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ADVANCED ECONOMICS ANSWERS (TYPE A)
SECTION A: ANSWER ALL QUESTIONS
(1)
(i) Scarcity of resources.
(ii) Choice of what to produce.
(iii) Choice of how to produce.
(iv) Choice of for whom to produce.
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(2a)
A firm is an organization that employs factors of production to produce goods and services to satisfy human wants.
(2b)
(i) They serve small local markets that large firms may ignore.
(ii) They provide personalized services that attract loyal customers.
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(3a)
The working population refers to the number of people within the age range who are willing and able to work.
(3b)
(i) Birth rate and death rate.
(ii) Level of migration.
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(4a)
Division of labour is the breaking down of production into different tasks, with each worker specializing in one task.
(4b)
(i) Size of the market.
(ii) Availability of capital.
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(5)
Manufacturer –> Wholesaler –> Retailer –> Consumer
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(6a)
Demand for money is the desire to hold money for various purposes rather than other financial assets.
(6b)
(i) Transaction motive to meet everyday expenses.
(ii) Precautionary motive to handle unforeseen needs.
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(7a)
Unemployment is a situation where people who are willing and able to work cannot find jobs.
(7b)
Collective bargaining is the negotiation between employers and workers’ unions on conditions of employment while industrial dispute is a disagreement or conflict between employers and workers that may result in strikes or lockouts.
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(8a)
National income is the total monetary value of all goods and services produced by a country in a year.
(8b)
Gross National Product is the total value of goods and services produced by the citizens of a country, whether at home or abroad, in one year.
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(9a)
A Capitalist Economic System is an economic system characterized by private ownership of the means of production and their operation for profit.
(9b)
(i) Private ownership of property.
(ii) Existence of competition.
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(10a)
A budget is a financial statement that estimates government income and expenditure for a given period, usually one year.
(10b)
A budget deficit occurs when expenditure exceeds revenue, while a budget surplus occurs when revenue exceeds expenditure.
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SECTION B
PART I: ANSWER ONE(1) QUESTION ONLY FROM THIS PART
(11a)
Price elasticity of demand is the degree of responsiveness of the quantity demanded of a commodity to changes in its price, ceteris paribus. It measures how much quantity demanded changes when price changes.
(11bi)
Given:
P₁ = 9, P₂ = 10
Q₁ = 1000, Q₂ = 900
∆Q = Q₂ – Q₁ = 900 – 1000 = -100
∆P = P₂ – P₁ = 10 – 9 = 1
Eₔ = (∆Q/∆P) × [(P₁+P₂ )/(Q₁ +Q₂)]
Eₔ = (-100/1) × [(9+10)/(1000+900)
Eₔ = -100 × (19/1900)
Eₔ = -100 × 0.01
Eₔ = -1
(11bii)
The demand is unit elastic because the absolute value of the elasticity coefficient is equal to 1.
(11biii)
Given:
P₁ = 9, P₂ = 8
Q₁ = 1000, Q₂ = 850
∆Q = Q₂ – Q₁ = 850 – 1000 = -150
∆P = P₂ – P₁ = 8 – 9 = -1
Eₛ = (∆Q/∆P) × [(P₁+P₂ )/(Q₁ +Q₂)]
Eₛ = (-150/-1) × [(9+8)/(1000+850)]
Eₛ = 150 × (17/1850)
Eₛ = 150 × 0.0092
Eₛ = 1.38
(11biv)
The supply is elastic because the elasticity coefficient is greater than 1.
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(12a)
Labour force is the sum of all employed and unemployed people who are available to supply labour for the production of goods and services.
(12bi)
Working population 2000 = 50 + 30 = 80
Working population 2005 = 100 + 35 = 135
Increase = 135 – 80 = 55
Percentage increase = (55 ÷ 80) × 100 = 68.75%
(12bii)
Dependents 2000 = 150 + 15 = 165
Workers 2000 = 80
Ratio = 165 : 80
Dividing both sides by 5
Ratio = 33 : 16
(12biii)
Dependents 2005 = 142 + 17 = 159
Workers 2005 = 135
Ratio = 159 : 135
Dividing both sides by 3
Ratio = 53 : 45
(12biv)
2000 ratio (approx.) = 33/16 ≈ 2.06
2005 ratio (approx.) = 53/45 ≈ 1.18
Since the ratio fell from about 2.06 to 1.18, the dependency ratio gas decreased.
