WAEC SSCE - Economics - 2008
Ajụjụ 1 Ripọtì
The gap between demand and supply curves above the equilibrium price is
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The gap between the demand and supply curves above the equilibrium price is called "excess supply". In a market, the demand curve shows the quantity of goods or services that buyers are willing to purchase at different prices, while the supply curve shows the quantity of goods or services that sellers are willing to offer at different prices. At the equilibrium price, the quantity demanded equals the quantity supplied. However, if the price is set above the equilibrium price, the quantity supplied exceeds the quantity demanded, resulting in an excess supply or surplus. This indicates that producers are producing more than what consumers are willing to buy at that particular price, and they may need to lower the price to clear the surplus.
Ajụjụ 2 Ripọtì
Revenue is the
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Revenue is the total amount of money a business earns from the sale of its goods or services. It is calculated by multiplying the price of each unit of product by the quantity sold. Therefore, the correct option is: "price of goods multiplied by the quantity sold".
Ajụjụ 3 Ripọtì
Productive resources can also be called
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Productive resources are the resources used in the production of goods and services. They can also be referred to as factors of production. These factors of production include land, labor, capital, and entrepreneurship. Land refers to natural resources, such as forests and minerals, while labor refers to the human effort required in production. Capital refers to man-made resources, such as machines and tools, while entrepreneurship refers to the ability to combine the other three factors of production to produce goods and services. Therefore, the correct option is "factors of production".
Ajụjụ 4 Ripọtì
During a sale by auction, the price at which the goods finally sold is determined mostly by
Ajụjụ 5 Ripọtì
Which of the following is regarded as fixed cost?
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Rent on land is regarded as a fixed cost. A fixed cost is a cost that remains constant in total regardless of the level of production or sales within a certain range of activity. Rent on land is a cost that the business incurs regardless of how much they produce or sell. It is a fixed cost because it does not change based on production or sales levels, but rather on the lease agreement with the landlord.
Ajụjụ 7 Ripọtì
A market situation with a larger number of firms selling closely related but, differentiated products is
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A market situation with a larger number of firms selling closely related but differentiated products is known as monopolistic competition. In this market structure, each firm has some control over its price due to product differentiation, but there is also a degree of competition as there are substitutes available. This market structure is characterized by easy entry and exit, as well as non-price competition such as advertising and product differentiation.
Ajụjụ 8 Ripọtì
Balance of payment surplus implies that the value of the country’s
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A balance of payment surplus occurs when a country's total earnings from exports of goods and services exceed its total expenditure on imports of goods and services. In other words, a country earns more foreign exchange than it spends, resulting in an inflow of foreign currency. This surplus indicates that the country is exporting more than it is importing, which can be seen as a positive sign for the economy as it helps to build up foreign reserves and can lead to an increase in the value of the country's currency.
Ajụjụ 9 Ripọtì
The indicator of the value of money is
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The indicator of the value of money is the general price level. The general price level refers to the average price of goods and services in the economy. It is an important indicator of the purchasing power of money. A high general price level means that money can buy fewer goods and services, while a low general price level means that money can buy more goods and services. Inflation, which is a sustained increase in the general price level, reduces the purchasing power of money over time. Conversely, deflation, which is a sustained decrease in the general price level, increases the purchasing power of money over time.
Ajụjụ 10 Ripọtì
Invisible trade refers to trade in?
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Invisible trade refers to trade in services that cannot be seen or touched. It includes services such as transportation, tourism, banking, insurance, and consulting, among others. These services are often intangible and cannot be physically transported across borders like tangible goods. Invisible trade is an important part of international trade and can contribute significantly to a country's economy. It is sometimes also referred to as "service trade" or "non-merchandise trade."
Ajụjụ 11 Ripọtì
An important feature of economic development is
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An important feature of economic development is a high literacy level. This means that the population is educated and skilled, which leads to a more productive and efficient workforce. With a higher literacy level, people can understand complex issues, have better decision-making skills, and engage in innovation and technological advancement. This can lead to a more diversified economy with higher levels of production and income. Additionally, a high literacy level can lead to better health outcomes, increased political participation, and overall societal progress. Therefore, promoting education and literacy is essential for sustainable economic development. The other options, such as population explosion, reduction in exports, and low exports, are not necessarily features of economic development and can even hinder it.
Ajụjụ 12 Ripọtì
If the co-efficient of elasticity of demand is 1.5, then the demand is
Akọwa Nkọwa
If the coefficient of elasticity of demand is 1.5, it means that for a 1% change in price, the quantity demanded will change by 1.5%. This level of responsiveness is considered elastic. In other words, a small change in price will result in a relatively larger change in quantity demanded. Therefore, the answer is "elastic".
Ajụjụ 13 Ripọtì
Which of the following will have a more destabilizing effect on the economy?
Akọwa Nkọwa
A tax on petrol will have a more destabilizing effect on the economy. When a tax is levied on petrol, it leads to an increase in the price of petrol, which affects the transportation sector and indirectly impacts other sectors of the economy that rely on transportation, such as the agriculture and manufacturing sectors. This, in turn, leads to an increase in the price of goods and services and inflation. Additionally, an increase in the price of petrol reduces the purchasing power of consumers, who may need to allocate a larger share of their income to fuel expenses, resulting in lower consumption and decreased economic activity. Therefore, a tax on petrol has a more destabilizing effect on the economy compared to the other options.
Ajụjụ 14 Ripọtì
industry can be define as
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Industry can be defined as a group of firms or businesses that are involved in the production of similar goods or services. These firms may produce the same or slightly different products, but they all belong to the same industry. For example, the automobile industry comprises of firms that produce cars and trucks, while the textile industry comprises of firms that produce clothing and fabrics. The key point is that they all produce similar products and are involved in the same business.
Ajụjụ 15 Ripọtì
The Central Bank can restrict credit through
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The Central Bank can restrict credit through open market operations. Open market operations refer to the buying and selling of government securities in the open market. When the Central Bank sells government securities, it reduces the amount of money in circulation, making it more expensive to borrow money, which can restrict credit. Conversely, when the Central Bank buys government securities, it increases the amount of money in circulation, making it less expensive to borrow money, which can stimulate credit. Therefore, the Central Bank can restrict credit by selling government securities in the open market, which reduces the amount of money in circulation and makes borrowing more expensive.
