gce model questions vol1 2024 economics | Essay

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Question 1 View Details
A small Nigerian community obtains its drinking water from a single well that can supply a maximum of 5,000 litres per day.
Question Parts
(a)
Define “scarcity” in the context of this community and explain why water is a scarce resource.
(b)
Using the concept of opportunity cost, discuss two different ways the community could allocate the water supply and the trade‑offs involved in each allocation.
(c)
If the community decides to allocate water between domestic use and irrigation in the ratio 3 : 2, calculate the amount of water each purpose receives and comment on how this allocation reflects the principle of choice.
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Question 2 View Details
The market for locally produced mangoes in a Nigerian town is described by the following schedules (price in ₦ per kilogram).
Question Parts
(a)
Determine the equilibrium price and quantity. Show all working steps.
(b)
The government imposes a per‑kilogram tax of ₦50 on mango producers. Assuming the tax shifts the supply curve vertically upwards by the tax amount, answer the following:
() Write the new supply schedule after the tax.
() Determine the new equilibrium price paid by consumers, the price received by producers, and calculate the percentage tax burden on each.
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Question 3 View Details
The government of Country X is considering raising the excise tax on cigarettes. The market for cigarettes can be approximated by the linear demand equation Q = 120 – 2P, where Q is the quantity demanded (in thousands of packs per month) and P is the price per pack (in Naira). Currently the price is N15 per pack. Assume the tax increase will raise the retail price from N15 to N20 per pack.
Question Parts
(a)
Using the midpoint (arc) method, calculate the price elasticity of demand between the price of N15 and N20.
(b)
State whether demand in this price range is elastic, inelastic or unit‑elastic and explain what this implies for total revenue when the price rises from N15 to N20.
(c)
If the tax increase of N5 per pack raises the price from N15 to N20, estimate the percentage change in quantity demanded using the elasticity you obtained, and discuss the likely effect on tax revenue collected by the government.
(d)
Discuss two factors that could cause the price elasticity of demand for cigarettes to differ from the value you have calculated above.
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Question 4 View Details
A small manufacturing firm uses a fixed amount of capital and varies the number of workers (labour) each month. The table below shows the total output (Q) produced with different numbers of workers (L). Output is measured in units per month. | L (workers) | Q (units) | |--------------|-----------| | 0 | 0 | | 1 | 20 | | 2 | 45 | | 3 | 63 | | 4 | 76 | | 5 | 84 | Assume that the capital stock remains unchanged throughout the period.
Question Parts
(a)
Calculate the marginal product (MP) and average product (AP) of labour for each additional worker using the data provided.
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Question 5 View Details
A firm operates in the domestic market for bottled water. The market demand for the product is given by the linear equation P = 200 – 2Q, where P is the price in Naira per litre and Q is the quantity demanded in thousands of litres per month. The firm’s total cost (TC) function is TC = 50 + 5Q + 0.5Q² (all amounts are in thousands of Naira).
Question Parts
(a)
Derive the expressions for (i) marginal cost (MC) and (ii) average total cost (ATC).
(b)
Using the demand curve and the MC derived in part (a), determine the profit‑maximising output (Q*) and the corresponding price (P*). Show all steps.
(c)
Calculate the break‑even output (where total revenue equals total cost) and state the profit (or loss) the firm would make if it produced the profit‑maximising output found in part (b).
(d)
Explain qualitatively how an increase of ₦20,000 in fixed cost would affect the break‑even output and the profit at the profit‑maximising output.
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Question 6 View Details
The textile sector in Nigeria has recently undergone consolidation. Two of the three largest firms merged, leaving the market dominated by three firms. Prior to the merger the sector behaved like a monopolistically competitive market; after the merger it is argued to resemble an oligopoly. The prevailing market demand is P = 120 – 0.5Q (P in Naira per unit, Q in thousands of units). All firms have identical constant marginal cost of ₦30 per unit. The current market price is observed at ₦70 per unit.
Question Parts
(a)
Identify the market structure before the merger and after the merger. Justify your answer with reference to product differentiation and the number of firms.
(b)
Explain, using the kinked‑demand model, why the observed market price of ₦70 tends to remain stable even if marginal costs change.
(c)
Assuming the kinked‑demand model applies, calculate the output level that would correspond to the observed price of ₦70 if firms produced where price equals marginal cost. Comment on the plausibility of this outcome.