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(13ai)
Cost equation: C = 20 + 2Q
Total cost when Q = 12;
C = 20 + (2 × 12)
C = 20 + 24
C = 44
(13aii)
Average cost when Q = 48;
C = 20 + (2 × 48) = 20 + 96 = 116
Average cost = 116 ÷ 48
Average cost = 2.42
(13aiii)
Total cost when Q = 23;
C = 20 + (2 × 23)
C = 20 + 46
C = 66
(13bi)
Profit when 23 units are produced;
Total revenue (TR) = P × Q = 5 × 23 = ₦115
Total cost (TC) = ₦66
Profit = TR − TC
Profit = 115 − 66
Profit = ₦49
(13bii)
Profit when 48 units are produced;
Total revenue (TR) = 5 × 48 = ₦240
Total cost (TC) = 20 + 2(48) = 20 + 96 = ₦116
Profit = 240 − 116 = ₦124.
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PART II: ANSWER THREE QUESTIONS ONLY FROM THIS PART
(14a)
Capital goods are man-made productive assets that are used to produce other goods and services. They are not meant for direct consumption but help in further production. Examples include machinery, tools, equipment, factory buildings and vehicles used for production activities.
(14b)
(i) Poor transportation network: Bad roads, inadequate rail systems and poor rural-urban connectivity make it difficult for goods to be moved easily. This results in delays, high transportation costs and spoilage of perishable goods.
(ii) Inadequate storage and warehousing facilities: Many areas lack modern storage facilities such as silos, cold rooms and warehouses. This leads to frequent spoilage, especially of agricultural products, and increases losses for producers and distributors.
(iii) High cost of distribution: Distributors often face high costs of fuel, vehicle maintenance, handling charges, multiple taxes and levies. These increased costs push up the final prices of goods for consumers.
(iv) Middlemen interference: Too many intermediaries between producers and consumers lead to price inflation and inefficiency. Each middleman adds a profit margin, making goods more expensive and slowing down distribution.
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(15a)
Net migration refers to the difference between the number of immigrants entering a country or region and the number of emigrants leaving it over a specific period, typically expressed as a rate per 1,000 population. A positive net migration indicates more inflows than outflows, leading to population growth, while a negative net migration shows more outflows, resulting in population decline. This measure is crucial in economics and demography for analyzing population dynamics and their impact on labor supply, economic growth, and resource allocation.
(15b)
(i) Overcrowding and slum development in urban centers: Massive influx of rural dwellers into cities like Lagos and Abuja overwhelms housing capacity, leading to rapid growth of informal settlements or slums where migrants live in substandard conditions without basic amenities. This strains urban planning, increases health risks from poor sanitation, and heightens social tensions due to competition for limited space, exacerbating urban poverty cycles.
(ii) Pressure on urban infrastructure and public services: The sudden population surge overloads existing facilities such as roads, water supply, electricity, hospitals, and schools, causing frequent breakdowns, traffic congestion, and inadequate service delivery. For instance, public transport systems become insufficient, hospitals face long waiting times, and schools operate overcrowded classrooms, forcing governments to divert resources inefficiently and reducing overall urban livability.
(iii) Decline in rural agricultural productivity: Departure of young, able-bodied individuals from villages leaves behind an aging population and labor shortages, reducing farm output, food production, and rural incomes. This leads to food insecurity nationwide, as Nigeria relies heavily on rural agriculture, while abandoned farmlands contribute to environmental degradation like soil erosion and decreased investment in farming technologies.
(iv) Increased unemployment and social vices in urban areas: Many unskilled rural migrants struggle to find jobs matching their skills, swelling the urban labor pool and raising unemployment rates, especially among youth. This fosters idleness, crime, prostitution, juvenile delinquency, and other vices as migrants resort to informal or illegal activities for survival, straining law enforcement and social welfare systems.
