WAEC SSCE - Economics - 1996

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Demand-pull inflation occurs when there is excessive demand for goods and services in an economy, resulting in increased prices. This is usually caused by a combination of factors, such as increased government spending, increased consumer confidence, low interest rates, or an increase in exports. As demand for goods and services increases, suppliers may increase prices in response to the higher demand, leading to inflation. This can also be caused by a shortage of goods and services, leading to competition among buyers, driving up prices.

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The co-efficient of elasticity of supply measures the responsiveness of quantity supplied of a commodity to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. Using the given values, the percentage change in price is: ((4 - 2)/2) x 100% = 100% The percentage change in quantity supplied is: ((125 - 100)/100) x 100% = 25% Therefore, the co-efficient of elasticity of supply is: 25% ÷ 100% = 0.25 So, the correct answer is 0.25.

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In production, factory buildings are regarded as fixed costs. Fixed costs are expenses that do not change regardless of the level of production. This means that even if the level of production increases or decreases, the fixed costs will remain the same. Examples of fixed costs include rent, salaries, property taxes, and depreciation of assets such as factory buildings. Therefore, the cost of the factory building remains the same whether the factory produces a large or small number of goods.

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Subsistence agriculture refers to farming practices that are carried out primarily to produce food for the farmer's own consumption and that of their family, rather than for sale in markets or for export. In other words, it is farming for household consumption. The goal is to produce enough food to sustain the farmer and their family, with little or no surplus to sell. This type of farming is often found in rural areas of developing countries where farmers have limited resources and rely on traditional and labor-intensive methods to grow crops and raise livestock.

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The international cartel formed to stabilize the world oil market is the Organization of Petroleum Exporting Countries (OPEC). OPEC is a group of 13 oil-producing nations that coordinate and unify their petroleum policies to ensure market stability and a steady income for member countries. OPEC was formed in 1960 and has its headquarters in Vienna, Austria. Its member countries collectively control approximately 44% of global oil production and 73% of the "proven" oil reserves.

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Farm produce are graded, packed and distributed by marketing cooperatives. Marketing cooperatives are owned and controlled by farmers who are producers of agricultural commodities. These cooperatives help the farmers to sell their products effectively, by providing grading, packing and distribution services. They can also negotiate better prices with buyers on behalf of farmers, reducing the risk of price fluctuations. By pooling their resources and working together, farmers can achieve economies of scale and gain access to larger markets, leading to increased income and profitability. Marketing cooperatives can also provide technical assistance and training to farmers, improving their skills and knowledge in production and marketing.

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A bank's responsibility to its shareholders is primarily to make profits. Shareholders are the owners of the bank, and they expect to earn a return on their investment. The bank must manage its operations in a way that generates profits, which may involve lending money, investing in securities, and charging fees for services. The profits made by the bank are distributed to shareholders in the form of dividends or reinvested in the bank to support its growth. While a bank may play a role in preventing inflation or issuing currencies, these are generally considered to be responsibilities of central banks or government authorities rather than commercial banks.

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Decreasing returns to scale means that if all factors of production are increased by a certain proportion, the resulting output will increase by a proportion that is less than the increase in inputs. So, if there are decreasing returns to scale, doubling all factors of production would result in an increase in output that is less than double. Therefore, the answer is "less than doubled."

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Rents and interest are rewards to land and capital respectively. Rent is a payment made for the use of land or any other natural resource. It is the income earned by the owner of the land or the natural resource for allowing someone else to use it. Interest, on the other hand, is the payment made for the use of capital. It is the compensation paid to the lender for the use of their funds or money. The lender may be an individual, a bank or any other financial institution that provides loans or credit to borrowers. Therefore, the rewards of rents and interest are related to the factors of production land and capital, respectively.

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Diminishing returns occurs in the short run when there is a reduction in the marginal product of the variable factor. In other words, when the additional output that is produced by adding one more unit of the variable factor, such as labor or capital, decreases. This is due to the limited capacity of the fixed factors, such as land, buildings, and equipment. As more and more variable factors are added, the fixed factors become more and more congested, leading to inefficiencies and a reduction in the marginal product of the variable factor.