Ajụjụ 16 Ripọtì
agriculture plays a dominant role in our country because
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Agriculture plays a dominant role in our country because it employs more than 50% of the total labour force. This means that a significant percentage of the population is engaged in agricultural activities such as farming and livestock rearing. As a result, the sector contributes significantly to the country's Gross Domestic Product (GDP) and serves as a major source of income for many households. Additionally, agriculture provides food for the growing population, raw materials for the agro-allied industries, and serves as a source of foreign exchange through the exportation of cash crops such as cocoa, groundnut, and palm oil.
Ajụjụ 18 Ripọtì
The trade unions in West Africa have achieved the following for the workers except
Akọwa Nkọwa
The trade unions in West Africa have achieved several benefits for workers such as increased wages, better conditions of service, and improved welfare facilities. However, they have not achieved competitive determination of wage rates. This means that the wages and salary structure in West Africa are still mostly influenced by the employers rather than by market forces. Trade unions have been able to negotiate better pay and conditions for their members, but they have not been able to achieve a truly competitive labor market where wages are set by supply and demand.
Ajụjụ 19 Ripọtì
Trades among nations is desirable because
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Trades among nations is desirable because it makes it possible for people in a country to enjoy the goods and services produced in other countries. This can lead to greater variety, lower prices, and higher quality products for consumers. It also encourages specialization and efficiency, as countries can focus on producing the goods and services that they are best at, and trade with other countries for goods and services that they are not as efficient at producing. This can lead to increased productivity and economic growth. Additionally, trade can help build relationships and understanding between countries, as people interact and exchange ideas and cultures through trade.
Ajụjụ 20 Ripọtì
the main objective of specialization is to
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The main objective of specialization is to increase productivity. Specialization involves workers focusing on a specific task or set of tasks, leading to increased efficiency and proficiency in those tasks. By doing this, the production process becomes more streamlined, reducing the time and resources needed to complete a task, and ultimately leading to an increase in overall productivity.
Ajụjụ 21 Ripọtì
The supply of money in the economy includes
Akọwa Nkọwa
The supply of money in the economy includes bank notes, coins and bank deposits. Bank notes and coins are physical currency while bank deposits are virtual money held in bank accounts. The money supply is important in determining the level of economic activity in a country and is controlled by central banks through monetary policy tools.
Ajụjụ 22 Ripọtì
If good P and Q are jointly demanded, an increase in the price of P will likely
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Ajụjụ 23 Ripọtì
Production covers all the following except when
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Production is a process of transforming raw materials or inputs into finished goods or outputs that satisfy human wants. Therefore, production always involves the creation of utility and the transformation of inputs into outputs. The options that refer to the manufacturing of a good or the creation of a commodity both involve production. However, the option that states "a commodity is consumed" does not refer to production, since consumption involves the use of goods or services that have already been produced. Therefore, the correct answer is: "Production covers all the following except when a commodity is consumed."
Ajụjụ 24 Ripọtì
A medium of exchange which is generally acceptable is
Akọwa Nkọwa
A medium of exchange which is generally acceptable is "money". Money is a widely accepted medium of exchange that facilitates transactions between buyers and sellers. It is used to purchase goods and services, pay off debts, and store value. Money can take different forms such as paper currency, coins, or digital currency, and it must be easily recognizable, divisible, durable, and portable. Money serves as a means of payment and a unit of account, enabling the pricing of goods and services in a standardized manner.
Ajụjụ 25 Ripọtì
The theory of diminishing marginal utility states that as more units of a commodity are consumed, the
Akọwa Nkọwa
The theory of diminishing marginal utility states that as more units of a commodity are consumed, the satisfaction or utility derived from an extra unit decreases. This means that the more you consume a particular good or service, the less satisfaction or utility you will derive from consuming an additional unit of that good or service. In other words, the more you have of something, the less valuable it becomes to you. This concept is important in economics as it helps explain consumer behavior and demand for goods and services.
Ajụjụ 26 Ripọtì
Small scale enterprises are important in a country because
Ajụjụ 27 Ripọtì
Public finance is basically an analysis of the
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Public finance is an area of economics that deals with the study of how governments collect revenue and spend money. It involves the analysis of government budgets, taxation policies, and public debt. Therefore, the answer is that public finance is basically an analysis of the income and expenditure of the government.
Ajụjụ 28 Ripọtì
The main characteristics of an ordinary shares are
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The main characteristics of ordinary shares are: maximum risk, variable dividends, and voting rights. Ordinary shares represent ownership in a company, and their value fluctuates depending on the company's performance. Shareholders are entitled to receive a portion of the company's profits in the form of dividends, but the amount of dividends can vary depending on the company's earnings. Ordinary shareholders also have the right to vote on matters such as the election of the board of directors and major company decisions. Since ordinary shares are the most common type of shares issued by companies, they are often referred to as "common shares".
Ajụjụ 29 Ripọtì
The main concern of economists is to
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The main concern of economists is to allocate scarce resources to satisfy human wants. This means that economists are focused on studying how society chooses to use its limited resources to produce goods and services that will satisfy people's needs and wants. They analyze how decisions are made about what to produce, how to produce it, and who gets to consume it. Through this analysis, economists provide insights into how to optimize resource allocation and achieve the greatest level of satisfaction for society as a whole. They do not focus on satisfying all human wants or controlling population growth, but rather on the efficient use of limited resources to improve the well-being of society.
Ajụjụ 30 Ripọtì
The employer's demand curve for labour is represented by the
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The employer's demand curve for labor is represented by the marginal product curve of labor. The marginal product curve shows the additional output that can be produced when one more unit of labor is employed, while holding all other inputs constant. The employer will continue to hire more labor up to the point where the marginal cost of hiring an additional worker (wage) equals the marginal product of labor (the additional output the worker produces). Therefore, the marginal product curve represents the employer's demand for labor.
Ajụjụ 31 Ripọtì
Which of the following determinants of supply cannot be predicted easily?
