WAEC Economics 2022 Theory — Question 6

Model answer

(a) A demand schedule is a table showing the quantities of a commodity demanded at various prices. (b)(i) Effective demand refers to the desire for a commodity backed by the ability to pay for it at a particular price and time. (ii) Composite demand refers to the demand for a commodity due to its various uses. (iii) Derived demand refers to demand for a commodity, not for its own sake, but for the production of another commodity. (c)(i) In the case where two commodities are substitutes e.g. Margarine and butter: When the price of margarine increases from P1 to P2, its quantity demanded will decrease from Q1 to Q2. When this happens, consumers being rational will switch to increasing the demand for butter, shown by a rightward shift of the demand curve from D1D1 to D2D2. (ii) In the case where the commodities are complements e.g. Torch and batteries: When the price of torch increases from P1 to P2, the quantity demanded will fall from Q1 to Q2. When this happens, the demand for batteries will fall, shown by a leftward shift of the demand curve from D1D1 to D2D2.