When the price of a given product is reduced from N100 to N90, the quantity demanded increases from 50 to 60 units. From this we can conclude that the product's
A.demand is elastic
B.demand is inelastic
C.demand is perfectly inelastic
D.supply is not elastic
E.demand has declined
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Answer: A (demand is elastic)
Explanation
Price falls by 10% but quantity demanded rises by 20%, so Ed = 20 ÷ 10 = 2, which is greater than 1: demand is elastic.
In the long-run, potential GNP is variable because I. technological change takes place II. the quantity of labour and capital is not fixed III. unemployment is not constant
A.I only
B.II only
C.I and II only
D.I and III only
E.III only
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Answer: C (I and II only)
Explanation
Potential GNP depends on the quantity of resources and technology; unemployment affects actual GNP, not potential GNP.
For two commodities A and B, MA and MB are the respective marginal utilities while PA and PB are the respective prices. Marginal utilities of the two commodities are maximized when
A.MA/PA = MB/PB
B.MA/PA > MB/PB
C.MA/PA < MB/PB
D.PA/MA < PB/MB
E.PA/MA > PB/MB
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Answer: A (MA/PA = MB/PB)
Explanation
A consumer is in equilibrium when the marginal utility per naira is the same for both goods.
Section A: answer one question only from this section. The data below shows an hypothetical age distribution of the population of a town in Nigeria. Age 10 and below: male 1350; female 2650; total 4000 Age 11 – 14: male 2275; female 2725; total X Age 15 – 35: male 1135; female 1365; total 2500 Age 36 – 64: male Y; female 4265; total 7500 Age 65 and above: male 3250; female Z; total 6000 From the above data calculate: (a) X, Y, Z (b) The total population of the town (c) the difference between the population of male and female aged 14 and below (d) The percentage of the population aged 14 and below (e) the dependency ratio in the town.
Section A: answer one question only from this section. Table of a Firm's Total Revenue and Costs Quantity of yams (kg): 0, 1, 2, 3, 4, 5, 6, 7, 8 Total revenue (TR) N: 0, 9, 18, 24, 28, 30, P, 28, 24 Marginal revenue (MR) N: –, 9, 9, 6, Q, 2, 1, −3, R Total cost (TC) N: 5, 8, 16, 21, 25, 25, 25, S, 24 Marginal cost (MC) N: –, 3, T, 5, 4, U, 0, 1, −2 Use the table above to answer the following questions (a) Complete the table by calculating the missing figures P.Q.R.S.T.U. (b) At what output is profit maximised? (c) Calculate the profit when quantity sold is 5 (d) At what output does MC begin to rise?
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Model answer
(a) MR = change in TR; MC = change in TC P = 30 + 1 = N31 Q = 28 − 24 = N4 R = 24 − 28 = −N4 S = 25 + 1 = N26 T = 16 − 8 = N8 U = 25 − 25 = N0 (b) Profit = TR − TC at each output: −5, 1, 2, 3, 3, 5, 6, 2, 0 MR = MC (N4) at 4 kg, but MC is falling there; profit is greatest (N6) at 6 kg (TR N31 − TC N25) (c) Profit at 5 kg = TR − TC = N30 − N25 = N5 (d) MC first rises after the 1st kg (from N3 to N8 at 2 kg); after falling, it rises again after 6 kg (from N0 to N1 at 7 kg)
Explanation
Work out MR and MC as differences between successive totals; profit is TR minus TC.
Section B: answer three questions only from this section. (a) Explain the term opportunity cost (b) Highlight the relevance of the opportunity cost concept to individuals, firms and government.
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Model answer
(a) Opportunity cost is the alternative forgone (the next best alternative given up) when a choice is made It arises because resources are scarce and wants are many; example: a student with N50 who buys a textbook instead of a meal has an opportunity cost of the meal (b) Individuals: helps them draw a scale of preference and spend limited income to get maximum satisfaction Firms: helps them choose what to produce, which inputs and methods (labour- or capital-intensive) to use, and where to invest Government: helps it rank projects and choose how to spend limited revenue (e.g. schools versus roads) for maximum welfare
Explanation
Define with an example, then apply the idea to each of the three groups.
Section B: answer three questions only from this section. Describe any five problems of distribution in Nigeria.
