WAEC Economics 2020 Theory — Question 3

Model answer

(a) Consumer goods can be defined as goods which are not meant for further production but rather for consumption by the final consumers. (b)(i) Fixed capital can be defined as those types of asset which are used repeatedly in the process of production. It does not vary with the level of output and it is consumed over years. (ii) Social capital can be defined as the net worth of an organization in terms of its relationship with the environment. It is usually regarded as the goodwill. (iii) Circulating capital can be defined as those assets that are used from time to time; it changes value many times during the year. They are assets that are used up within a year. (c) Reasons for low level of savings in a country: i. Low level of income: if the level of income is low, definitely the savings will be low. ii. High level of consumption: in most developing countries and in any country where consumption is high, the savings will be low. iii. Low return on investment: majority of people save for the purpose of investment; if the return on investment is low, they will be put off and will tend to save less.