WAEC SSCE - Economics - 2000 (Essay)

Maelezo ya Majibu

a. Mobility of labour. Mobility of labour is the ease or freedom with which workers can move from one job or occupation to another (occupational mobility) or from one geographical location to another (geographical mobility).

b. Obstacles to occupational mobility of labour.

• Lack of required skill or training: a worker cannot move into a job that demands qualifications he does not have.
• Cost of training: the money and time needed to acquire a new skill may be beyond the worker's reach.
• Natural ability or talent: some occupations need special aptitudes (for example, music or surgery) that not everyone possesses.
• Ignorance of job opportunities: workers may not know that vacancies exist in other occupations.
• Professional and trade-union barriers: entry requirements, licences or union rules restrict movement into certain jobs.
• Discrimination: on grounds of sex, tribe, age or religion, some workers are denied certain jobs.
• Cost of tools and equipment: some occupations require expensive equipment the worker cannot afford.

Maelezo ya Majibu

The International Bank for Reconstruction and Development (the World Bank) can help the economic development of a country in the following ways:

• Provision of long-term loans: it lends money at moderate interest to finance development projects.
• Financing infrastructure: it funds roads, dams, power stations, water supply and similar projects that support growth.
• Technical assistance and advice: it provides experts to plan and supervise projects and to advise on economic policy.
• Feasibility studies: it helps investigate whether proposed projects are viable before funds are committed.
• Capacity building and training: it helps train personnel and strengthen local institutions.
• Support for key sectors: it channels funds into agriculture, education and health to raise productivity and welfare.
• Encouraging further investment: its involvement gives confidence that attracts other lenders and investors.

Maelezo ya Majibu

a. Indigenisation policy. This is a government policy that transfers the ownership and control of business enterprises from foreigners to citizens (nationals) of the country, so that indigenes participate more fully in and dominate the economy.

b. Localisation of industry. This is the concentration of a particular industry in a specific geographical area, arising from advantages such as nearness to raw materials, availability of labour, market, power or good transport in that area.

c. Economies of scale. These are the cost advantages, that is, the fall in average (unit) cost of production, that a firm enjoys as it expands its scale of output. They may be internal (arising within the firm, such as bulk buying and better machines) or external (arising from the growth of the whole industry).

d. National budget. This is a financial statement showing the government's estimated revenue and proposed expenditure for a given period, usually one year. It may be balanced (revenue equals expenditure), a surplus budget (revenue exceeds expenditure) or a deficit budget (expenditure exceeds revenue).

Maelezo ya Majibu

Maelezo ya Majibu

(a) Laws of demand and supply

1. Law of demand: Other things being equal, the quantity demanded of a commodity rises when its price falls and falls when its price rises.
2. Law of supply: Other things being equal, the quantity supplied of a commodity rises when its price rises and falls when its price falls.

(b) Change in quantity demanded

A change in quantity demanded is a movement along the same demand curve caused solely by a change in the commodity's own price. It is different from a change in demand, which shifts the whole demand curve.

In the diagram, the price of maize falls from $200 at point A to $150 at point B. Consequently, quantity demanded rises from 200 bags to 300 bags. This movement from A to B along the demand curve DD is called an extension or expansion in quantity demanded.

Conversely, if the price rises from $150 to $200, quantity demanded falls from 300 bags to 200 bags. The movement from B to A along the same demand curve is called a contraction in quantity demanded.

Maelezo ya Majibu

a. Meaning of unemployment. Unemployment is a situation in which people who are willing and able to work at the prevailing wage rate are unable to find suitable jobs.

b. Three types of unemployment.

• Frictional unemployment: the short-term unemployment that occurs when workers are between jobs, for example when they have left one job and are searching for another.
• Structural unemployment: unemployment caused by a change in the structure of the economy or of demand, so that workers' skills no longer match the jobs available (for example, when a product goes out of use or a new technology replaces old skills).
• Cyclical (demand-deficient) unemployment: unemployment that arises during a general fall in economic activity or depression, when total demand for goods and services is low, so firms cut output and lay off workers.

(Other types include seasonal and disguised unemployment.)

Maelezo ya Majibu

A country measures its national income for the following reasons:

• To assess economic performance: national income shows the total output of the economy and whether it is growing or declining.
• To compare standards of living: per-capita income allows comparison of welfare over time and between countries.
• To aid economic planning: reliable income figures guide the government in preparing budgets and development plans.
• To measure the contribution of sectors: it shows how much agriculture, industry and services each add to output.
• To study income distribution: it reveals how income is shared among the people and regions.
• To guide policy: it helps government decide on taxation, spending and other measures.
• For international purposes: it is used to assess a country's ability to contribute to, or receive aid from, international bodies.