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(16a)
A market in economics refers to the entire arrangement or system comprising buyers and sellers who interact, either directly or indirectly through intermediaries, to exchange goods, services, or factors of production, where prices are determined by the forces of supply and demand. Unlike the common perception of a physical location like a shop or bazaar, a market encompasses any region (local, national, or global) where commercial intercourse exists, enabling free competition that equalizes prices across the area for the same commodity. This facilitates efficient resource allocation, trade, and economic coordination in society.
(16b)
(i) Large number of buyers and sellers: The market consists of numerous small-scale buyers and sellers, each too insignificant relative to the total market size to influence price individually; thus, all participants are price takers who must accept the prevailing market price determined by overall supply and demand. This eliminates market power, prevents monopolistic practices, and ensures that no single entity can manipulate prices through output restrictions or collusion.
(ii) Homogeneity of products: All firms sell identical or perfectly substitutable products with no differentiation in quality, branding, style, or packaging, making consumers indifferent between sellers’ offerings. This forces competition purely on price, eliminates product loyalty, and ensures that the market price reflects the true value without premiums for perceived superiority.
(iii) Free entry and exit: There are no barriers such as legal restrictions, high startup costs, patents, or economies of scale preventing new firms from entering or existing ones from exiting the market freely in the long run. This mobility ensures that economic profits attract entrants, eroding supernormal profits to normal levels, while losses prompt exits, maintaining equilibrium and allocative efficiency.
(iv) Perfect knowledge or information: All buyers and sellers possess complete, costless, and instantaneous information about product prices, quality, availability, technology, and market conditions across all locations. This transparency enables rational decision-making, prevents exploitation through misinformation, and ensures resources flow to their most productive uses without transaction costs from ignorance.
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(17)
(i) Major contributor to GDP and economic growth: Agriculture accounts for 30-50% of GDP in most West African countries, serving as the backbone of their economies and driving overall growth through production of cash crops like cocoa, cashew, and palm oil for export. This sector generates substantial revenue from exports, supports agro-industries, and sustains economic stability amid fluctuating global commodity prices, enabling governments to fund infrastructure and public services. Without agriculture’s GDP share, many West African nations would face severe economic contraction and reduced capacity for development initiatives.
(ii) Primary source of employment and livelihoods: The sector employs 65-80% of the population, particularly smallholder farmers and rural dwellers, providing income opportunities and reducing poverty levels in regions where alternative jobs are scarce. It supports millions through farming, livestock rearing, fishing, and related activities, fostering self-employment and family sustenance while contributing to household food security and local economic circulation. This high employment intensity makes agriculture pivotal for social stability and poverty alleviation in West Africa.
(iii) Ensures food security and nutrition: Agriculture produces staple crops such as maize, cassava, rice, yams, and millet, meeting the daily food needs of over 70% of the population and preventing widespread hunger in a region prone to climate variability. Through rain-fed and small-scale farming across diverse agro-ecological zones from Sahel to rainforests, it supplies affordable local foods, reduces import dependency, and enhances nutritional outcomes, especially for vulnerable groups like children and the elderly. Sustained agricultural output is thus critical for achieving food self-sufficiency and combating malnutrition.
(iv) Generates foreign exchange through exports: Export of cash crops like cocoa from Côte d’Ivoire and Ghana, cashew from Nigeria and Benin, and cotton from Burkina Faso brings in vital foreign currency, bolstering national reserves and balancing trade deficits in West African economies. This export revenue funds imports of essential goods, technologies, and services, while promoting regional trade under ECOWAS frameworks that standardize products and reduce barriers. Agriculture’s export role strengthens economic resilience and supports currency stability against external shocks.
(v) Foundation for rural development and poverty reduction: By providing livelihoods in rural areas where poverty is highest, agriculture drives infrastructure improvements like roads and markets, while initiatives in research, extension services, and climate-smart practices boost productivity and incomes. It enables value chain development through agro-processing, creating jobs for youth and women, and aligns with policies like ECOWAP for sustainable growth, regional integration, and equitable resource distribution. This rural focus is essential for inclusive development and achieving SDGs in West Africa.
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(18a)
A balance of payment (BOP) deficit occurs when a country’s total payments to foreign countries exceed its total receipts from them during a specific period. This means the country is spending more foreign exchange on imports, services and capital outflows than it is earning from exports, foreign investment and other inflows. A persistent BOP deficit puts pressure on a country’s foreign reserves and may require corrective economic measures.
