WAEC SSCE - Economics - 1991 (Essay)

Maelezo ya Majibu

Agriculture is closely linked to industry, and in Nigeria it has aided industrial development in several concrete ways. Five contributions are:

1. Supply of raw materials. Agriculture provides the primary inputs that manufacturing industries process, for example cotton for textile mills, cocoa for beverage and confectionery plants, palm produce for oil and soap factories, and groundnut for oil mills. Without these, agro-based industries could not operate.
2. Provision of food for the industrial workforce. A steady, cheap food supply feeds urban factory workers, keeps wages and production costs down and makes industrial labour available and productive.
3. Provision of a market for industrial goods. Farmers buy manufactured inputs such as fertilisers, tractors, pesticides, cutlasses and processing machinery, creating demand that stimulates industrial output.
4. Source of capital and foreign exchange. Earnings from the export of cash crops provide savings and foreign exchange used to import industrial machinery and to finance industrial investment; agricultural taxes and marketing-board surpluses have also funded industry.
5. Supply of labour. As farming becomes more productive, surplus labour is released from the land to work in the growing industrial sector.

Examination reminder: organise the answer around the four classic linkages - raw materials, food, market and capital/labour - and give a Nigerian example for each to gain the illustration marks.

Maelezo ya Majibu

Average cost is found from \(AC=\dfrac{TC}{Q}\) and marginal cost from \(MC=TC_n-TC_{n-1}\). At an output of 1 the average cost is 8, so the total cost there must be 8 (the value 18 is an error); the rest of the schedule then follows consistently:

(a) AC is at its minimum at an output of 4 units, where \(AC=\dfrac{20}{4}=5\).

(b) MC is at its minimum at an output of 4 units, where \(MC=2\).

(c) AC starts to increase at an output of 5 units (it falls to 5 at output 4, then rises to 6 at output 5).

(d) MC first becomes greater than AC at an output of 5 units (there \(MC=10\) while \(AC=6\)).

(e) The maximum output shown in the schedule is 6 units.

Maelezo ya Majibu

(a) Mobility of labour. Mobility of labour is the ease with which workers can move from one job, occupation or place to another. It has two forms. Geographical (place) mobility is the movement of labour from one location or region to another in search of work. Occupational (vertical and horizontal) mobility is the movement of labour from one occupation, trade or grade to another. A factor is mobile when such movement is easy and immobile when it is difficult.

(b) Why labour may be unwilling to move.

• Family and social ties. Reluctance to leave family, friends, community and familiar cultural or religious surroundings.
• Cost and difficulty of housing. High cost of accommodation and the expense of moving to a new area.
• Ignorance of opportunities. Lack of information about jobs, wages and conditions available elsewhere.
• Lack of required skills or qualifications. A worker cannot move into an occupation for which he is not trained, and training is costly and slow (occupational immobility).
• Differences in language, climate or customs. Fear of an unfamiliar environment in the new area.
• Pension, promotion and seniority rights. Loss of accumulated benefits, seniority and prospects tied to the present job.
• Job security and uncertainty. Fear that the new job may be less secure than the present one.

Examination reminder: separate reasons that block geographical movement (family ties, housing, distance) from those that block occupational movement (lack of skill, cost of training), as the examiner looks for both dimensions.

Maelezo ya Majibu

The supply of labour means the total number of hours of work (or number of workers) offered for employment in the economy at a given time. In Nigeria it is affected by the following factors:

1. Size and structure of the population. A large population with a high proportion in the working-age bracket (18-64) provides a bigger potential labour force.
2. The working population and age structure. The number actually able and willing to work, after removing children, students, the aged, the sick and the retired, determines effective supply.
3. Level of wages and other rewards. Generally, higher real wages and better conditions attract more people into the labour market and encourage longer hours.
4. Length of the working day, week and holidays. Legally fixed hours, leave and overtime rules affect how much labour each worker supplies.
5. Education, training and skills. The availability of skilled, trained manpower influences the supply of effective (as opposed to mere numerical) labour.
6. Mobility of labour. The ease with which workers can move between jobs and regions affects how much labour reaches where it is needed.
7. Social and cultural factors. Attitudes to certain jobs, the role of women in work, and early or delayed entry into employment affect participation.
8. Migration. Immigration adds to and emigration (brain drain) subtracts from the labour force.
9. Government policy and health. Retirement age, labour laws, and the general state of health and nutrition of the people affect availability and productivity of labour.

Examination reminder: distinguish the numerical supply of labour (how many people) from its quality (education and skills); a full answer covers both.

Maelezo ya Majibu

Reading the chart. The three sectors of a pie chart must total \(360^\circ\). The \(18\text{-}54\) sector carries a right-angle mark, so it is \(90^\circ\), and the \(55+\) sector is \(108^\circ\). The remaining \(0\text{-}17\) sector is therefore \(360^\circ - 90^\circ - 108^\circ = 162^\circ\). (The figure printed near it, \(182^\circ\), cannot be right because \(182+90+108 = 380^\circ\), which is more than a full circle.)

Each group \(= \dfrac{\text{sector angle}}{360^\circ}\times 120\text{ million}.\)

(a)(i) Children, 0-17 years

\[\dfrac{162}{360}\times 120 = 54\text{ million}\]

(a)(ii) Old people, 55+ years

\[\dfrac{108}{360}\times 120 = 36\text{ million}\]

(a)(iii) Working population, 18-54 years

\[\dfrac{90}{360}\times 120 = 30\text{ million}\]

Check: \(54 + 36 + 30 = 120\) million.

