WAEC Economics 2000 past questions and answers

Scarcity means the goods and services (and resources) available are limited compared with what people want.

The basic economic problem comes from limited resources set against unlimited wants, which forces choice.

Extractive activities such as farming, fishing, mining and lumbering take resources straight from nature, which is primary production.

Total utility is the whole satisfaction from all the units consumed; marginal utility is only the extra satisfaction from the last unit.

Data as first collected, before it is sorted or processed, is called raw data.

Mean, median and mode are measures of central tendency; variance measures spread (dispersion).

Qs = 70 + ½ × 8 = 70 + 4 = 74.

Average product is total product divided by the number of units of the variable factor (here, men employed).

Marketing economies (buying and selling in bulk) are enjoyed inside a large firm, so they are internal economies.

AVC = TVC ÷ output: the variable cost per unit produced.

Public enterprises are set up mainly to provide essential services such as water, electricity and transport, not mainly for profit.

A sole proprietor owns the business alone, takes all the profit and bears all the risk with unlimited liability.

Authorised (nominal) capital is the most share capital the company's memorandum allows it to raise.

A consumers' co-operative is owned by its members, who buy shares and share the surplus.

A retailer stocks a wide variety of goods from many producers so consumers can choose in one place; financing manufacturers is a wholesaler's job.

The bigger the population (especially of working age), the more labour is available.

Most workers in West Africa are farmers, so agriculture employs the majority of the labour force.

Population censuses are normally held every ten years.

With over-population, national income is shared among too many people, so income per head falls.

Hassan changed his occupation (teaching to banking) in the same place, which is occupational mobility.

Net migration = number of people coming in (immigrants) minus number leaving (emigrants).

The marginal productivity theory says a worker is paid according to the value of the extra output he adds.

A change in the good's own price moves us along the curve: a change in quantity demanded. A change in demand shifts the whole curve.

An industry is the group of all firms producing the same or similar products.

A trade union is an organisation of workers formed to protect their interests, e.g. wages and working conditions.

AVC first falls (increasing returns) and then rises (diminishing returns), giving a U shape.

For a normal good, demand rises when income rises, so income elasticity is positive.

Composite demand is demand for one good that has several uses, e.g. sugar for tea, sweets and soft drinks.

Selling the same product at different prices to different buyers is price discrimination.

If demand does not respond to price, the seller can pass the whole tax on in a higher price, so consumers bear it.

A regressive tax takes a smaller percentage of income as income rises, so the rate falls as income increases.

Recurrent expenditure is spent regularly on running government, such as wages and salaries; roads and ports are capital expenditure.

A deficit budget is one in which planned spending is greater than expected revenue.

Above all, money must be generally accepted in exchange; without acceptability it cannot serve as money.

An unstable market is one where demand and supply keep changing, so prices go up and down.

The stock exchange is the market for buying and selling shares and stocks.

More goods reduce excess demand, and holding wages stops costs and spending from pushing prices up further.

The central bank manages the country's foreign reserves and enforces exchange control.

The central bank is the bankers' bank and runs the clearing house where banks settle debts with one another.

Mortgage banks specialise in long-term loans for building or buying houses.

Workers replaced by new technology lose jobs because the structure of production has changed: structural (technological) unemployment.

'Mono' means one: a mono-product economy depends on one main commodity for most of its income and exports.

The NIDB was set up to give medium- and long-term loans to industrial (manufacturing) firms.

The main problem of small firms is lack of capital, since they depend on the owner's savings and find bank loans hard to get.

OPEC is a group of producers who agree on output quotas to influence the price of oil, which is a cartel.

Cocoa is the leading export crop of West Africa (Ghana, Côte d'Ivoire, Nigeria).

A deficit means payments to other countries (for imports) are more than receipts from them (for exports).

West African countries do make development plans, but poor implementation (corruption, lack of funds, instability) keeps development low.

Cameroun is in Central Africa and belongs to ECCAS, not ECOWAS.

(a) Each degree = 72,000 ÷ 360 = 200 tonnes.
Cocoa = 117 × 200 = 23,400 tonnes; Rubber = 96 × 200 = 19,200 tonnes; Beans = 50 × 200 = 10,000 tonnes; Cotton = 42 × 200 = 8,400 tonnes; Rice = 55 × 200 = 11,000 tonnes.
(b)(i) Export crops (cocoa, rubber, cotton) = 23,400 + 19,200 + 8,400 = 51,000 tonnes; food crops (beans, rice) = 10,000 + 11,000 = 21,000 tonnes; difference = 30,000 tonnes.
(ii) Cotton contributed the least, 8,400 tonnes (15,000 tonnes less than cocoa, the largest).
(iii) Cocoa has the highest output (23,400 tonnes).

Find tonnes per degree first (total ÷ 360), then multiply each angle.

(a) Income elasticity of demand is the degree of responsiveness of quantity demanded to a change in consumers' income: YED = % change in quantity demanded ÷ % change in income.
(b)(i) A to B: quantity falls 120 → 96 = −24/120 × 100 = −20%; income rises 20,000 → 36,000 = 16,000/20,000 × 100 = 80%; YED = −20 ÷ 80 = −0.25.
(ii) C to D: quantity 160 → 200 = 40/160 × 100 = 25%; income 40,000 → 44,000 = 4,000/40,000 × 100 = 10%; YED = 25 ÷ 10 = 2.5.
(iii) E to F: quantity 240 → 252 = 12/240 × 100 = 5%; income 45,000 → 47,000 = 2,000/45,000 × 100 ≈ 4.44%; YED = 5 ÷ 4.44 ≈ 1.13.
(c)(i) A and B: negative YED, so an inferior good.
(ii) C and D: positive and greater than 1, so a normal good (a luxury, income-elastic).