(18b)
(i) Export promotion strategies: The government can encourage industries to increase export production through subsidies, improved infrastructure, export incentives and reduced export duties. Higher exports lead to greater foreign exchange earnings, which help reduce the BOP deficit.
(ii) Import restriction policies: Measures such as higher import tariffs, import quotas, or banning luxury imports can reduce the volume of foreign goods entering the country. By cutting down unnecessary imports, the country spends less foreign exchange, thereby improving the balance of payments.
(iii) Exchange rate devaluation: Devaluing the currency makes exports cheaper and more competitive in international markets, while making imports more expensive. This encourages foreigners to buy more of the country’s products and discourages citizens from buying imported goods, helping reduce the deficit.
(iv) Encouraging foreign investment and remittances: Attracting foreign direct investment (FDI) and encouraging citizens abroad to send remittances increase the inflow of foreign exchange. These inflows help finance the country’s external obligations and reduce pressure on the balance of payments.
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(19a)
(i) Promotion of free movement of people and goods: ECOWAS aims to remove restrictions on movement so that citizens of member states can travel, work and trade freely within the region. This enhances regional integration and economic cooperation.
(ii) Creation of a large common market: By encouraging the removal of trade barriers such as tariffs and quotas, ECOWAS helps member countries trade more easily with one another. This increases market size and promotes industrial growth.
(iii) Coordination and harmonization of economic policies: ECOWAS works to align members’ monetary, fiscal, industrial and agricultural policies. Harmonized policies help reduce economic conflict and promote collective development.
(iv) Promotion of peace, security and political stability: Through mediation, peacekeeping missions and conflict resolution mechanisms, ECOWAS helps prevent and resolve conflicts within member states. This ensures a stable environment for economic development.
(v) Development of transport, communication and energy networks: ECOWAS encourages joint projects such as highways, power grids and communication systems across West Africa. Improved infrastructure enhances trade and economic integration.
(19b)
Political instability and frequent conflicts in member states.
(ii) Poor transport and communication infrastructure.
(iii) Differences in economic policies among member countries.
(iv) Lack of adequate funding for ECOWAS programmes.
(v) Language barriers slowing coordination.
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(20a)
Privatization is the process by which ownership and control of business enterprises, assets, or services are transferred from the public sector to private individuals or companies. This transfer is usually done by selling government shares or assets to private investors with the aim of improving efficiency, increasing competition, and reducing the financial burden on governments. Privatization shifts the responsibility for producing goods and services to the private sector, which is believed to operate more efficiently due to profit incentives.
(20b)
(i) Corruption and lack of transparency in the process: Privatization exercises often involve undue political interference, nepotism, and favoritism, where assets are sold at undervalued prices to cronies, politicians, or high-net-worth individuals rather than competitive bidders, leading to massive revenue losses for the government and public mistrust. For instance, in Nigeria’s phases I and II privatization under the Bureau for Public Enterprises, shares were hijacked by elites, bypassing transparent bidding, which eroded anticipated fiscal gains and failed to attract genuine investors.
(ii) Inability to attract foreign investors and low subscription rates: Weak economic fundamentals, political instability, and poor infrastructure deter foreign direct investment, while domestic investors lack capital or confidence, resulting in disappointing share sales and incomplete privatization deals. In Nigeria, many enterprises like power distribution companies saw low participation from credible buyers, leaving the government to retain unwanted stakes and continue subsidizing inefficiencies.
(iii) Labour problems and massive job losses: Private buyers prioritize cost-cutting through workforce rationalization, retrenchments, and wage reductions to boost profitability, sparking strikes, union resistance, and social unrest that delay or derail the process. Nigeria’s privatization led to widespread unemployment exacerbating poverty without creating promised new jobs, as new owners focused on short-term profits over re-employment.
(iv) Absence of strong regulatory frameworks and capacity: Governments often lack robust oversight bodies to monitor private operators, monitor performance, prevent monopolies, or enforce service standards, allowing exploitation, poor service delivery, and asset stripping. In Nigeria, the absence of reliable regulators post-privatization resulted in continued power outages despite sales, as buyers underinvested, highlighting human capacity gaps and policy implementation flaws.
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