WAEC Economics 2014 Theory Past Questions

Model answer

(a) Balance of trade (visible trade only) = Receipts − Payment = $52,000 − $40,000 = $12,000 (b) Balance on current account = (visible trade + invisible trade credits) − (visible trade + invisible trade debits) = $(52,000+4,000+20,000+2,500+22,800) − $(40,000+8,000+5,000+7,500+7,000) = $101,300 − $67,500 = $33,800 (c) Balance on capital account = (credit items) − (debit items) = $(50,000+254,000+221,000) − $(26,000+289,000+238,000) = $525,000 − $553,000 = −$28,000 (d) Balance of payment = balance on current account + balance on capital account = $33,800 + (−$28,000) = $5,800.00

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(a) At P=$20, Q=500. At P=$18, Q=400. % change in Q = (400−500)/500 × 100 = −20% % change in P = (18−20)/20 × 100 = −10% Price elasticity of supply = −20/−10 = 2 (b) Since the coefficient (2) is greater than 1, supply is elastic — a given percentage change in price leads to a more-than-proportionate (double) percentage change in quantity supplied.

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(i) On a price–quantity graph, the supply curve for palm oil shifts to the right, from S₀ to S₁, at the constant price P₀=$6.00; quantity supplied increases from q₀ to q₁ even though price is unchanged. (ii) The two commodities have joint supply — an increase in the price of one commodity increases the quantity supplied of the other because they are jointly supplied from a common source (e.g. palm oil and palm kernel oil, both from the oil palm fruit), causing an outward shift in supply of the related product even at a constant own-price.

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A change in supply can be caused by: i. A change in the price of a related commodity ii. A change in technology iii. A change in the cost of factors of production iv. A change in the number of sellers v. A change in government policy vi. A change in weather conditions vii. Natural disasters

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Occupational mobility of labour is the ease or ability with which workers can move from one occupation or job to another.

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1. Family ties: geographical mobility can be limited for a married person or someone who is unwilling to leave their family. 2. Age: young people have a higher tendency of changing jobs or their geographical location than older people. 3. Cost of training: the cost or length of the period required for training can discourage labour from changing jobs. 4. Trade union or professional association restrictions: these may limit the ease of moving into an occupation if membership requirements must be met.

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1. Level of education and training: the skill acquired through formal and informal training can make a significant difference in the performance of labour. 2. Better condition of service and good remuneration/incentives.

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Crop farming is the cultivation of plants (crops) for food, raw materials, or other economic purposes.

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1. Use of improved/high-yielding seed varieties. 2. Use of fertilizers to improve soil fertility. 3. Provision of irrigation facilities to ensure adequate water supply. 4. Mechanization of farming (use of modern farm tools and machinery).

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1. Provision of farm inputs such as fertilizers, machinery, and tools by industries. 2. Processing of agricultural produce, adding value through agro-processing industries.

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Public Limited Company | Private Limited Company 1. Can sell shares to the general public | 1. Cannot sell shares to the general public 2. Requires a minimum of 7 shareholders | 2. Requires a minimum of 2 shareholders 3. Shares are freely transferable (traded on the stock exchange) | 3. Shares are not freely transferable 4. Must publish its accounts/annual reports | 4. Not required to publish its accounts publicly

Model answer

1. Shareholders enjoy limited liability — their liability is limited to the amount they invested. 2. The company has a separate legal entity and perpetual succession (it continues to exist even if a shareholder dies or leaves). 3. It has the ability to raise more capital through the sale of shares. 4. Ownership can be transferred easily, as shares can be bought and sold.

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Gross national income (GNI) is the total income earned by the nationals/residents of a country, both at home and abroad, over a given period (usually a year), including net income from abroad.

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(i) Personal income is the total income received by individuals/households from all sources (e.g. wages, rent, interest, dividends) before the deduction of personal income tax. (ii) Disposable income is the income left for an individual to spend or save after personal income tax has been deducted from personal income. Example: if a worker's personal income is ₦100,000 and tax deducted is ₦20,000, disposable income = ₦80,000.

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1. To measure and compare the standard of living of a country's citizens. 2. To compare the economic performance/growth of a country over time or with other countries. 3. To assist government in economic planning and policy formulation.

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The normal chain of distribution is the route/channel through which goods move from the producer to the final consumer, typically: Producer → Wholesaler → Retailer → Consumer.

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1. Breaking bulk — buying goods in large quantities from producers and selling them in smaller units. 2. Storage/warehousing — storing goods to ensure a steady supply to consumers. 3. Transportation — moving goods from the point of production to the point of consumption.

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1. Poor transportation/road network infrastructure. 2. Poor storage facilities, leading to spoilage of perishable goods. 3. Inadequate or poor communication networks. 4. Instability in prices due to market fluctuations (also: insecurity along trade routes, bureaucratic/customs bottlenecks).

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A specific tax is a tax imposed as a fixed amount per unit of a commodity, regardless of the commodity's price (e.g. a fixed amount per litre of fuel).

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With a perfectly elastic demand (horizontal demand curve), the producer bears the entire burden of the tax. The supply curve shifts upward by the amount of the tax, but the price paid by consumers remains unchanged (at the original price level); quantity demanded and supplied falls, since the producer cannot pass the tax on to the price-sensitive consumers. [Diagram: horizontal demand curve D; supply curve shifts from S to S+tax; price stays at P₀; quantity falls from Q₀ to Q₁]

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With a perfectly inelastic demand (vertical demand curve), the entire burden of the tax is passed on to the consumer. Price rises by the full amount of the tax, while the quantity demanded remains unchanged. [Diagram: vertical demand curve D; supply curve shifts from S to S+tax; price rises from P₀ to P₁ by the full tax amount; quantity remains at Q₀]

Model answer

1. A direct tax is levied directly on the income or wealth of an individual/entity (e.g. income tax), while an indirect tax is levied on goods and services (e.g. VAT, sales tax). 2. The burden of a direct tax cannot be shifted to another person, while the burden of an indirect tax can be shifted (e.g. from seller to buyer through the price of the good).