gce model questions vol1 2017 economics | Essay

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Question 1 View Details
Consider a closed economy where resources are scarce and choices must be made. Answer the following.
Question Parts
(a)
Define scarcity and explain why it is the fundamental problem that gives rise to economics.
(b)
Distinguish between wants and needs, giving two examples of each that are relevant to households in Nigeria.
(c)
Explain the concept of opportunity cost and illustrate it with a farmer who must decide whether to plant maize or cassava on a hectare of land.
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Question 2 View Details
The Nigerian government has introduced a 5 % tax on all mobile data bundles sold by telecom operators. Answer the following questions, using appropriate economic reasoning.
Question Parts
(a)
Explain how the tax will affect the demand curve, the supply curve and the resulting equilibrium price and quantity of data bundles in the short run.
(b)
Given that the price elasticity of demand for data bundles is –0.5 and the price elasticity of supply is 1.2, discuss which group – consumers or producers – bears a greater burden of the tax and why.
(c)
If the tax is removed after one year, predict the short‑run adjustments in price and quantity and discuss any possible lag in the market’s response.
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Question 3 View Details
The market for bottled water in Nigeria is competitive. The price of bottled water increased from ₦150 per litre to ₦180 per litre, and as a result the quantity demanded fell from 12,000 litres per month to 9,600 litres per month. At the same time, the price of a close substitute, sachet drink, fell from ₦100 to ₦85 per litre, leading to an increase in its quantity demanded from 8,000 to 10,000 litres per month.
Question Parts
(a)
Calculate the price elasticity of demand for bottled water using the midpoint (arc) method.
(b)
Calculate the cross‑price elasticity of demand for bottled water with respect to the price of sachet drink, using the midpoint method.
(c)
Based on the elasticities obtained, discuss how a firm producing bottled water should respond in terms of pricing and product strategy.
(d)
Explain two possible reasons why the demand for bottled water might be relatively elastic in this market.
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Question 4 View Details
A small manufacturing firm produces wooden chairs. The short‑run total cost (TC) function is TC = 200 + 5Q + 0.1Q², where Q is output (units per month). The firm sells each chair at a constant market price of ₦150.
Question Parts
(a)
Derive the short‑run marginal cost (SMC) and average total cost (ATC) functions.
(b)
Determine the level of output at which the firm should produce to maximise profit, or explain why it should shut down.
(c)
Calculate the profit (or loss) at that output level.
(d)
Discuss how the firm’s decision would change in the long run if the market price fell to ₦120.
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Question 5 View Details
A small manufacturing firm produces hand‑crafted wooden chairs. The following information is available for a typical month. Output (units) | Total Cost (₦) | Total Revenue (₦) --- | --- | --- 0 | 20,000 | 0 100 | 45,000 | 55,000 200 | 70,000 | 100,000 300 | 100,000 | 135,000 400 | 140,000 | 160,000
Question Parts
(a)
Calculate the average total cost (ATC) and average total revenue (ATR) at an output of 300 units. Comment on the firm’s profitability at that output.
(b)
Estimate the marginal cost of the 300th unit using the data provided. Explain the method you used.
(c)
Using the data, determine the output level at which the firm makes the maximum profit within the range given. Show your reasoning.
(d)
Discuss two ways in which the firm could achieve lower average costs in the long run. Relate your discussion to the concepts of economies of scale and technical progress.
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Question 6 View Details
The market for bottled sachet water in a Nigerian city has the following characteristics: - A large number of small firms sell an identical product. - There are no legal or technical barriers to entry. - Firms are price‑takers; the market price is determined by the interaction of total supply and total demand. - Recently a large multinational company entered the market and now accounts for about 30 % of total sales. - The government has introduced a price ceiling of ₦25 per sachet, which is below the current equilibrium price of ₦30 per sachet. Answer the questions that follow.
Question Parts
(a)
Identify the market structure that best describes the market before the multinational entered. Justify your answer with at least three relevant characteristics.
(b)
After the entry of the multinational, discuss whether the market structure has changed. Use the concepts of market concentration and barriers to entry in your explanation.
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Question 7 View Details
The table below shows selected macro‑economic data for Country X for the year 2022 (all values in billions of naira).
Question Parts
(a)
Using the expenditure approach, calculate the Gross Domestic Product (GDP) at market prices.
(b)
Adjust the figure obtained in part (a) to determine Gross National Product (GNP) at market prices.
(c)
Derive National Income (NI) at factor cost from the GNP obtained in part (b).
(d)
Assume that exports increase by 10 % while all other components of aggregate demand remain unchanged. Explain qualitatively how this change would affect the National Income and why.
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Question 8 View Details
The Central Bank of Country Y operates a fractional‑reserve banking system. The statutory reserve ratio is currently 10 %. The banking system holds total deposits of ₦5,000 million. The Central Bank is considering lowering the reserve ratio to 5 % to stimulate the economy.
Question Parts
(a)
Calculate the money multiplier under the current reserve ratio and state the maximum possible increase in the money supply if all banks fully utilise this multiplier.
(b)
If the reserve ratio is reduced to 5 %, recompute the money multiplier and the theoretical increase in the money supply relative to the level found in part (a).
(c)
Discuss two channels through which the increase in the money supply can affect aggregate demand, linking your answer to the Keynesian model. Include the likely short‑run effects on output and the price level.
(d)
Critically assess one possible downside of lowering the reserve ratio, considering both inflationary pressures and financial‑sector stability.
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Question 9 View Details
The table below shows the Consumer Price Index (CPI) for Nigeria, with 2010 as the base year (CPI = 100).
Question Parts
(a)
Calculate the annual inflation rate for each year from 2015 to 2020 using the CPI data.
(b)
Identify the overall trend in the inflation rates you have calculated and discuss two macro‑economic factors that could have contributed to this trend in Nigeria.
(c)
Explain how the observed pattern of inflation is likely to affect (i) households with fixed incomes, (ii) borrowers, and (iii) exporters.
() Households with fixed incomes
() Borrowers
() Exporters
(d)
Evaluate two policy measures – one monetary and one fiscal – that the Central Bank of Nigeria could adopt to bring inflation down to the target range of 6‑9 %. Discuss the likely advantages and possible drawbacks of each measure.
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Question 10 View Details
The labour market statistics for Nigeria in 2020 are given below:
Question Parts
(a)
Using the data, calculate (i) the overall unemployment rate and (ii) the youth unemployment rate (youth = ages 15‑24).
() Overall unemployment rate
() Youth unemployment rate
(b)
Discuss two structural and two cyclical factors that could be contributing to the level of unemployment observed in Nigeria.
(c)
Explain how a persistently high unemployment rate might influence inflation in the Nigerian economy, referring to the Phillips curve relationship.
(d)
Recommend two policy measures (one demand‑side and one supply‑side) that could be implemented to reduce unemployment. For each measure, outline the mechanism through which it would operate and a possible limitation.
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