gce model questions vol1 2020 economics | Essay

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Question 1 View Details
Consider a small island economy that produces only two goods: fish and coconuts.
Question Parts
(a)
Define scarcity and explain why it exists in this economy.
(b)
Using the concept of opportunity cost, explain what is sacrificed when the island decides to increase fish production by 10 tonnes, assuming resources are reallocated from coconut production.
(c)
Evaluate the role of the price mechanism in allocating the limited resources between fish and coconuts, mentioning both advantages and possible limitations.
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Question 2 View Details
The government of Nigeria is considering imposing a tax of ₦200 per litre on petrol.
Question Parts
(a)
Explain, using demand and supply analysis, how the tax is expected to affect the equilibrium price and quantity of petrol. Include a brief description of the shifts in the curves.
(b)
Assuming the initial equilibrium price was ₦150 per litre and the equilibrium quantity was 1,000,000 litres per month, and that the price elasticity of demand for petrol is –0.4 while the price elasticity of supply is 0.6, estimate the approximate incidence of the tax on consumers and producers (i.e., how the ₦200 tax is shared). Show the steps of your reasoning.
(c)
Discuss two possible unintended consequences of the tax on the broader economy, linking them to concepts such as substitution effect, black market, or fiscal revenue.
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Question 3 View Details
A small textile firm sells a single type of shirt. The table below shows the price per shirt (in ₦) and the corresponding quantity demanded per week. | Price (₦) | Quantity demanded (units) | |-----------|---------------------------| | 500 | 2000 | | 550 | 1800 | | 600 | 1650 | Using this information, answer the following:
Question Parts
(a)
Calculate the price elasticity of demand between the first two rows (price 500 ₦ to 550 ₦) using the midpoint method.
(b)
Interpret the magnitude of the elasticity you obtained and explain what it implies for the firm’s total revenue if it raises the price.
(c)
If the price is increased from ₦500 to ₦600, estimate the expected percentage change in quantity demanded using the elasticity from part (a).
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Question 4 View Details
A small workshop employs labour as the only variable input in the short‑run. The table shows the amount of labour employed each week (number of workers) and the total output produced. | Labour (workers) | Total Output (units) | |------------------|----------------------| | 1 | 20 | | 2 | 45 | | 3 | 75 | | 4 | 100 | | 5 | 120 | | 6 | 130 | Using this data, answer the following:
Question Parts
(a)
Calculate the marginal product (MP) of labour and the average product (AP) of labour for each level of employment and present the results in a table.
(b)
From your calculations, identify the range of labour over which diminishing marginal returns set in and explain how you identified it.
(c)
Discuss how the shapes of the MP and AP curves reflect the law of diminishing returns and the concept of economies of scale in the short‑run.
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Question 5 View Details
A textile firm produces shirts. The table below shows its total cost (TC) and total revenue (TR) at various levels of output. | Output (units) | TC (₦) | TR (₦) | |----------------|--------|--------| | 0 | 200,000| 0 | | 100 | 260,000| 300,000| | 200 | 340,000| 560,000| | 300 | 440,000| 780,000| | 400 | 560,000| 960,000| | 500 | 700,000| 1,100,000|
Question Parts
(a)
Calculate the average cost (AC) and average revenue (AR) for each output level shown in the table.
(b)
Determine the output at which the firm breaks even (i.e., where total revenue equals total cost). Show the method you use and state the approximate break‑even output.
(c)
Using the concept of marginal cost (MC), discuss whether the firm should increase output beyond the break‑even point. Include:
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Question 6 View Details
Consider the market for bottled water in Nigeria.
Question Parts
(a)
Define perfect competition and monopoly. List three distinguishing characteristics of each market structure.
(b)
Using economic reasoning (no diagram required), explain how price and output are determined in each of the two market structures.
(c)
The government is considering imposing a price ceiling of ₦50 per litre on bottled water, where the current equilibrium price is ₦70 per litre. Evaluate the likely effects of this price ceiling on consumer surplus, producer surplus and overall market efficiency.
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Question 7 View Details
National income accounting provides a framework for measuring the economic performance of a country. Using the data and concepts below, answer the following questions.
Question Parts
(a)
Define the three major components of aggregate demand and explain how a change in each component can affect national income.
(b)
In 2022 the nominal GDP of the country was ₦15 trillion and the price index (base year 2010 = 100) was 120. Calculate the real GDP for 2022.
(c)
Real GDP grew by 4 % from 2021 to 2022 while the population grew by 2.5 % over the same period. Calculate the per‑capita real GDP growth rate and comment on its economic significance.
(d)
Discuss two major limitations of using GDP as a measure of the welfare of a nation.
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Question 8 View Details
Money and banking are central to the functioning of a modern economy. Using the information and concepts given, answer the questions below.
Question Parts
(a)
Explain how money is created in a fractional‑reserve banking system and derive the formula for the simple money multiplier.
(b)
The Central Bank has set the statutory reserve requirement at 10 %. It now purchases government securities worth ₦2 billion in an open‑market operation. Assuming banks hold no excess reserves and the public’s preference for cash does not change, calculate the maximum possible increase in the money supply resulting from this operation.
(c)
The economy is currently experiencing demand‑pull inflation. Discuss two monetary‑policy tools the Central Bank could employ to curb inflation, evaluating their likely effectiveness and possible side‑effects.
(d)
Critically assess the limitations of the simple money‑multiplier concept when applied to a real‑world economy.
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Question 9 View Details
The table below shows the Consumer Price Index (CPI) for Nigeria from 2015 to 2019. | Year | CPI | |------|-----| | 2015 | 115 | | 2016 | 124 | | 2017 | 136 | | 2018 | 150 | | 2019 | 165 | Using this information, answer the following:
Question Parts
(a)
Explain the main causes of demand‑pull inflation and cost‑push inflation, giving one realistic example of each that could occur in the Nigerian economy.
(b)
Calculate the annual inflation rate for each year from 2016 to 2019 using the CPI data, then determine the average inflation rate over the four‑year period. Comment on the trend shown by the calculated rates.
(c)
Discuss the likely impact of the inflation trend you have identified on (i) real wages of workers and (ii) the value of household savings in Nigeria. Then evaluate two monetary‑policy measures that the Central Bank of Nigeria could adopt to curb inflation, highlighting one advantage and one limitation of each measure.
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Question 10 View Details
The table below presents the unemployment rate in Nigeria for the years 2015–2019. | Year | Unemployment Rate (%) | |------|-----------------------| | 2015 | 7.5 | | 2016 | 7.8 | | 2017 | 8.1 | | 2018 | 9.0 | | 2019 | 9.5 | Answer the following questions:
Question Parts
(a)
Define structural, frictional and cyclical unemployment. Based on the data above, which type is most likely to be dominant in Nigeria and why?
(b)
Calculate the average annual increase in the unemployment rate (in percentage points) over the period 2015–2019 and interpret what the figure suggests about the labour market trend.
(c)
Discuss two major socio‑economic consequences of high unemployment in Nigeria. Then evaluate the likely effectiveness of (i) a nationwide vocational‑training programme and (ii) a public‑works infrastructure scheme in reducing unemployment, giving one advantage and one limitation for each policy.
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