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The determinant of supply that cannot be predicted easily is national emergencies. This is because national emergencies, such as natural disasters or political crises, can occur unexpectedly and disrupt the supply of goods or services. For example, a flood may destroy crops, leading to a decrease in the supply of food. Since national emergencies are unforeseeable, it is difficult to plan or make predictions about their impact on the supply of a commodity. On the other hand, factors such as the price of the commodity, new techniques of production, and mobility of labor can be predicted to a certain extent and can be accounted for in supply projections.
Ajụjụ 32 Ripọtì
The national income off a country can be estimated through the
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The national income of a country can be estimated through the output approach. This approach involves calculating the total value of goods and services produced by all sectors of the economy within a given period, usually a year. This value is known as Gross Domestic Product (GDP) and is considered a measure of the economic activity and size of a country's economy. The output approach involves calculating the value of all final goods and services produced by different sectors of the economy such as agriculture, manufacturing, and services. By adding up the value of all final goods and services produced, we get an estimate of the total output or GDP of the country.
Ajụjụ 33 Ripọtì
The purely competitive firm should close down when its price is less than its
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In a purely competitive market, firms are price takers, meaning that they have no control over the market price. If a firm's price falls below its average variable cost, it means that the firm is not even able to cover its variable costs, such as labor and materials. In this situation, the firm is better off shutting down and minimizing its losses rather than continuing to operate at a loss. Therefore, the purely competitive firm should close down when its price is less than its average variable cost. This is because continuing to produce and sell at such a price would result in a greater loss than shutting down.
Ajụjụ 34 Ripọtì
The transformation curve slopes indicate that
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The slope of the transformation curve indicates the opportunity cost of producing one commodity in terms of the other. Opportunity cost refers to the cost of forgoing the next best alternative. In this case, it refers to the cost of producing one commodity instead of the other. The slope of the curve represents the rate at which one commodity can be exchanged for the other. Therefore, the steeper the slope, the higher the opportunity cost of producing one commodity in terms of the other. Conversely, the flatter the slope, the lower the opportunity cost of producing one commodity in terms of the other.
Ajụjụ 35 Ripọtì
A major function of the price mechanism is that it determines the
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The price mechanism plays a major role in determining the allocation of resources in a market economy. It is the mechanism by which prices of goods and services are determined through the interaction of supply and demand. When there is a scarcity of a particular good or service, the price will increase, signaling to suppliers that they should produce more to meet the demand. On the other hand, if there is an oversupply of a particular good or service, the price will decrease, signaling to suppliers that they should reduce production. This process helps to ensure that resources are allocated efficiently and effectively to meet the needs and wants of consumers. Therefore, the correct answer is "allocation of resources".
Ajụjụ 36 Ripọtì
Which of the following factors does not cause a change in demand
Akọwa Nkọwa
The factor that does not cause a change in demand is the price of the commodity itself. The price of a commodity affects the quantity demanded, but not the demand itself. Other factors such as taste and fashion, vagaries of weather, and price of other commodities can affect the demand for a particular product or service.
Ajụjụ 37 Ripọtì
The Economic Commission for Africa is an agency of the
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The Economic Commission for Africa (ECA) is an agency of the United Nations (UN). It was established by the UN in 1958 as one of the regional commissions to promote economic and social development in Africa. The ECA's mandate is to promote the economic and social development of its member states, foster intra-regional integration, and promote international cooperation for Africa's development. Its headquarters is located in Addis Ababa, Ethiopia.
Ajụjụ 38 Ripọtì
which of the following does not affect a country's population?
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Unemployment does not directly affect a country's population. Birth rate, death rate, and emigration all directly affect the number of people in a country, while unemployment relates to the availability of jobs and the economy.
Ajụjụ 39 Ripọtì
Data presented in tables are usually arranged in
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Data presented in tables are usually arranged in rows and columns. Tables are a common way of presenting data in an organized and systematic manner, allowing for easy comparison and analysis of data. The data is arranged in rows, which are horizontal, and columns, which are vertical. Each row typically represents a single observation, while each column represents a particular variable or category. This format makes it easy to read and interpret large amounts of data quickly and efficiently.
Ajụjụ 40 Ripọtì
A continuous fall in the general price level is called
Akọwa Nkọwa
A continuous fall in the general price level is called deflation. Deflation is the opposite of inflation, which is the continuous rise in the general price level. Deflation can be caused by a decrease in the money supply, a decrease in government spending, or an increase in productivity. Deflation can have negative effects on the economy, such as a decrease in consumer spending and an increase in debt burdens. However, it can also have positive effects, such as an increase in the purchasing power of consumers and a decrease in the cost of borrowing.
Ajụjụ 41 Ripọtì
All indirect taxes tend to be
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Indirect taxes tend to be regressive. This means that as income increases, the proportion of income paid in taxes decreases. Indirect taxes are usually levied on goods and services, such as sales tax or value-added tax (VAT), which are included in the price of the goods or services. As a result, everyone pays the same tax on the same goods or services, regardless of their income level. This tends to affect lower-income individuals more as they spend a larger proportion of their income on these goods and services compared to higher-income individuals. As a result, indirect taxes are considered to be regressive.
Ajụjụ 42 Ripọtì
Creation of money by commercial bank is done by
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Commercial banks can create money by lending to borrowers. When a bank receives a deposit from a customer, it is required to hold only a fraction of that deposit as cash reserves, known as the reserve ratio. The remaining portion can be lent out to borrowers as loans. When a loan is made, the bank credits the borrower's account with the loan amount, creating new money in the process. This new money is then spent or deposited in other banks, and the process can repeat, further increasing the money supply in the economy. Therefore, the act of lending to borrowers is how commercial banks create money.
Ajụjụ 43 Ripọtì
In the long run all factors of production are
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In the long run, all factors of production are considered to be variable. This means that all inputs used in the production process can be adjusted or changed to meet the needs of the business. This is in contrast to the short run where at least one input is considered fixed, usually capital or land. In the long run, a business can change the amount of labor, capital, and land that it uses to produce its goods or services, and can even change its production process altogether. Therefore, the long run is a period of time during which a business can make all necessary adjustments to its inputs and production process, and all factors of production are variable.