Use the first figure of each pair as the base; the sign of the answer tells you the kind of good.

(a) Law of demand: other things being equal, the lower the price, the higher the quantity demanded, and the higher the price, the lower the quantity demanded.
Law of supply: other things being equal, the higher the price, the higher the quantity supplied, and the lower the price, the lower the quantity supplied.
(b) Diagram: one downward-sloping demand curve DD, price on the vertical axis, quantity on the horizontal axis, with two points marked (e.g. price falls from P1 to P2 and quantity rises from Q1 to Q2).
A change in quantity demanded is caused only by a change in the commodity's own price, other things being constant.
It is shown as a movement along the same demand curve, not a shift of the curve.
A fall in price causes an extension (rise) in quantity demanded; a rise in price causes a contraction (fall).
The demand schedule/curve itself stays the same, since income, tastes and prices of other goods are unchanged.

Keep 'change in quantity demanded' (movement along) separate from 'change in demand' (shift).

Recommended: sole proprietorship (one-man business).
Little capital is needed to start a tailoring business.
It is easy to set up, with few legal formalities.
The owner takes quick decisions and keeps all the profit.
Personal contact with customers (measurements, styles, tastes) is important and easy to maintain.
The scale of operation is small, so one person can manage it without hired managers.
The tailor can keep business secrets and work flexibly to suit customers.

Name the business form first, then give at least five reasons.

(a) Mobility of labour is the ease with which labour moves from one occupation to another (occupational mobility) or from one place to another (geographical mobility).
(b) Obstacles to occupational mobility:
Long and costly training or retraining needed for the new job.
Lack of the natural ability, skill or talent required.
Age: older workers find it hard to learn new skills and employers may not hire them.
Restrictions by professional bodies and trade unions (entry requirements, licences).
Lack of information about vacancies elsewhere.
Personal preference, attachment to one's job, and fear of losing seniority or pension.
Discrimination by sex, religion or ethnic origin.

Define both kinds of mobility, then list obstacles for occupational mobility only.

To protect consumers from exploitation by producers or sellers (maximum prices).
To keep essential goods affordable to low-income earners.
To control inflation.
To protect producers, e.g. farmers, by guaranteeing minimum prices.
To prevent wide fluctuations in prices of goods such as farm produce.
To protect workers through minimum wages.
To limit the excess profits of monopolies.

Mention both maximum and minimum price objectives.

To measure the standard of living (income per head).
To compare living standards and growth between countries.
To measure the rate of economic growth over time.
To help government in economic planning and policy making.
To show the contribution of each sector (agriculture, industry, services) to the economy.
To guide the distribution of income and help fiscal policy, e.g. taxation.
To help international bodies decide contributions and aid (e.g. IMF quotas, World Bank loans).
To give information to investors and researchers.

Give each use as a separate point with a brief explanation.

(a) Indigenisation policy: a deliberate government policy of transferring ownership and control of businesses from foreigners to citizens, e.g. by reserving some businesses or a share of equity for indigenes.
(b) Localization of industry: the concentration of firms in the same industry in a particular area, e.g. because of raw materials, markets or power supply.
(c) Economies of scale: the cost advantages (fall in average cost) a firm enjoys as it grows. Internal economies come from the firm's own size (technical, managerial, marketing, financial, risk-bearing); external economies come from the growth of the industry or area.
(d) National budget: a statement of the government's estimated revenue and planned expenditure for a coming period, usually one year; it may be balanced, surplus or deficit.

Each part needs a clear definition plus an example or brief detail.

(a) Unemployment is a situation in which people who are able and willing to work at the current wage cannot find jobs.
(b) Any three, explained:
Frictional: short-term unemployment while workers move between jobs or lack information about vacancies.
Structural: caused by long-term changes in the structure of the economy or technology, e.g. machines replacing workers or a declining industry.
Cyclical: caused by a general fall in demand during a depression or recession in the trade cycle.
Seasonal: caused by seasonal changes in demand or weather, e.g. farm workers in the dry season.
Disguised: more workers are employed than needed, so the marginal product of some is zero.
Residual: people who are unemployable through physical or mental disability.

Define each type and give its cause or an example.

To raise revenue to finance government expenditure.
To redistribute income and reduce inequality (e.g. progressive taxes).
To discourage consumption of harmful goods such as alcohol and tobacco.
To protect infant industries (import duties).
To control inflation by reducing spending power.
To correct balance of payments deficits by reducing imports.
To influence the location of industries and the use of resources.
To control monopolies and excess profits.

Give at least five reasons, each with a short explanation.

Shortage of capital for investment.
Shortage of skilled labour, managers and technical know-how.
Poor infrastructure: unreliable electricity, bad roads, poor communications.
Small domestic market due to low incomes.
Inadequate supply of local raw materials and dependence on imported inputs.
Political instability and inconsistent government policies.
Competition from cheaper or preferred foreign goods.
Corruption and poor management.

Five well-explained reasons are needed.

By granting long-term loans at low interest for development projects (roads, power, water).
By financing infrastructure and agricultural or industrial projects.
By giving technical assistance and expert advice on development planning.
By training local personnel and experts.
By carrying out or funding feasibility studies for projects.
By guaranteeing loans from private lenders to the country.
By encouraging private foreign investment.
By supporting education, health and poverty-reduction programmes.

Link each World Bank function to development in the country.