Maelezo ya Majibu

(a) Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in consumer income: \[E_y=\dfrac{\%\ \text{change in quantity demanded}}{\%\ \text{change in income}}.\]

(b)(i) Between A and B: \(\%\Delta Q=\dfrac{96-120}{120}\times100=-20\%\); \(\%\Delta Y=\dfrac{36{,}000-20{,}000}{20{,}000}\times100=80\%\); \[E_y=\dfrac{-20}{80}=-0.25.\]

(b)(ii) Between C and D: \(\%\Delta Q=\dfrac{200-160}{160}\times100=25\%\); \(\%\Delta Y=\dfrac{44{,}000-40{,}000}{40{,}000}\times100=10\%\); \[E_y=\dfrac{25}{10}=2.5.\]

(b)(iii) Between E and F: \(\%\Delta Q=\dfrac{252-240}{240}\times100=5\%\); \(\%\Delta Y=\dfrac{47{,}000-45{,}000}{45{,}000}\times100=4.44\%\); \[E_y=\dfrac{5}{4.44}=1.13.\]

(c)(i) Between A and B the elasticity is negative (-0.25), so the good is an inferior good (demand falls as income rises).

(c)(ii) Between C and D the elasticity is positive and greater than 1 (2.5), so the good is a normal good, specifically a luxury (superior) good.

Maelezo ya Majibu

Governments impose taxes for several reasons:

• To raise revenue: taxes are the main source of government income for financing its expenditure.
• To redistribute income: progressive taxes take more from the rich, and the proceeds are used to provide services that benefit the poor, reducing inequality.
• To control inflation or deflation: as a tool of fiscal policy, higher taxes reduce spending power to curb inflation, while lower taxes boost demand.
• To protect infant industries: import duties make foreign goods dearer and shield young home industries.
• To discourage consumption of harmful goods: heavy taxes on items such as tobacco and alcohol reduce their consumption.
• To correct a balance-of-payments deficit: taxes on imports reduce spending on foreign goods.
• To check monopoly and windfall gains: taxes can reduce excessive profits.

Maelezo ya Majibu

Recommendation: a tailor should operate as a sole proprietorship (one-man business).

Reasons.

• Small capital required: tailoring needs only a sewing machine, tools and a small workshop, which one person can finance.
• Easy to establish: there are few legal formalities, so the business can start quickly.
• Direct personal service: the tailor deals face to face with customers and can meet their individual tastes and measurements.
• Quick decision-making: the owner is the sole decision-maker and can respond promptly to customers' needs.
• The owner enjoys all the profit: there is no sharing of profit with partners or shareholders.
• Ease of management and flexibility: the business is small and simple to control, and the owner can easily change designs or working hours.

Because tailoring is a small-scale, skill-based, personal service, the one-man business suits it better than a partnership or company.

Maelezo ya Majibu

Price control is government regulation of the price of goods and services, usually by fixing a maximum (ceiling) or minimum (floor) price. Its objectives include:

• To prevent exploitation of consumers: a maximum price stops sellers from charging excessively high prices for essential goods.
• To check inflation: holding prices down helps to control a general rise in the price level.
• To protect low-income earners: it keeps essential goods within the reach of the poor.
• To ensure fair distribution of goods: controlled prices, often with rationing, spread scarce goods more evenly.
• To stabilise prices: a minimum price protects producers (for example farmers) from ruinously low prices and steadies their incomes.

(Other valid objectives: to discourage hoarding and profiteering, and to reduce the general cost of living.)

Maelezo ya Majibu

The low rate of industrial growth in a developing country such as Nigeria is caused by:

• Inadequate capital: shortage of funds to build factories and buy machinery limits industrial expansion.
• Poor infrastructure: unreliable electricity, bad roads and poor water supply raise costs and discourage industry.
• Low level of technology: outdated machinery and methods keep productivity and quality low.
• Shortage of skilled labour and managers: too few trained technicians and entrepreneurs to run modern industry.
• Small market and low demand: low incomes mean weak demand for manufactured goods, and competition from cheap imports further reduces sales.

(Other valid reasons: political instability, inadequate local raw materials, and unfavourable government policy.)