Ajụjụ 44 Ripọtì
A business outfit is said to be a public limited company when it
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A business outfit is said to be a public limited company when it sells its shares to members of the public. In a public limited company, shares of the company can be bought and sold by members of the public through a stock exchange. The company is owned by shareholders who have limited liability and are not personally responsible for the company's debts. Public limited companies are regulated by the government to protect investors and ensure that the company operates fairly and transparently.
Ajụjụ 45 Ripọtì
Since money is demanded for what it can buy, the demand is said to be
Akọwa Nkọwa
The statement "since money is demanded for what it can buy" implies that the demand for money is derived from the demand for goods and services. Therefore, the answer is "derived". In other words, people demand money in order to buy goods and services, and the demand for money is a result of the demand for these goods and services.
Ajụjụ 46 Ripọtì
equilibrium under perfect competition requires that
Akọwa Nkọwa
Equilibrium under perfect competition requires that MR (Marginal Revenue) = MC (Marginal Cost) = AR (Average Revenue) = AC (Average Cost). In simpler terms, a firm operating in a perfectly competitive market will produce where the price (which equals AR) is equal to the marginal cost of producing the last unit (MC). At this point, the firm will be maximizing its profit. If the price is higher or lower than this point, the firm will not be maximizing its profit.
Ajụjụ 48 Ripọtì
Outline any five effects of high dependency ratio [20 marks]
The dependency ratio is the ratio of the dependent population (those below the working age, usually under 15, and those above it, usually over 64) to the working population (aged 15 to 64). A high dependency ratio means each worker supports many non-workers. Its effects include:
- Low savings and investment: most income is spent on maintaining dependants, leaving little to save, so funds available for investment and growth are reduced.
- Low standard of living: a worker's income is shared among many dependants, so income per head is small and living standards fall.
- Heavy burden on the working population: workers bear high responsibility for feeding, clothing, housing, educating and caring for dependants, which can lower their morale and welfare.
- Pressure on social services: demand for schools, hospitals, housing and other amenities rises faster than they can be provided, leading to congestion and poor services.
- Increased government expenditure on welfare: government must spend more on education, health and social security for dependants, straining public finances.
- Reduced capital formation and slow economic growth: because savings and investment are low, the economy grows slowly. (Also acceptable: encourages child labour and can worsen unemployment.)
Any five, well explained, complete the answer.
Akọwa Nkọwa
The dependency ratio is the ratio of the dependent population (those below the working age, usually under 15, and those above it, usually over 64) to the working population (aged 15 to 64). A high dependency ratio means each worker supports many non-workers. Its effects include:
- Low savings and investment: most income is spent on maintaining dependants, leaving little to save, so funds available for investment and growth are reduced.
- Low standard of living: a worker's income is shared among many dependants, so income per head is small and living standards fall.
- Heavy burden on the working population: workers bear high responsibility for feeding, clothing, housing, educating and caring for dependants, which can lower their morale and welfare.
- Pressure on social services: demand for schools, hospitals, housing and other amenities rises faster than they can be provided, leading to congestion and poor services.
- Increased government expenditure on welfare: government must spend more on education, health and social security for dependants, straining public finances.
- Reduced capital formation and slow economic growth: because savings and investment are low, the economy grows slowly. (Also acceptable: encourages child labour and can worsen unemployment.)
Any five, well explained, complete the answer.
Ajụjụ 49 Ripọtì
The demand function for a commodity is given as \(Qd = 21 - 3p\).
(a) Use the demand function to complete the table below. [6 marks]
| Price $ | 0 | 1 | 3 | 4 | 5 | 6 |
| Quantity demanded (Kg) |
(b) Draw the demand curve for the completed schedule in 1(a) (Use of graph sheet is essential) [8 marks]
(c) Outline any three factors affecting demand [6 marks]
(a) Demand schedule
Given \(Q_d = 21 - 3P\):
| Price, \(P\) ($) | 0 | 1 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Quantity demanded, \(Q_d\) (kg) | 21 | 18 | 12 | 9 | 6 | 3 |
For example:
- When \(P=0\), \(Q_d=21-3(0)=21\) kg.
- When \(P=3\), \(Q_d=21-3(3)=12\) kg.
- When \(P=6\), \(Q_d=21-3(6)=3\) kg.
(b) Demand curve
Plot quantity demanded on the horizontal axis and price on the vertical axis. Plot the points \((21,0)\), \((18,1)\), \((12,3)\), \((9,4)\), \((6,5)\), and \((3,6)\), and join them with a straight line labelled \(DD\).
The downward-sloping curve shows the inverse relationship between price and quantity demanded.
(c) Three factors affecting demand
- Income of consumers: An increase in income raises demand for normal goods, while it may reduce demand for inferior goods.
- Prices of related goods: A rise in the price of a substitute increases demand for the commodity, whereas a rise in the price of a complement reduces its demand.
- Tastes, fashion and advertisement: Favourable changes in consumers' tastes or effective advertisement increase demand, while unfavourable changes reduce it.
Akọwa Nkọwa
(a) Demand schedule
Given \(Q_d = 21 - 3P\):
| Price, \(P\) ($) | 0 | 1 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Quantity demanded, \(Q_d\) (kg) | 21 | 18 | 12 | 9 | 6 | 3 |
For example:
- When \(P=0\), \(Q_d=21-3(0)=21\) kg.
- When \(P=3\), \(Q_d=21-3(3)=12\) kg.
- When \(P=6\), \(Q_d=21-3(6)=3\) kg.
(b) Demand curve
Plot quantity demanded on the horizontal axis and price on the vertical axis. Plot the points \((21,0)\), \((18,1)\), \((12,3)\), \((9,4)\), \((6,5)\), and \((3,6)\), and join them with a straight line labelled \(DD\).
The downward-sloping curve shows the inverse relationship between price and quantity demanded.
(c) Three factors affecting demand
- Income of consumers: An increase in income raises demand for normal goods, while it may reduce demand for inferior goods.
- Prices of related goods: A rise in the price of a substitute increases demand for the commodity, whereas a rise in the price of a complement reduces its demand.
- Tastes, fashion and advertisement: Favourable changes in consumers' tastes or effective advertisement increase demand, while unfavourable changes reduce it.