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The process that leads to an agreement on the conditions of service between an employer and an employee is called collective bargaining. It involves negotiations between representatives of the workers (usually a union) and representatives of the employer to reach an agreement on issues such as wages, benefits, and working conditions. The goal of collective bargaining is to ensure that both parties are satisfied with the terms of the agreement and to avoid labor disputes such as strikes or lockouts.

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The correct illustration of the chain of distribution is: Manufacturer -> wholesaler -> retailer -> consumer In this chain, the manufacturer produces goods and sells them to the wholesaler who then sells them to the retailer. The retailer, in turn, sells the goods directly to the consumer. This is the most common chain of distribution for most goods and products. The manufacturer has a direct relationship with the wholesaler, who then has a direct relationship with the retailer, who finally has a direct relationship with the consumer.

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The International Monetary Fund (IMF) is an international organization that helps countries with their financial problems. Specifically, the IMF assists countries in resolving their balance of payments issues, which is when a country is unable to pay for its imports or other international obligations. The IMF provides loans and other types of financial support to these countries to help them stabilize their economies and get back on track. The IMF is not owned by any particular country, but rather is a cooperative organization that all member countries have a stake in.

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An economic system in which most means of production are owned and controlled by the state is known as a socialist economy. In a socialist economy, the state plays a major role in planning and managing the economy, with the goal of achieving greater social and economic equality. The state may own and operate key industries such as healthcare, education, and transportation, as well as regulate and control private enterprise. This is in contrast to a capitalist economy, in which private individuals and businesses own and operate the means of production, and the government's role is limited to regulating and providing some services. A mixed economy combines elements of both socialism and capitalism, with varying degrees of government intervention in the economy depending on the specific country or region.

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The establishment of public enterprises is done to achieve various economic goals, including the provision of socially necessary facilities, services that are natural monopolies, employment opportunities, and services at a cheaper cost. However, establishing public enterprises to express national prestige is not an economic reason. This is because the expression of national prestige is a political or social reason rather than an economic one. In summary, public enterprises are established to achieve economic goals, but the expression of national prestige is not one of them.

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The United Nation Conference on Trade and Development (UNCTAD) is a forum designed specifically for discussing better terms of trade in the world. UNCTAD is an organization under the United Nations system that promotes international trade, investment, and development. Its primary goal is to integrate developing countries into the global economy on equitable terms. UNCTAD provides research, analysis, and policy recommendations to help countries to make informed decisions related to trade and development. Its discussions and initiatives aim to promote fair and sustainable trade policies that benefit all countries, particularly the developing ones.

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The efficiency of a country's labor force refers to how productive and effective the workers are in contributing to the country's economic output. All of the options listed, except for frequent strikes and lock-outs, can contribute to improving the efficiency of a country's labor force. Improved working conditions, such as providing a safe and comfortable work environment, can increase job satisfaction and productivity. Better healthcare facilities can lead to a healthier workforce, reducing absenteeism and improving productivity. Adequate training can equip workers with the necessary skills to perform their jobs more effectively, increasing their output. A stable economy can create an environment conducive to business growth and investment, leading to increased employment opportunities and improved worker productivity. Frequent strikes and lock-outs, on the other hand, can disrupt productivity, leading to a loss of income for both workers and the country. Therefore, frequent strikes and lock-outs can negatively impact the efficiency of a country's labor force.

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The unemployment associated with a decrease in demand is referred to as cyclical unemployment. This type of unemployment occurs when there is a decrease in the demand for goods and services in an economy, leading to a decrease in production and a decrease in the demand for labor. Workers who are unable to find jobs due to the decrease in demand are said to be cyclical unemployment. This type of unemployment is temporary in nature and is expected to decrease when the economy starts to recover and demand for goods and services begins to increase again.

