Neco 2018 Economics Question 2

Practice essay / theory question 2 from the 2018 Neco Economics examination. This question covers Demand, Supply, Price Elasticity, Consumer Surplus, Producer Surplus, Government Expenditure, Welfare Analysis .

Neco 2018 Economics Essay / Theory

Topics: Demand Supply Price Elasticity Consumer Surplus Producer Surplus Government Expenditure Welfare Analysis

Question 2 NECO • 2018 • ECONOMICS • essay

The government of Nigeria decides to subsidise wheat to make it more affordable. Before the subsidy, the market equilibrium price of wheat was ₦200 per kilogram and the equilibrium quantity was 5,000 tonnes. After the subsidy, the price paid by consumers fell to ₦150 per kilogram and the quantity traded increased to 6,500 tonnes. The price elasticity of demand for wheat is –0.5 and the price elasticity of supply is 0.8.

Question Parts

( a )

Using the given elasticities, calculate the monetary value of the subsidy per kilogram of wheat.

( b )

Determine the approximate change in (i) consumer surplus and (ii) producer surplus resulting from the subsidy. Show your working.

( c )

Discuss the impact of the subsidy on (i) government expenditure and (ii) overall economic welfare.

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About This Question

This is Neco 2018 Economics Question 2. It is one of the essay questions from the 2018 Neco Economics examination.

The question covers Demand, Supply, Price Elasticity, Consumer Surplus, Producer Surplus, Government Expenditure, Welfare Analysis .

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