Neco Model Questions Vol1 2021 Economics Question 1

Practice essay / theory question 1 from the 2021 Neco Model Questions Vol1 Economics examination. This question covers Basic Economic Concepts .

Neco Model Questions Vol1 2021 Economics Essay / Theory
Topic: Basic Economic Concepts
Question 1 NECO_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • essay

A small open economy produces only two goods, rice and cloth. The economy has 1,000 hours of labour and 500 units of capital available each month. One tonne of rice requires 2 hours of labour and 1 unit of capital. One tonne of cloth requires 1 hour of labour and 2 units of capital.

Question Parts

( a )
Define scarcity and explain how it is illustrated in the above economy.
( b )
Derive the opportunity cost of producing one additional tonne of rice in terms of cloth.
( c )
The government imposes a price ceiling of ₦200 per tonne on rice. Discuss the likely effects on the rice market, mentioning at least three possible outcomes.
( ) Potential shortage of rice.
( ) Emergence of a black‑market or illegal sales.
( ) Possible decline in quality or reduction in supply incentives.
( d )
Explain how the price mechanism allocates resources efficiently in this economy when there is no government intervention.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Neco Model Questions Vol1 2021 Economics Question 1. It is one of the essay questions from the 2021 Neco Model Questions Vol1 Economics examination.

The question covers Basic Economic Concepts .

View More Neco Model Questions Vol1 2021 Economics Questions More Neco Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support