Ajụjụ 50 Ripọtì
(a) What is a market? [4 marks]
(b) Explain the main features of a perfectly competitive market. [16 marks]
(a) A market is any arrangement, place or situation that brings buyers and sellers of a good or service into contact so that they can carry out transactions and determine a price. It need not be a physical location; contact by telephone or the internet also forms a market.
(b) Main features of a perfectly competitive market:
- Very many buyers and sellers: each buyer and seller is so small relative to the whole market that no one of them can influence the price; every firm is a price taker.
- Homogeneous product: all firms sell an identical (uniform) product, so buyers have no reason to prefer one seller to another.
- Freedom of entry and exit: there are no barriers, so firms can enter the industry when profits are high and leave when they make losses.
- Perfect knowledge: buyers and sellers have full information about prices and market conditions, so the same price rules throughout the market.
- Perfect mobility of factors of production: resources can move freely from one use or place to another.
- No transport costs and no government interference, so a single uniform price prevails.
Because of these conditions, a single ruling price is established and each firm faces a perfectly elastic (horizontal) demand curve.
Akọwa Nkọwa
(a) A market is any arrangement, place or situation that brings buyers and sellers of a good or service into contact so that they can carry out transactions and determine a price. It need not be a physical location; contact by telephone or the internet also forms a market.
(b) Main features of a perfectly competitive market:
- Very many buyers and sellers: each buyer and seller is so small relative to the whole market that no one of them can influence the price; every firm is a price taker.
- Homogeneous product: all firms sell an identical (uniform) product, so buyers have no reason to prefer one seller to another.
- Freedom of entry and exit: there are no barriers, so firms can enter the industry when profits are high and leave when they make losses.
- Perfect knowledge: buyers and sellers have full information about prices and market conditions, so the same price rules throughout the market.
- Perfect mobility of factors of production: resources can move freely from one use or place to another.
- No transport costs and no government interference, so a single uniform price prevails.
Because of these conditions, a single ruling price is established and each firm faces a perfectly elastic (horizontal) demand curve.
Ajụjụ 51 Ripọtì
(a) What is public recurrent expenditure? [5 marks]
(b) Give five reasons for the rapid increase in government expenditure in your country. [15 marks]
(a) Public recurrent expenditure. This is government spending on the day-to-day running of the state that recurs regularly and does not create a lasting physical asset. It covers items such as salaries and wages of civil servants, interest on public debt, maintenance of existing facilities, subsidies and general administration. It is contrasted with capital expenditure, which builds durable assets like roads, schools and hospitals.
(b) Reasons for the rapid increase in government expenditure in Nigeria.
- Rapid population growth: a larger and fast-growing population demands more schools, hospitals, water and other public services, raising spending.
- Provision of infrastructure: heavy outlays on roads, electricity, railways and ports needed for development enlarge the budget.
- Rising cost of administration: creation of new states, ministries and local governments, plus higher salaries and pensions, increases recurrent spending.
- Inflation: a general rise in prices means the government pays more for the same goods, services and projects.
- Debt servicing: interest and principal repayments on growing internal and external debts consume an increasing share of the budget.
- Defence and internal security: spending on the armed forces and police to maintain law and order has risen sharply.
- Social and welfare services: expansion of education, health, subsidies and poverty-relief programmes adds to expenditure.
Examination reminder: the question asks for five reasons, so state five clearly and explain each with a short sentence rather than merely listing.
Akọwa Nkọwa
(a) Public recurrent expenditure. This is government spending on the day-to-day running of the state that recurs regularly and does not create a lasting physical asset. It covers items such as salaries and wages of civil servants, interest on public debt, maintenance of existing facilities, subsidies and general administration. It is contrasted with capital expenditure, which builds durable assets like roads, schools and hospitals.
(b) Reasons for the rapid increase in government expenditure in Nigeria.
- Rapid population growth: a larger and fast-growing population demands more schools, hospitals, water and other public services, raising spending.
- Provision of infrastructure: heavy outlays on roads, electricity, railways and ports needed for development enlarge the budget.
- Rising cost of administration: creation of new states, ministries and local governments, plus higher salaries and pensions, increases recurrent spending.
- Inflation: a general rise in prices means the government pays more for the same goods, services and projects.
- Debt servicing: interest and principal repayments on growing internal and external debts consume an increasing share of the budget.
- Defence and internal security: spending on the armed forces and police to maintain law and order has risen sharply.
- Social and welfare services: expansion of education, health, subsidies and poverty-relief programmes adds to expenditure.
Examination reminder: the question asks for five reasons, so state five clearly and explain each with a short sentence rather than merely listing.
Ajụjụ 52 Ripọtì
(a) What is supply? [5 marks]
(b) Describe any five determinants of supply. [15marks]
(a) Supply is the quantity of a good or service that producers are willing and able to offer for sale at a given price over a given period of time. It is not the total stock in existence but the amount actually put on the market at each price; according to the law of supply, more is supplied at a higher price and less at a lower price, other things being equal.
(b) Five determinants of supply:
- Price of the commodity: a higher price makes production more profitable, so producers supply more; a lower price reduces the quantity supplied.
- Cost of production: a rise in the cost of inputs (wages, raw materials, fuel) reduces profit and lowers supply, while a fall in costs raises supply.
- State of technology: improved technology raises productivity and lowers unit cost, enabling producers to supply more.
- Prices of other (related) goods: if the price of an alternative product a firm could make rises, resources shift to it, reducing the supply of the original good.
- Government policy: taxes on production reduce supply, while subsidies to producers increase supply.
(Other acceptable determinants: natural factors such as weather for agricultural goods, the number of producers in the market, and producers' expectations of future prices.)
Akọwa Nkọwa
(a) Supply is the quantity of a good or service that producers are willing and able to offer for sale at a given price over a given period of time. It is not the total stock in existence but the amount actually put on the market at each price; according to the law of supply, more is supplied at a higher price and less at a lower price, other things being equal.
(b) Five determinants of supply:
- Price of the commodity: a higher price makes production more profitable, so producers supply more; a lower price reduces the quantity supplied.
- Cost of production: a rise in the cost of inputs (wages, raw materials, fuel) reduces profit and lowers supply, while a fall in costs raises supply.
- State of technology: improved technology raises productivity and lowers unit cost, enabling producers to supply more.
- Prices of other (related) goods: if the price of an alternative product a firm could make rises, resources shift to it, reducing the supply of the original good.
