as its main currency for lending to member countries that are experiencing balance of payments difficulties. The IMF also has special drawing rights (SDRs), which is a supplementary reserve asset that is used in transactions among member countries and is based on a basket of major currencies including the US dollar.

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The economic system in which most capital goods are owned by individuals and private firms is known as a capitalist economy. In a capitalist economy, the means of production are privately owned and operated for profit. The production of goods and services is determined by supply and demand in the market, and the price system is used to allocate resources and distribute output. This system is based on the principles of private property, individual initiative, and free enterprise, and is often associated with a market-oriented approach to economic development.

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The item that is not a capital expenditure is "Payment of interest on loans." Capital expenditure refers to expenses incurred for acquiring, improving, or extending a company's fixed assets, such as buildings, equipment, or land, that will be used for several years in the business. These expenditures usually involve significant outlays of cash and provide benefits to the company for an extended period. Building of roads and bridges, building of dams, building of harbours, and supply of electricity all involve the acquisition or improvement of significant fixed assets and thus fall under the category of capital expenditure. On the other hand, "Payment of interest on loans" is not an acquisition or improvement of any fixed asset, but it is a cost of borrowing money to finance the acquisition or improvement of fixed assets. Interest paid on loans is recorded as an expense in the income statement and not as a capital expenditure in the balance sheet.

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The economic problem refers to the challenge of allocating scarce resources among competing wants and needs. All the options listed are typical economic problems faced by any economic system. However, equal distribution of goods and services is not an economic problem in the sense that it is more of a social and political goal rather than a fundamental economic problem. While economic systems may strive to promote equality, ensuring equal distribution is not a problem that arises solely from the scarcity of resources. Therefore, the correct answer is "Equal distribution of goods and services."

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The imposition of high income tax by the government to cut down demand is known as Fiscal Policy. Fiscal policy is a tool used by the government to regulate the economy by adjusting government spending and taxation. In this case, the government is using taxation to reduce the disposable income of individuals and households, which will ultimately lead to a reduction in their demand for goods and services. This is done in order to control inflationary pressures in the economy and promote economic stability.

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The drawer of a cheque is the person who writes out the cheque. They are the ones who have the account from which the money is drawn and they are authorizing the payment to the payee, which is usually another person or an organization. The drawer is the one who signs the cheque and writes in the amount of money to be paid, as well as the name of the payee.

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When the demand for a commodity is inelastic, the consumer bears the greater burden of the indirect tax. This is because when the demand for a product is inelastic, it means that the consumers are not very responsive to changes in price. Therefore, if the price of the product increases due to an indirect tax, the consumers will continue to buy the product despite the price increase, and the producer will not be significantly affected. The producer can, therefore, pass on most of the tax burden to the consumer by increasing the price of the product. As a result, the consumer pays more for the product, while the producer's profits remain relatively unchanged.

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The price of a commodity is determined by the interaction of demand and supply. When there is a high demand for a commodity and the supply is low, the price tends to increase. On the other hand, when the demand is low and the supply is high, the price tends to decrease. The point at which the demand and supply curves intersect is known as the equilibrium price, and this is the price at which the quantity of goods demanded is equal to the quantity of goods supplied. Therefore, it can be said that the price of a commodity is determined by the forces of demand and supply in the market.

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The coefficient of price elasticity of demand measures how responsive the demand for a good or service is to a change in its price. When the coefficient is zero, it means that the quantity demanded does not change at all in response to a change in price. This occurs only when the demand is perfectly inelastic. In other words, the demand for a good or service is said to be perfectly inelastic when its price changes have no effect on the quantity demanded by consumers. This can happen when the good or service is a necessity with no substitutes, and consumers will continue to buy it regardless of its price.

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The marginal propensity to consume is the change in consumption as a percentage of change in income. In other words, it is the proportion of additional income that a person or household spends on consumption. For example, if a household's income increases by $100 and they spend $80 of it on consumption, then their marginal propensity to consume is 0.8 (80/100). This concept is important in macroeconomics because it helps to predict how changes in income will affect overall consumption and, therefore, the level of economic activity in a country.