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Economic growth specifically refers to a sustained increase in the output of goods and services per person (per head) in an economy. This means that over time, the economy is producing more goods and services per person, which can lead to higher standards of living, increased employment opportunities, and improved overall economic well-being. It is not about relying on imported goods in preference to home-made goods, depleting natural resources, or simply increasing the total number of people in the economy. Rather, it is a result of changes in the technical and institutional arrangements of the economy that lead to increased efficiency, productivity, and innovation.

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The ranking of a consumer's need in order of importance is termed a "scale of preference". This refers to the way in which individuals prioritize their wants and needs based on their level of importance or urgency. The scale of preference enables consumers to make rational economic decisions by allocating their limited resources to satisfy their most important needs first. The scale of preference is essential in decision making as it helps consumers to avoid overspending on less important items while ensuring that they satisfy their essential needs first.

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The petroleum industry in Nigeria is an example of a capital-intensive industry. This is because it requires a large amount of investment in equipment, machinery, technology, and infrastructure to extract and refine petroleum. The exploration, drilling, extraction, transportation, and refining of petroleum all require a significant amount of capital investment. Additionally, the production processes involved in the petroleum industry are highly mechanized and automated, requiring relatively few workers compared to other industries. Therefore, the petroleum industry in Nigeria is an example of an industry that requires a significant amount of capital investment to operate efficiently and profitably.

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The natural growth rate of a population refers to the difference between the birth rate and the death rate. It indicates the rate at which a population is increasing or decreasing without considering the effects of migration. The natural growth rate can be calculated by subtracting the death rate from the birth rate. Therefore, the correct option is "Birth rate minus death rate."

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Localization of industries refers to the concentration of industries or firms in a particular area or region. It is the process of selecting and locating an industry in a specific place or region due to the availability of resources, labor, and other favorable conditions. This process is influenced by factors such as transportation, communication, raw materials, and labor availability. The aim of localization of industries is to achieve economies of scale, increase efficiency, and reduce production costs. Therefore, it is an important factor in the economic development of a region or country.

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Development banks mainly provide capital for the development of specific sectors in a country. They are established by governments or international organizations to provide long-term funding for projects that are deemed important for the development of a country's economy. These banks focus on financing projects that may not be attractive to commercial banks due to their risk or lack of profitability, but which have a potential for long-term economic growth. Development banks provide loans, equity investments, and technical assistance to support projects in areas such as infrastructure, agriculture, industry, and small and medium enterprises. By providing long-term financing, development banks can play a critical role in promoting economic growth and reducing poverty in developing countries.

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Changes in the value of money can be measured by a price index. A price index is a measure of the average price of a basket of goods and services consumed in an economy. The price index is used to track the changes in the price of goods and services over a period of time. The most commonly used price index is the Consumer Price Index (CPI), which measures the price changes of a basket of goods and services purchased by households. The CPI is used by the government and central banks to monitor inflation, which is the rate at which the prices of goods and services are increasing over time. By monitoring inflation, the government can adjust policies and take necessary actions to stabilize the economy.

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Monopoly can be described as a market structure in which a single seller or producer sells a product that has no close substitutes. In a monopoly market, there are no other firms producing the same product or offering a similar substitute. The single producer or seller has complete control over the price and supply of the product in the market, with no competition to worry about. This can lead to higher prices for consumers and reduced efficiency in production.

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When the demand for a commodity is inelastic, it means that consumers are not very responsive to changes in price and will continue to purchase the commodity even if the price increases. In this situation, the burden of an indirect tax falls more heavily on the consumers because they are willing to pay the higher price and cannot easily reduce their consumption. Therefore, the correct answer is "consumers".

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Two ways they are similar

• Both have a large number of buyers and sellers, so no single buyer dominates the market.
• Both allow freedom of entry into and exit from the industry, so in the long run firms earn only normal profit.

Three ways they differ

A further difference is that buyers and sellers have perfect knowledge of the market under perfect competition, but only imperfect knowledge under monopolistic competition.

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Ageing population. An ageing population is one in which the proportion of old people (those above the working age, usually 60 or 65 years and over) is rising relative to the rest of the population. It occurs where the birth rate is low and life expectancy is high, so the average age of the population increases and the number of dependent elderly people grows.