(d)
Discuss two policy measures the government could adopt to enhance competition in the post‑merger textile market and the likely impact of each on consumer welfare.
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Question 7 View Details
The following macro‑economic data relate to Country X for the year 2023 (all figures are in ₦ billions): - Consumption (C) = 3,200 - Investment (I) = 800 - Government spending (G) = 1,200 - Exports (X) = 500 - Imports (M) = 600 - Indirect taxes less subsidies (T) = 300 - Net factor income from abroad (NFI) = –50 (net outflow) - Depreciation (D) = 150 Using this information, answer the questions below. (a) Calculate the Gross Domestic Product (GDP) at market price. (b) Derive GDP at factor cost, Gross National Income (GNI) and National Income (NI). (c) Discuss two major limitations of using GNI as a measure of the economic welfare of a country and suggest two policy measures that could improve the distribution of national income.
Question Parts
(a)
Calculate the Gross Domestic Product (GDP) at market price.
(b)
Derive GDP at factor cost, Gross National Income (GNI) and National Income (NI).
(c)
Discuss two major limitations of using GNI as a measure of the economic welfare of a country and suggest two policy measures that could improve the distribution of national income.
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Question 8 View Details
Country Z’s central bank initially operates with a reserve requirement of 10 %, a discount rate of 5 % and holds government securities worth ₦2,000 bn. The monetary base (MB) at that time is ₦500 bn. Assume the simple money multiplier is m = 1 / reserve‑requirement. The bank then implements the following policy mix: 1. Raises the reserve requirement to 12 %. 2. Reduces the discount rate to 4 %. 3. Conducts an open‑market sale of ₦200 bn of government securities. Assume the open‑market sale reduces bank reserves by the same amount, thereby lowering the monetary base. Answer the questions below. (a) Calculate the new money multiplier and the new money supply after the policy changes. (b) Using the LM curve framework, explain the likely effect of the change in money supply on the equilibrium interest rate. (c) Within the IS‑LM model, discuss the expected impact on national output and the price level. (d) Identify two transmission mechanisms through which the policy mix influences the economy and discuss one possible trade‑off that the central bank may face between price stability and exchange‑rate stability.
Question Parts
(a)
Calculate the new money multiplier and the new money supply after the policy changes.
(b)
Using the LM curve framework, explain the likely effect of the change in money supply on the equilibrium interest rate.
(c)
Within the IS‑LM model, discuss the expected impact on national output and the price level.
(d)
Identify two transmission mechanisms through which the policy mix influences the economy and discuss one possible trade‑off that the central bank may face between price stability and exchange‑rate stability.
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Question 9 View Details
The table below shows the Consumer Price Index (CPI) for Country X over the period 2018‑2022. | Year | CPI | |------|-----| | 2018 | 110 | | 2019 | 115 | | 2020 | 124 | | 2021 | 138 | | 2022 | 150 | Using this information, answer the following questions.
Question Parts
(a)
Explain the main causes of demand‑pull inflation and cost‑push inflation. In your answer, distinguish between the two and give one real‑world example of each.
(b)
Calculate the annual inflation rate for each year from 2019 to 2022 and then determine the average inflation rate over the four‑year period. Comment on the trend shown by the data.
(c)
Discuss the effectiveness of the three main monetary‑policy tools (interest‑rate changes, open‑market operations, and reserve‑requirement adjustments) in controlling inflation in a developing economy such as Country X. In your discussion, refer to the trend you identified in part (b).
(d)
Evaluate how a sustained inflation rate of around 8 % could affect income distribution in Country X. Include in your answer the concepts of real wages, poverty, and wealth inequality.
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Question 10 View Details
Country Y has a labour force of 10 million people. The distribution of workers across three sectors and the sector‑specific unemployment rates are shown in the table. | Sector | Share of labour force | Unemployment rate | |---------------|-----------------------|-------------------| | Agriculture | 30 % | 14 % | | Manufacturing | 25 % | 10 % | | Services | 45 % | 9 % | National statistics, however, report an overall unemployment rate of 12 %. Answer the following questions.
Question Parts
(a)
Define frictional, structural and cyclical unemployment. For each type, give a brief example that could be relevant to Country Y.
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