gce model questions vol1 2021 economics | Essay

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Question 1 View Details
Answer the following questions on basic economic concepts.
Question Parts
(a)
Define scarcity and explain how it creates the need for economic choice.
(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 decision that a small‑holder farmer in northern Nigeria might face.
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Question 2 View Details
The government of Nigeria imposes a specific excise tax on each pack of cigarettes. The market data before and after the tax are summarised below. - Before the tax: equilibrium price = ₦200 per pack, equilibrium quantity = 5,000 packs per month. - After the tax: price paid by consumers = ₦250 per pack, price received by producers = ₦230 per pack (the difference of ₦20 is the tax per pack), equilibrium quantity = 4,000 packs per month. Using this information, answer the following questions.
Question Parts
(a)
Calculate the price elasticity of demand (PED) between the two situations. Show all steps.
(b)
Based on the calculated elasticity, state whether demand is elastic, inelastic or unit‑elastic and explain the implication for total revenue of cigarette sellers after the tax.
(c)
Discuss how the tax affects consumer surplus, producer surplus and government revenue. Identify which group (consumers or producers) bears the greater burden of the tax and justify your answer using the concepts of elasticity and the data provided.
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Question 3 View Details
A small manufacturing firm sells a single product. The table below shows the quantity of the product demanded at two different market prices. | Price (₦) | Quantity Demanded (units) | |-----------|---------------------------| | 200 | 500 | | 250 | 400 | Using this information, answer the following questions.
Question Parts
(a)
Calculate the price elasticity of demand between the two price points using the midpoint (arc) method. State whether demand is elastic, inelastic or unit‑elastic and justify your answer.
(b)
The government imposes a specific tax of ₦50 per unit on this product. Assuming the full amount of the tax is added to the price paid by consumers, predict the effect of the tax on total revenue and explain your reasoning using the elasticity calculated in part (a).
(c)
If consumer income rises by 10 % and the income elasticity of demand for the product is 1.5, estimate the percentage change in quantity demanded and discuss the likely impact on the firm’s sales strategy.
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Question 4 View Details
A firm produces a single product using a fixed amount of capital and varying numbers of labour units. The data below show the weekly output (units) obtained for each additional worker employed. | Labour (L) | Output (Q) | |------------|------------| | 0 | 0 | | 1 | 20 | | 2 | 45 | | 3 | 66 | | 4 | 80 | | 5 | 90 | Assume the weekly wage rate per worker is ₦500 and the fixed capital cost is ₦2,000. Answer the following questions.
Question Parts
(a)
Calculate the marginal product (MP) and average product (AP) of labour for each additional worker (from the 1st to the 5th worker). Present your results in a clear table.
(b)
Using the results from part (a), identify the stage of production (I, II or III) that the firm is in for each level of labour employed. Explain the basis of your identification.
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Question 5 View Details
A small manufacturing firm produces a single type of widget. The firm incurs fixed costs of ₦200,000 per month. The variable cost per widget is ₦150 and the current selling price is ₦250 per widget. At present the firm produces and sells 2,000 widgets each month.
Question Parts
(a)
Calculate the firm’s total cost, total revenue and profit for the current level of output.
(b)
Determine the break‑even output (the number of widgets that must be sold for profit to be zero). Show the algebraic steps used.
(c)
The firm wishes to increase its profit by 20 % without changing the selling price. Assuming the variable cost per unit remains constant, calculate the minimum additional output required to achieve this target.
(d)
Discuss two non‑price factors that could cause the firm’s average total cost (ATC) curve to shift. For each factor, explain how the shift would affect the break‑even output.
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Question 6 View Details
The market for cassava flour in Nigeria is characterised by the following observations: - There are a large number of small‑scale producers, each supplying a relatively small share of total output. - The product is largely homogeneous, but firms occasionally differentiate by packaging and branding. - Entry into the market requires modest capital and no special licences, although access to reliable electricity can be a constraint. - Consumer demand is relatively price‑elastic, and a rise in consumer income tends to increase the quantity demanded. - The price of cassava flour has been relatively stable over the past year, hovering around ₦150 per kilogram.
Question Parts
(a)
Identify the market structure that most closely matches the description above and justify your choice with reference to at least three defining characteristics.
(b)
Explain how a rise in consumer income would affect the demand curve for cassava flour and, using a short paragraph, describe the likely impact on the market equilibrium price and quantity.
(c)
The government is considering two policy measures to protect consumers in this market: (i) imposing a price ceiling of ₦130 per kilogram; (ii) providing a subsidy of ₦20 per kilogram to producers. Evaluate the likely effectiveness of each measure in improving consumer welfare, and discuss any possible unintended consequences.
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Question 7 View Details
National income statistics are central to economic planning and policy evaluation.
Question Parts
(a)
Define Gross Domestic Product (GDP) using the expenditure approach and list its four components.
(b)
Discuss two major limitations of using GDP as a measure of a country’s economic welfare.
(c)
Evaluate how a large informal sector can affect the reliability of national income estimates in a developing country.
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Question 8 View Details
Monetary policy is a key instrument for macro‑economic management in Nigeria.
Question Parts
(a)
Outline the transmission mechanism through which a change in the policy interest rate influences aggregate demand.
(b)
Compare the likely effectiveness of open‑market operations (OMO) and a change in the reserve requirement ratio (RRR) in achieving a contractionary stance in the Nigerian economy.
(c)
Analyse two possible unintended consequences of a sustained contractionary monetary policy in a developing country like Nigeria.
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Question 9 View Details
Inflation has become a major macro‑economic issue in Nigeria.
Question Parts
(a)
Define inflation and explain the two principal types – demand‑pull and cost‑push – giving one cause for each type.
(b)
In the year 2022 the Consumer Price Index (CPI) rose from 120 to 138. (i) Calculate the percentage rate of inflation for the year. (ii) If the average nominal wage increased by 5 % over the same period, determine the percentage change in real wages and comment on the likely effect on workers.
(c)
Discuss the advantages and limitations of monetary policy and fiscal policy as tools for controlling inflation in a developing economy such as Nigeria. In your answer, suggest which policy or combination you consider most appropriate and justify your choice.
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Question 10 View Details
Unemployment remains a persistent problem in many developing economies, including Nigeria.
Question Parts
(a)
Define unemployment and distinguish between structural, frictional and cyclical unemployment, giving one example of each.
(b)
In a given year the total labour force in Nigeria is 20 million and the number of unemployed persons is 2.5 million. Of the unemployed, 0.8 million are structurally unemployed and 0.5 million are frictionally unemployed. (i) Calculate the overall unemployment rate. (ii) Calculate the structural unemployment rate. (iii) Discuss briefly the likely macro‑economic implications of a high structural unemployment rate for Nigeria.
(c)
Evaluate two policy measures that the Nigerian government could adopt to reduce structural unemployment. In your evaluation, consider both the short‑term and long‑term effects and any possible trade‑offs.
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