- Government policy: taxes on production reduce supply, while subsidies to producers increase supply.
(Other acceptable determinants: natural factors such as weather for agricultural goods, the number of producers in the market, and producers' expectations of future prices.)
Ajụjụ 53 Ripọtì
(a) Define the profit of a firm [4 marks]
(b) With appropriate formula, explain the following revenue and cost concepts:
(i) total revenue (TR); [4 marks]
(ii) average revenue (AR): [4 marks]
(iii) marginal revenue (MR); [4 marks]
(iv) average fixed cost (AFC). [4 marks]
(a) Profit of a firm. Profit is the financial surplus a firm earns when its total revenue from selling output exceeds its total cost of production over a given period. In symbols, \( \text{Profit} = TR - TC \). Economists distinguish accounting profit (revenue minus explicit money costs) from economic (normal and supernormal) profit, where cost also includes the opportunity cost of the entrepreneur's own resources. Profit rewards the entrepreneur for risk-bearing and organisation.
(b) Revenue and cost concepts.
(i) Total Revenue (TR): the total money a firm receives from selling a given quantity of output. \( TR = P \times Q \), where \( P \) is price per unit and \( Q \) is quantity sold. If 100 units sell at \( \text{N}5 \) each, \( TR = 100 \times 5 = \text{N}500 \).
(ii) Average Revenue (AR): revenue earned per unit of output sold. \( AR = \dfrac{TR}{Q} = P \). AR equals the price, so the AR curve is the firm's demand curve.
(iii) Marginal Revenue (MR): the addition to total revenue from selling one extra unit of output. \( MR = \dfrac{\Delta TR}{\Delta Q} \). Under perfect competition \( MR = AR = P \); under imperfect competition \( MR < AR \).
(iv) Average Fixed Cost (AFC): fixed cost per unit of output. \( AFC = \dfrac{TFC}{Q} \), where \( TFC \) is total fixed cost. Because \( TFC \) is constant, AFC falls continuously as output rises (the fixed cost is spread over more units), so the AFC curve slopes downward throughout.
Examination reminder: always attach the correct formula to each concept and note that profit is maximised where \( MR = MC \), not where TR is simply large.
Akọwa Nkọwa
(a) Profit of a firm. Profit is the financial surplus a firm earns when its total revenue from selling output exceeds its total cost of production over a given period. In symbols, \( \text{Profit} = TR - TC \). Economists distinguish accounting profit (revenue minus explicit money costs) from economic (normal and supernormal) profit, where cost also includes the opportunity cost of the entrepreneur's own resources. Profit rewards the entrepreneur for risk-bearing and organisation.
(b) Revenue and cost concepts.
(i) Total Revenue (TR): the total money a firm receives from selling a given quantity of output. \( TR = P \times Q \), where \( P \) is price per unit and \( Q \) is quantity sold. If 100 units sell at \( \text{N}5 \) each, \( TR = 100 \times 5 = \text{N}500 \).
(ii) Average Revenue (AR): revenue earned per unit of output sold. \( AR = \dfrac{TR}{Q} = P \). AR equals the price, so the AR curve is the firm's demand curve.
(iii) Marginal Revenue (MR): the addition to total revenue from selling one extra unit of output. \( MR = \dfrac{\Delta TR}{\Delta Q} \). Under perfect competition \( MR = AR = P \); under imperfect competition \( MR < AR \).
(iv) Average Fixed Cost (AFC): fixed cost per unit of output. \( AFC = \dfrac{TFC}{Q} \), where \( TFC \) is total fixed cost. Because \( TFC \) is constant, AFC falls continuously as output rises (the fixed cost is spread over more units), so the AFC curve slopes downward throughout.
Examination reminder: always attach the correct formula to each concept and note that profit is maximised where \( MR = MC \), not where TR is simply large.
Ajụjụ 54 Ripọtì
The table below shows the budgetary allocation of a country to selected sectors of the economy in a particular year. Study the table carefully and answer the questions that follow.
| Sectors | Amount ( $ Million) |
| Education | 6,250 |
| Mining | 2,150 |
| Agriculture | 4,300 |
| Communication | 2,400 |
| Health | 2,900 |
(a) Present the above information contained in the table in the form of a pie chart. (Show your workings clearly). [12 marks]
(b) Distinguish between a budget surplus and a budget deficit. [8 marks]
(a) Pie chart of the budgetary allocation
First, calculate the total allocation:
\[\$6,250+\$2,150+\$4,300+\$2,400+\$2,900=\$18,000\text{ million}\]
The angle for each sector is calculated as:
\[\text{Sector angle}=\frac{\text{Sector allocation}}{\text{Total allocation}}\times360^\circ\]
| Sector | Allocation ($ million) | Working | Angle |
|---|---|---|---|
| Education | 6,250 | \(\frac{6,250}{18,000}\times360^\circ\) | 125° |
| Mining | 2,150 | \(\frac{2,150}{18,000}\times360^\circ\) | 43° |
| Agriculture | 4,300 | \(\frac{4,300}{18,000}\times360^\circ\) | 86° |
| Communication | 2,400 | \(\frac{2,400}{18,000}\times360^\circ\) | 48° |
| Health | 2,900 | \(\frac{2,900}{18,000}\times360^\circ\) | 58° |
| Total | 18,000 | 360° |
Using the calculated angles, the pie chart is:
(b) A budget surplus occurs when the government’s planned revenue is greater than its planned expenditure. A budget deficit occurs when the government’s planned expenditure is greater than its planned revenue.
Akọwa Nkọwa
(a) Pie chart of the budgetary allocation
First, calculate the total allocation:
\[\$6,250+\$2,150+\$4,300+\$2,400+\$2,900=\$18,000\text{ million}\]
The angle for each sector is calculated as:
\[\text{Sector angle}=\frac{\text{Sector allocation}}{\text{Total allocation}}\times360^\circ\]
| Sector | Allocation ($ million) | Working | Angle |
|---|---|---|---|
| Education | 6,250 | \(\frac{6,250}{18,000}\times360^\circ\) | 125° |
| Mining | 2,150 | \(\frac{2,150}{18,000}\times360^\circ\) | 43° |
| Agriculture | 4,300 | \(\frac{4,300}{18,000}\times360^\circ\) | 86° |
| Communication | 2,400 | \(\frac{2,400}{18,000}\times360^\circ\) | 48° |
| Health | 2,900 | \(\frac{2,900}{18,000}\times360^\circ\) | 58° |
| Total | 18,000 | 360° |
Using the calculated angles, the pie chart is:
(b) A budget surplus occurs when the government’s planned revenue is greater than its planned expenditure. A budget deficit occurs when the government’s planned expenditure is greater than its planned revenue.