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Model answer
Poor transport network: bad roads, few railways, so goods move slowly and costly Inadequate storage and warehousing facilities, leading to waste of perishables Hoarding and artificial scarcity by middlemen Too many middlemen, raising prices Poor communication facilities Inadequate finance/credit for distributors Smuggling and unfair foreign competition Insecurity: armed robbery on highways Poor packaging and processing of goods Government policies such as frequent price controls and import bans
Explanation
Describe five problems, each with a sentence of explanation.
Section B: answer three questions only from this section. (a) Define population census (b) State the implications of (i) optimum population (ii) over-population.
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Model answer
(a) A population census is the official counting of all the people in a country at a particular time, also recording details such as age, sex, occupation and location; usually done every ten years (b)(i) Optimum population: output per head (income per head) is at its maximum Resources are fully and efficiently used; full employment Highest standard of living for the given resources (ii) Over-population: low income per head and a falling standard of living Unemployment and under-employment Pressure on social amenities, housing and land; congestion Food shortages and higher food imports, leading to balance of payments problems Rural–urban drift, crime and environmental damage
Section B: answer three questions only from this section. With the aid of a diagram, explain the super-normal profit of a monopolist.
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Model answer
Diagram: price/cost on the vertical axis, quantity on the horizontal axis; downward-sloping AR (demand) curve with MR below it; U-shaped MC and AC curves The monopolist produces where MC = MR, giving output OQ Price OP is read from the AR (demand) curve at OQ Average cost at OQ is ON, below the price Total revenue = OP × OQ; total cost = ON × OQ Super-normal profit = (OP − ON) × OQ, the shaded rectangle PNAB (price above AC) Because entry is blocked, the monopolist can keep this super-normal profit in the long run
Explanation
Profit is the rectangle between price and AC at the output where MC = MR.
Section B: answer three questions only from this section. What is money? Why do people prefer to hold money?
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Model answer
Money is anything generally acceptable as a medium of exchange and for settling debts People hold money (liquidity preference) for three motives: Transactions motive: to pay for day-to-day purchases between pay days; depends mainly on income Precautionary motive: to meet unforeseen expenses such as illness, accidents or job loss Speculative motive: to take advantage of expected changes in the prices of bonds/securities and interest rates; people hold more cash when they expect security prices to fall
Explanation
Define money, then explain the three Keynesian motives.
Section B: answer three questions only from this section. Explain any five reasons why a joint stock company is preferable to a one-man business.
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Model answer
It can raise much larger capital by selling shares to many people and borrowing more easily Limited liability: shareholders lose only what they invested, unlike the sole trader's unlimited liability Continuity: it continues despite the death or withdrawal of a shareholder Separate legal entity: it can sue and be sued in its own name It enjoys economies of large-scale production It can employ specialists and experts to manage it Risk is spread among many shareholders Shares are transferable, so owners can leave easily
Explanation
Five clear comparisons with the sole proprietorship.
Section B: answer three questions only from this section. State any three positive and any two negative effects of petroleum industry on the economy of Nigeria.
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Model answer
Positive (any three): main source of foreign exchange earnings Main source of government revenue (royalties, profit tax, rents) Provides employment Supplies raw materials for petrochemical, fertiliser and other industries Development of infrastructure in oil areas and the country Supplies energy (petrol, kerosene, gas) for transport, industry and homes Negative (any two): environmental pollution (oil spills, gas flaring) destroys farmland and fishing Neglect of agriculture and other sectors (mono-product economy) Rural–urban drift Unrest/conflict in the oil-producing areas Economy vulnerable to fluctuations in world oil prices; corruption
Explanation
Three positive and two negative effects, each briefly explained.
Section B: answer three questions only from this section. (a) Define the term Balance of Payments (b) What are its main components?
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Model answer
(a) The balance of payments is a systematic record of all economic transactions between residents of a country and the rest of the world over a period, usually one year (b) Current account: visible trade (exports and imports of goods, the balance of trade) and invisible items (services such as shipping, insurance, tourism, interest, dividends and transfers) Capital account: long-term and short-term capital movements, e.g. foreign investment, loans and repayments Official settlements (monetary movements) account: changes in foreign reserves, borrowing from the IMF, used to settle the overall balance
Explanation
Define it, then explain the current, capital and monetary accounts.