(b) Economic implication

Only 30 million people, a quarter of the nation, are of working age, yet they must support 90 million dependants (54 million children and 36 million elderly). The dependency ratio is \(\dfrac{90}{30} = 3:1\), which is extremely high. The consequences are:

• A very heavy dependency burden on each worker, so the average standard of living is low.
• High consumption but low savings and investment, which slows capital formation and growth.
• Large public spending on education for the many children and on pensions and health care for the aged.
• A small effective labour force relative to the whole population, which limits total national output.

Maelezo ya Majibu

(a) A market. In economics a market is not necessarily a physical place. It is any arrangement or system by which buyers and sellers of a particular good or service are brought into contact to exchange it at an agreed price. It exists wherever such contact and exchange can take place, whether face to face, by telephone or over the internet.

(b) Four characteristics of a perfect market.

1. Large number of buyers and sellers. There are so many that no single buyer or seller can influence the market price; each is a price taker.
2. Homogeneous (identical) product. All sellers offer exactly the same, uniform product, so buyers have no reason to prefer one seller to another.
3. Perfect knowledge of the market. All buyers and sellers have full and up-to-date information about prices and conditions, so the same good sells at one uniform price throughout the market.
4. Free entry and exit. There are no barriers preventing firms from entering the market when profitable or leaving when unprofitable.

Other features include perfect mobility of factors and goods, absence of transport cost, and no government or collusive interference, all of which help establish a single ruling price.

Examination reminder: the whole point of these conditions is that together they produce one uniform price for the product throughout the market; link each characteristic to that result.

Maelezo ya Majibu

The key is to distinguish a movement along a demand curve from a shift of the whole curve. Draw both on axes with price on the vertical axis and quantity demanded on the horizontal axis.

(a) Change in quantity demanded. This is a change in the amount buyers wish to buy caused only by a change in the price of the good itself, all other factors remaining constant. It is shown as a movement along the same demand curve \( DD \): a fall in price causes a downward movement to a larger quantity (an extension of demand), while a rise in price causes an upward movement to a smaller quantity (a contraction of demand). The curve does not move.

(b) Change in demand. This is a change in the amount demanded at every price, caused by a change in a factor other than the good's own price, for example income, tastes, the price of related goods, population or expectations. It is shown as a shift of the entire demand curve: an increase in demand shifts the curve rightward from \( DD \) to \( D_1D_1 \) (more bought at each price), while a decrease shifts it leftward to \( D_2D_2 \) (less bought at each price).

Examination reminder: if the good's own price changes, it is a change in quantity demanded (movement along); if any other factor changes, it is a change in demand (shift of the curve). Confusing the two is the commonest error on this topic.

Maelezo ya Majibu

The size of a country's population at any time depends on the balance among three forces: births, deaths and migration. Population grows when births plus immigration exceed deaths plus emigration, and falls when the reverse holds.

1. Birth rate (fertility). The number of live births per \( 1{,}000 \) people per year. A high birth rate, encouraged by early marriage, large-family cultures, low use of family planning and high infant mortality that prompts more births, raises population size.
2. Death rate (mortality). The number of deaths per \( 1{,}000 \) people per year. It is influenced by medical facilities, nutrition, sanitation, standard of living, war, famine and epidemics. Falling death rates enlarge the population.
3. Migration. Immigration (movement into the country) increases the population, while emigration (movement out) decreases it; net migration is the difference between the two.
4. Natural increase. The excess of births over deaths; a wide gap means rapid natural growth.
5. Government policy. Policies that promote or discourage childbearing, control immigration, or improve health care alter the size of the population.
6. Age and sex structure and marriage patterns. A large proportion of people in the reproductive age group, and a balanced sex ratio, raise the potential number of births.

Examination reminder: reduce the whole answer to one identity: \[ \text{Population change} = (\text{Births} - \text{Deaths}) + (\text{Immigration} - \text{Emigration}) \] then explain what drives each term.

Maelezo ya Majibu

The median. The median is a measure of central tendency: it is the value of the middle item when a set of observations is arranged in order of size (ascending or descending). It divides the distribution into two equal halves, so that one half of the items lie below it and the other half above it. For \( n \) arranged items, when \( n \) is odd the median is the \( \left(\frac{n+1}{2}\right)^{th} \) item; when \( n \) is even it is the average of the two middle items, the \( \left(\frac{n}{2}\right)^{th} \) and \( \left(\frac{n}{2}+1\right)^{th} \) items.

Merits.

• It is not affected by extreme values (very large or very small items), so it gives a good typical value for skewed data.
• It is easy to understand and compute, requiring only ordering of the data.
• It can be found even for open-ended classes, since only the middle position is needed.
• It can be determined graphically from an ogive (cumulative-frequency curve).

Demerits.

• It ignores the actual values of all items except the middle one, so it does not use all the data.
• It requires the data to be arranged in order first, which is tedious for large sets.
• It is not suitable for further algebraic treatment (unlike the mean).
• Where items cluster unevenly it may not truly represent the distribution, and for even \( n \) it may give a value that is not an actual item.

Examination reminder: its great strength is resistance to extreme values, which is exactly why the median is preferred to the mean for skewed data such as incomes.