Ajụjụ 55 Ripọtì
(a) Distinguish between a cheque and a bank note [8 marks]
(b) What are the main problems of trade by barter? [12 marks]
(a) Cheque compared with a bank note.
| Feature | Cheque | Bank note |
|---|---|---|
| Nature | A written order instructing a bank to pay a stated sum from the drawer's account | Printed paper currency issued by the Central Bank |
| Legal tender | Not legal tender; a payee may lawfully refuse it | Legal tender that must be accepted in settlement of debt |
| Issuer | Drawn by an account holder on a commercial bank | Issued solely by the Central Bank |
| General acceptability | Limited; may bounce if the account lacks funds | Generally and readily acceptable |
| Denomination | Written for any exact amount | Comes in fixed denominations |
(b) Main problems of trade by barter. Barter is the direct exchange of goods for goods without money. Its problems are:
- Double coincidence of wants: each trader must find someone who has what he wants and also wants what he has, which is difficult and time-wasting.
- Lack of a common measure of value: there is no single unit for pricing, so it is hard to state how much of one good exchanges for another.
- Indivisibility of some goods: items such as a cow or a house cannot be split to buy small-value goods without destroying their value.
- Difficulty in storing value (wealth): many goods (foodstuffs, livestock) are perishable, so wealth cannot easily be saved for the future.
- Problem of deferred (future) payments: contracts, loans and credit are hard to arrange because there is no stable standard for repayment.
- Lack of portability: moving bulky goods over distances to exchange them is costly and inconvenient.
Examination reminder: present the barter problems as the mirror-image of the functions of money, since money was invented to solve exactly these difficulties.
Akọwa Nkọwa
(a) Cheque compared with a bank note.
| Feature | Cheque | Bank note |
|---|---|---|
| Nature | A written order instructing a bank to pay a stated sum from the drawer's account | Printed paper currency issued by the Central Bank |
| Legal tender | Not legal tender; a payee may lawfully refuse it | Legal tender that must be accepted in settlement of debt |
| Issuer | Drawn by an account holder on a commercial bank | Issued solely by the Central Bank |
| General acceptability | Limited; may bounce if the account lacks funds | Generally and readily acceptable |
| Denomination | Written for any exact amount | Comes in fixed denominations |
(b) Main problems of trade by barter. Barter is the direct exchange of goods for goods without money. Its problems are:
- Double coincidence of wants: each trader must find someone who has what he wants and also wants what he has, which is difficult and time-wasting.
- Lack of a common measure of value: there is no single unit for pricing, so it is hard to state how much of one good exchanges for another.
- Indivisibility of some goods: items such as a cow or a house cannot be split to buy small-value goods without destroying their value.
- Difficulty in storing value (wealth): many goods (foodstuffs, livestock) are perishable, so wealth cannot easily be saved for the future.
- Problem of deferred (future) payments: contracts, loans and credit are hard to arrange because there is no stable standard for repayment.
- Lack of portability: moving bulky goods over distances to exchange them is costly and inconvenient.
Examination reminder: present the barter problems as the mirror-image of the functions of money, since money was invented to solve exactly these difficulties.
Ajụjụ 56 Ripọtì
Give four reasons why the governments of West African countries have found the policy of privatization attractive. [20 marks]
Privatization is the transfer of ownership and control of government-owned enterprises to private individuals or companies. Governments of West African countries have found it attractive for the following reasons:
- To reduce the financial burden on government: many public enterprises run at a loss and depend on subsidies; selling them stops this drain and even raises revenue from the sale.
- To improve efficiency and productivity: private owners are profit-motivated and are expected to manage the enterprises more efficiently, reduce waste and raise the quality of goods and services.
- To raise revenue for the government: the proceeds from selling the enterprises provide funds that can be used to finance other development projects or reduce debt.
- To encourage private investment and widen ownership: privatization attracts local and foreign investors and, through the sale of shares, spreads ownership of wealth among more citizens.
(Other acceptable reasons: to reduce political interference and corruption in the management of enterprises, and to deepen the capital market by increasing the number of quoted companies.)
Akọwa Nkọwa
Privatization is the transfer of ownership and control of government-owned enterprises to private individuals or companies. Governments of West African countries have found it attractive for the following reasons:
- To reduce the financial burden on government: many public enterprises run at a loss and depend on subsidies; selling them stops this drain and even raises revenue from the sale.
- To improve efficiency and productivity: private owners are profit-motivated and are expected to manage the enterprises more efficiently, reduce waste and raise the quality of goods and services.
- To raise revenue for the government: the proceeds from selling the enterprises provide funds that can be used to finance other development projects or reduce debt.
- To encourage private investment and widen ownership: privatization attracts local and foreign investors and, through the sale of shares, spreads ownership of wealth among more citizens.
(Other acceptable reasons: to reduce political interference and corruption in the management of enterprises, and to deepen the capital market by increasing the number of quoted companies.)
Ajụjụ 57 Ripọtì
(a) Define the term limited liability [4 marks]
(b) Explain any four problems of statutory public corporations in your country [16 marks]
(a) Limited liability means that the liability (financial responsibility) of an owner for the debts of a business is limited to the amount he has invested or agreed to contribute. If the business fails, the owner can lose only his investment; his personal property cannot be seized to settle the business's debts.
(b) Four problems of statutory public corporations:
- Inefficiency and mismanagement: because they are government owned and not driven by profit, many corporations are poorly managed, wasteful and produce low-quality services.
- Political interference: appointments and decisions are often influenced by politicians rather than by ability and sound business judgement, which lowers efficiency.
- Financial losses and dependence on subsidies: many corporations run at a loss and depend on government subsidies, becoming a drain on public funds.