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The advantage of price control is the ability of the government to regulate the prices of goods and services in order to make them more affordable and prevent exploitation of consumers. However, one disadvantage of price control is the distortion of the price mechanism. This means that prices are no longer determined by market forces, such as supply and demand, but rather by government intervention. This can lead to inefficiencies in the market, such as shortages or surpluses, and can also discourage innovation and competition. Therefore, the answer to the question is "Distortion of price mechanism."

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The factor that does not cause a change in demand is the price of the commodity concerned. This is because the price of a commodity affects the quantity demanded but not the demand itself. Demand refers to the willingness and ability of consumers to buy a certain quantity of a commodity at a given price, while the price of the commodity is one of the determinants of the quantity demanded. When the price of a commodity increases, the quantity demanded decreases, and vice versa, but the demand itself remains unchanged. Therefore, a change in the price of a commodity would cause a movement along the demand curve, while the other factors such as income, taste and fashion, population, and price of other commodities, would cause a shift in the demand curve.

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Subsistence farming means producing food mainly for the need of our immediate and extended family. In subsistence farming, farmers grow crops and rear animals to provide food for their families and immediate community. The farmers produce just enough to feed their families and do not have much left to sell. They may also engage in small-scale trading of their excess produce. The goal of subsistence farming is to provide food for the family and to meet basic needs, not for profit or export.

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The equilibrium position of a firm is attained when the firm's Marginal Cost (MC) is equal to its Marginal Revenue (MR). Marginal Cost is the additional cost of producing one more unit of a good or service, while Marginal Revenue is the additional revenue generated from selling one more unit of a good or service. When the Marginal Cost of producing an additional unit of a good or service is equal to the Marginal Revenue generated from selling that additional unit, the firm is operating at its optimal level of output and has reached its equilibrium position. Therefore, option C, "when MC = MR," is the correct answer.

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International trade and domestic trade share many similarities, such as the exchange of goods and services and the involvement of transportation by land, water, and air. However, the main difference between the two is that international trade involves the exchange of goods and services between different countries that may have different currencies, while domestic trade involves the exchange of goods and services within a country using the same currency. This difference in currency can create unique challenges, such as currency exchange rates and trade restrictions, that do not exist in domestic trade. Additionally, international trade can also lead to increased specialization and consumption as countries focus on producing and exporting goods in which they have a comparative advantage.

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Price control refers to a government policy that sets a maximum or minimum price for certain goods or services in order to regulate the market. The government may choose to set price controls on goods that are considered essential or have a significant impact on the economy or society. This can include goods consumed by low-income earners, certain selected goods, and sometimes even luxury goods. Price controls on goods consumed by low-income earners are intended to make essential goods more affordable and accessible to the most vulnerable members of society. On the other hand, price controls on luxury goods may be used to discourage excessive consumption and reduce income inequality. Price controls can also be set on certain imported capital goods in order to protect domestic industries or to encourage the growth of domestic manufacturing. However, price controls on imported goods can also lead to reduced competition and potentially harm domestic consumers in the long term. Overall, price controls are a tool that governments can use to manage the economy and promote social welfare, but they can also have unintended consequences and drawbacks.

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Rubber, Cocoa, Coffee, and Palm Kernel can be referred to as Nigeria's current export crops. These crops have been major foreign exchange earners for Nigeria in recent years. They are grown in different parts of the country, with cocoa and coffee mainly cultivated in the southern parts of the country, while rubber and palm kernel are predominantly grown in the central and eastern parts of Nigeria. These crops have a ready market in the international market, and their demand and prices have remained relatively stable, making them attractive for farmers and exporters alike. Other crops like groundnuts, beniseed, cotton, shear butter, sorghum, onions, sugarcane, soya beans, rice, and cashew nut are also grown in Nigeria but are not major export crops.

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