WAEC Economics 2017 Theory Past Questions

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Price elasticity of demand = (% change in quantity demanded) / (% change in price). % change in quantity demanded = (800-600)/800 x 100 = 25%. % change in price = (450-500)/450... using magnitude: (500-450)/450 x 100 = 11.11%. ∴ Price elasticity of demand = 25%/11.11% = 2.25.

Model answer

It is fairly price elastic. Since the price elasticity of demand is greater than 1, then it is fairly elastic demand. (Note: it would be perfectly elastic only if price elasticity = ∞.)

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(i) Total revenue before price increased = $450 x 800 = $360,000. Total revenue after price increased = $500 x 600 = $300,000. (ii) Change in total revenue = $360,000 - $300,000 = $60,000 (a decrease). (iii) The effect of the increase in price is a reduction of the total revenue by $60,000 (since demand is elastic, raising price reduces total revenue). (iv) Factors influencing price elasticity of demand: (a) Price of the commodity (b) Change in consumer's taste (other factors include availability of substitutes, proportion of income spent on the good, and necessity vs luxury).

Model answer

Demand schedule: at Price=2, Qd=30-2=28; Price=4, Qd=30-4=26; Price=7, Qd=30-7=23. Supply schedule: at Price=2, Qs=15+2(2)=19; Price=4, Qs=15+2(4)=23; Price=7, Qs=15+2(7)=29.

Model answer

Equilibrium price is achieved at Qd=Qs: 30-P=15+2P → 3P=15 → P=$5. Qd=30-P=30-5=25 units (Qs=15+2(5)=25 units also, confirming). ∴ Equilibrium price is $5 while equilibrium quantity is 25 units.

Model answer

If price is fixed at $3: Qd=30-3=27 units. Qs=15+2(3)=21 units. Excess demand = Qd-Qs = 27-21 = 6 units.

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(i) New demand function Qd=40-P: at Price=2, Qd=40-2=38; Price=4, Qd=40-4=36; Price=7, Qd=40-7=33. (ii) It represents an increase in demand. (iii) Since the new quantity demanded at the same level of price increases (compared to the original schedule), then it is an increase in demand.

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Land can be defined as a factor of production which has fixed quantity and is naturally available for exploration of resources, with rent as its reward.

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Features of land: (i) It is fixed in supply (ii) It embodies natural resources (iii) It is subjected to diminishing returns.

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Ways in which land contributes to economic development of Nigeria: (i) Land makes resources available for exploration such as the crude oil, the coal, gold etc. which are available in different parts of the country. (ii) Land is used for farming and grazing in Nigeria; thus, it makes it easy to make available agricultural products. (iii) Land serves as source of employment to a large majority of the population through mining, farming etc. (iv) Land is used to build factory and houses in different parts of Nigeria.

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Subsistence farming can be defined as farming for family consumption. It does not aim at selling in the market.

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Crop farming involves cultivation of food crops such as yam, cassava, beans, rice, while livestock farming involves rearing of animals such as sheep, goats, cows, poultry etc.

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Methods to boost Agricultural Production: (i) Provision of adequate and sufficient fertilizers to the farmers (ii) Provision of storage facilities and efficient marketing board for the farmers (iii) Provision of loans for the farmers (iv) Provision of technical assistance and advice to the farmers.

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Features of perfect competition: (i) Free entry and exit to the market (ii) Large number of buyers and sellers. Features of Monopolistic competition: (i) Few sellers with differentiated goods (ii) Restriction of entry and exit to the market.

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(i) To be a price taker means that the firm cannot determine prices of goods but the market determines it. (ii) To be a price maker means that the firm's decisions can determine prices of goods and does not take price from the market.

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(i) Act of parliament: This has to do with when the law establishes the monopoly and gives it the exclusion right to run the business. (ii) Copyright: This has to do with a situation where the material is developed originally by the person. This gives such person exclusive right to the material. (iii) Natural monopoly: This has to do with a situation where the monopoly is created as a result of some natural forces which cannot be acquired. (iv) Cartel: This is a situation where monopoly is created by coming together of firms that produces similar product to regulate output.

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Inflation can be defined as the sustained increase in the general price level of commodities within some space of the year.

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Causes of demand pull inflation: (i) Increase in the absolute total population (ii) Decrease in supply of output (iii) Increase in taxation (any relevant third cause may include increase in government spending). Causes of cost-push inflation: (i) Increase in the cost of factors of production (ii) Increase in taxation (iii) Fall in the domestic value of money.

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Economic development can be defined as sustained economic growth coupled with structural change in the economy.

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Features of a developing country: (i) Low level of Human Development Index (HDI) (ii) High fertility rate (iii) High level of illiteracy.

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Factors that can speed up economic development: (i) Improvement in the level of technology (ii) Adequate man power training (iii) Stabilization of political posts and offices (iv) Diversification of the economy.

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Features of free trade area: I. Zero tax and tariff II. Free movement of members' countries. Features of common markets: I. Equal percentage of tax and tariff II. Free movement of factors or production.

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Advantages of common market: (i) Stability is promoted as each member of a country know the tariff to pay (ii) It fastens friendliness among member countries. Disadvantages of common market: (i) It may lead to human trafficking (ii) The development of member countries may be one sided as people will prefer to move their goods to places with high population.