Gce Model Questions Vol1 2019 Economics Question 2

Practice essay / theory question 2 from the 2019 Gce Model Questions Vol1 Economics examination. This question covers Demand Curve, Supply Curve, Equilibrium, Government Subsidy, Macroeconomic Impact .

Gce Model Questions Vol1 2019 Economics Essay / Theory
Topics: Demand Curve Supply Curve Equilibrium Government Subsidy Macroeconomic Impact
Question 2 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • essay

The market for maize in Nigeria is described by the data in the table below (price in ₦ per kilogram, quantity in million tonnes). The government is considering a subsidy on fertilizer that will lower producers’ costs. | Price (₦/kg) | Quantity Demanded (million tonnes) | Quantity Supplied (million tonnes) | |--------------|------------------------------------|------------------------------------| | 100 | 2.0 | 0.5 | | 150 | 1.5 | 1.0 | | 200 | 1.0 | 1.5 | | 250 | 0.5 | 2.0 | Answer the following questions.

Question Parts

( a )
Using the data, sketch (conceptually) the demand and supply curves and state the initial equilibrium price and quantity.
( b )
Explain how the fertilizer subsidy is expected to affect the supply curve and give the economic reasoning behind the shift.
( c )
Assuming the subsidy raises the quantity supplied at every price by 0.6 million tonnes, determine the new equilibrium price and quantity using a linear approximation based on the two points nearest the original equilibrium.
( d )
Discuss two possible macro‑economic consequences of introducing the fertilizer subsidy for the Nigerian economy.

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About This Question

This is Gce Model Questions Vol1 2019 Economics Question 2. It is one of the essay questions from the 2019 Gce Model Questions Vol1 Economics examination.

The question covers Demand Curve, Supply Curve, Equilibrium, Government Subsidy, Macroeconomic Impact .

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