Effects on an economy:

• Smaller labour force: fewer people of working age means less labour available for production, which can lower total output.
• Higher dependency burden: the working population must support a large number of retired people through pensions and taxes, reducing funds for investment.
• Increased government spending on the aged: more money is needed for pensions, health care and old-people's welfare, straining the budget.
• Fall in savings and investment: the elderly consume their savings rather than add to them, reducing funds available for capital formation.
• Change in pattern of demand: demand shifts towards goods and services for the old (medicines, health care) and away from those for the young, affecting the structure of production.
• Lower labour mobility and productivity: an older workforce may be less mobile, less adaptable to new technology and less productive.
• Possible labour shortage and reliance on immigration: the economy may need to import labour to fill gaps.

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(a) Methods of measuring national income. There are three approaches, all of which should give the same total because one person's expenditure is another's income which arises from output.

• Income approach: add up all the incomes earned by the factors of production in a year, that is wages and salaries, rent, interest and profit. Transfer payments such as pensions and gifts are excluded to avoid double counting.
• Output (product) approach: add up the money value of all final goods and services produced in the country, or sum the value added at each stage of production. Only final goods, or values added, are counted to avoid double counting.
• Expenditure approach: add up all spending on final goods and services, namely consumption (C), investment (I), government spending (G) and net exports (X - M): \( Y = C + I + G + (X - M) \).

(b) Three problems of measuring national income

• Double counting: the risk of counting the value of a good more than once at different stages of production.
• Unpaid and subsistence services: goods produced and consumed at home (for example a farmer's own food) are hard to value and are often omitted.
• Inadequate and unreliable data: poor record keeping and illiteracy in developing countries make accurate statistics difficult to obtain.

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The government can improve agricultural production in Nigeria in the following ways:

• Provision of credit facilities: giving farmers loans at low interest through agricultural banks and schemes so they can buy inputs and expand.
• Supply of improved inputs: providing improved seeds, fertilisers, pesticides, and better breeds of livestock at subsidised prices.
• Provision of modern implements/mechanisation: making tractors and other machinery available to raise output and reduce drudgery.
• Agricultural education, research and extension services: training farmers, researching better methods and pests/diseases, and sending extension officers to advise them.
• Guaranteed minimum prices and marketing boards: assuring farmers of stable, remunerative prices to encourage production.
• Provision of infrastructure: building feeder roads, irrigation facilities, dams, storage and processing facilities to reduce losses and ease transport of produce to market.
• Land reform: making land more easily available to farmers for large-scale farming.
• Subsidies and tax relief: subsidising inputs and reducing taxes on farming to lower costs.
• Establishment of special programmes: such as farm settlements, irrigation projects and river-basin development authorities.
• Control of pests and diseases: organised campaigns to protect crops and livestock.

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(a) Meaning of devaluation. Devaluation is the deliberate official reduction in the exchange value of a country's currency relative to other currencies (or to gold) under a fixed exchange rate system. It makes the country's exports cheaper to foreigners and its imports more expensive, and is used mainly to correct a persistent balance of payments deficit.

(b) Measures to correct a balance of payments deficit

• Devaluation: lowering the currency's value makes exports cheaper and imports dearer, encouraging exports and discouraging imports.
• Deflationary (contractionary) policies: reducing government spending and money supply lowers domestic incomes and demand, thereby cutting spending on imports.
• Import restrictions: imposing tariffs, quotas and outright bans reduces the volume and value of imports.
• Export promotion: giving subsidies and incentives to exporters and diversifying exports raises export earnings.
• Exchange control: government rations and controls the use of foreign exchange so that scarce foreign currency is used only for essential imports.
• Import substitution: producing locally the goods formerly imported reduces reliance on imports.

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During a trade dispute both sides have industrial weapons they can use to force the other to concede.