- Corruption: weak accountability encourages fraud, embezzlement and misuse of the corporation's resources by officials.
(Other acceptable problems: bureaucratic red tape and slow decision-making, and the tendency toward monopoly, which removes the pressure to be efficient.)
Akọwa Nkọwa
(a) Limited liability means that the liability (financial responsibility) of an owner for the debts of a business is limited to the amount he has invested or agreed to contribute. If the business fails, the owner can lose only his investment; his personal property cannot be seized to settle the business's debts.
(b) Four problems of statutory public corporations:
- Inefficiency and mismanagement: because they are government owned and not driven by profit, many corporations are poorly managed, wasteful and produce low-quality services.
- Political interference: appointments and decisions are often influenced by politicians rather than by ability and sound business judgement, which lowers efficiency.
- Financial losses and dependence on subsidies: many corporations run at a loss and depend on government subsidies, becoming a drain on public funds.
- Corruption: weak accountability encourages fraud, embezzlement and misuse of the corporation's resources by officials.
(Other acceptable problems: bureaucratic red tape and slow decision-making, and the tendency toward monopoly, which removes the pressure to be efficient.)
Ajụjụ 58 Ripọtì
(a) Explain the term internal economies of scale. [4 marks]
(b) Outline any four economies of scale a firm enjoys as it grows in size. [16marks]
(a) Internal economies of scale are the cost advantages that a single firm enjoys as it expands its own scale of production, causing its average (unit) cost of production to fall. They arise from within the firm itself, not from the growth of the whole industry.
(b) Four economies of scale enjoyed as the firm grows:
- Technical economies: a large firm can install big, specialised and more efficient machines and use methods (such as mass production) that spread fixed costs over more units, lowering cost per unit.
- Managerial economies: a large firm can employ specialist managers for separate departments (production, finance, marketing), so it is more efficiently run and management costs per unit fall.
- Marketing (commercial) economies: by buying raw materials in bulk it obtains discounts, and it spreads advertising and selling costs over a large output, reducing cost per unit.
- Financial economies: a large, well-known firm can raise capital more easily and at lower interest rates than a small firm, because lenders regard it as more secure.
(Other acceptable types: risk-bearing economies through diversifying products and markets, and research economies from funding its own research and development.)
Akọwa Nkọwa
(a) Internal economies of scale are the cost advantages that a single firm enjoys as it expands its own scale of production, causing its average (unit) cost of production to fall. They arise from within the firm itself, not from the growth of the whole industry.
(b) Four economies of scale enjoyed as the firm grows:
- Technical economies: a large firm can install big, specialised and more efficient machines and use methods (such as mass production) that spread fixed costs over more units, lowering cost per unit.
- Managerial economies: a large firm can employ specialist managers for separate departments (production, finance, marketing), so it is more efficiently run and management costs per unit fall.
- Marketing (commercial) economies: by buying raw materials in bulk it obtains discounts, and it spreads advertising and selling costs over a large output, reducing cost per unit.
- Financial economies: a large, well-known firm can raise capital more easily and at lower interest rates than a small firm, because lenders regard it as more secure.
(Other acceptable types: risk-bearing economies through diversifying products and markets, and research economies from funding its own research and development.)
Ajụjụ 59 Ripọtì
Explain the following systems of agriculture as practiced in your country:
(a) subsistence farming; [4 marks]
(b) co-operative agriculture; [4 marks]
(c) plantation agriculture; [4 marks]
(d) mechanized agriculture; [4 marks]
(e) peasant farming. [4 marks]
These are the main systems under which agriculture is organised in Nigeria.
(a) Subsistence farming: production of crops and livestock mainly to feed the farmer and the household, with little or no surplus for sale. It uses simple tools (hoe, cutlass), small plots and family labour, so output and productivity are low.
(b) Co-operative agriculture: a system in which farmers voluntarily pool their resources (land, capital, labour, and inputs) and work together as a registered co-operative society. They share tools, obtain credit and improved seeds jointly, market produce together and share the proceeds, which raises their bargaining power and reduces costs.
(c) Plantation agriculture: large-scale cultivation of a single cash crop (for example oil palm, rubber, cocoa or sugar cane) on a very large estate, using heavy capital, hired labour and modern management, mainly for export or industrial processing.
(d) Mechanized agriculture: farming that relies on machines and modern equipment such as tractors, harvesters, planters and irrigation pumps rather than human or animal power. It permits large hectarage, higher output per worker and timely operations, but requires much capital.
(e) Peasant farming: small-scale farming carried out by individual local farmers on scattered small holdings, using traditional methods, family labour and simple implements, producing mainly for the family with a small surplus sold in local markets.
Examination reminder: keep subsistence, peasant and mechanized distinct: subsistence stresses the purpose (self-consumption), peasant stresses the scale and holder (small individual farmer), and mechanized stresses the method (use of machines).
Akọwa Nkọwa
These are the main systems under which agriculture is organised in Nigeria.
(a) Subsistence farming: production of crops and livestock mainly to feed the farmer and the household, with little or no surplus for sale. It uses simple tools (hoe, cutlass), small plots and family labour, so output and productivity are low.
(b) Co-operative agriculture: a system in which farmers voluntarily pool their resources (land, capital, labour, and inputs) and work together as a registered co-operative society. They share tools, obtain credit and improved seeds jointly, market produce together and share the proceeds, which raises their bargaining power and reduces costs.
(c) Plantation agriculture: large-scale cultivation of a single cash crop (for example oil palm, rubber, cocoa or sugar cane) on a very large estate, using heavy capital, hired labour and modern management, mainly for export or industrial processing.
(d) Mechanized agriculture: farming that relies on machines and modern equipment such as tractors, harvesters, planters and irrigation pumps rather than human or animal power. It permits large hectarage, higher output per worker and timely operations, but requires much capital.
(e) Peasant farming: small-scale farming carried out by individual local farmers on scattered small holdings, using traditional methods, family labour and simple implements, producing mainly for the family with a small surplus sold in local markets.
Examination reminder: keep subsistence, peasant and mechanized distinct: subsistence stresses the purpose (self-consumption), peasant stresses the scale and holder (small individual farmer), and mechanized stresses the method (use of machines).