Three weapons of a trade union

• Strike action: workers collectively and deliberately withdraw their labour and refuse to work until their demands are met. Because production stops and the employer loses output and revenue, the strike pressures management to negotiate.
• Collective bargaining: the union negotiates jointly on behalf of all members over wages and conditions. Bargaining as one body gives the workers far greater strength than any individual worker negotiating alone.
• Picketing: striking members stand at the entrance of the workplace to persuade other workers and suppliers not to enter or do business with the firm, thereby tightening the effect of the strike.

Other union weapons include the go-slow, work-to-rule, overtime ban and boycott.

Two weapons of an Employers' Association

• Lock-out: the employers shut the workplace and prevent workers from coming in to work, so that the loss of wages pressures the workers to accept the employers' terms.
• Dismissal or replacement of workers: the employers may lay off or sack the agitating workers and hire new hands, or refuse to re-employ ring-leaders (blacklisting), thereby weakening the union.

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(a) Completed utility schedule

Quantity of goods consumed (Q)	Total Utility (TU)	Marginal Utility (MU)
0	0	0
1	10	10
2	16	6
3	20	4
4	22	2
5	23	1
6	23	0

Using \(MU_n = TU_n - TU_{n-1}\):

\(MU_2=16-10=6\); \(TU_3=16+4=20\); \(TU_4=23-1=22\); \(MU_4=22-20=2\); \(MU_6=23-23=0\).

(b) Marginal utility curve

(c)(i) TU equals MU at 0 unit, where both are 0, and at 1 unit, where both are 10.

(ii) TU is at its maximum value of 23 units from the 5th unit onward. MU is 1 at the 5th unit and becomes 0 at the 6th unit, when TU no longer increases.

(iii) As quantity consumed increases, TU increases at a decreasing rate and finally remains constant at 23 units.

(iv) As quantity consumed increases, MU diminishes, falling from 10 to 0.

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(a) Economic planning. Economic planning is the deliberate and conscious effort by the government to coordinate economic decision-making over a period, setting definite objectives and directing the nation's scarce resources towards achieving them. It usually takes the form of a development plan covering several years.

(b) Problems of development plans in Nigeria

• Inadequate and unreliable data: shortage of accurate statistics makes realistic target-setting difficult.
• Shortage of skilled manpower: too few trained planners, economists and technicians to design and execute the plans.
• Inadequate finance/capital: insufficient domestic savings and heavy dependence on uncertain oil revenue and foreign aid.
• Corruption and mismanagement: diversion and embezzlement of funds meant for projects.
• Political instability: frequent changes of government lead to abandonment or change of plans midway.
• Over-ambitious and unrealistic targets: plans set goals beyond the country's actual resources and capacity.
• Poor implementation and monitoring: weak execution and lack of continuity in projects.

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(a) Bar graph of daily sales

Using a vertical scale of ₦500 per major division, plot the days on the horizontal axis and daily sales on the vertical axis. The completed bar graph is:

Day	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday
Sales (₦)	1,750	1,000	3,500	2,250	1,000	2,500

(b) Average daily sales

\[\text{Total sales}=₦1,750+₦1,000+₦3,500+₦2,250+₦1,000+₦2,500=₦12,000\]

\[\text{Average daily sales}=\frac{₦12,000}{6}=₦2,000\]

Therefore, the average daily sales for the week is ₦2,000.

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A Public Limited Company (PLC) is a large joint-stock company that can raise capital from the general public. Its main sources of finance are:

• Ordinary (equity) shares: the company sells ordinary shares to the public; shareholders become part owners and are paid dividends out of profit. This provides permanent capital that need not be repaid.
• Preference shares: shares that carry a fixed rate of dividend paid before ordinary shareholders. They attract investors who want a steadier, more secure return.
• Debentures (loan stock): long-term loans raised from the public on which the company pays a fixed rate of interest whether or not it makes profit; the debenture holders are creditors, not owners.
• Bank loans and overdrafts: medium and short-term borrowing from commercial banks to finance expansion or working capital, repaid with interest.
• Retained (ploughed-back) profits: part of the company's profit that is not distributed as dividend but re-invested in the business, providing a cheap internal source of finance.

Other sources include mortgages on landed property and trade credit from suppliers.