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WAEC: ECONOMICS

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2014 Economics WAEC Theory Past Questions

WAEC: ECONOMICS 2014 Economics WAEC Theory Past Questions

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The table below shows an extract from balance of payments for country A. Use the table to answer the questions that follow: Balance of payments items

S/N Items of transaction  Receipt $ Payment $
1. Merchandise (visible trade) 52,000 40,000
2. Shipping other transport and travel 4,000 8,000
3. Investment incomes 20,000 5,000
4. Other  services 2,500 7,500
5. Unrequired transfers 22,800 7,000
6. Direct investment 50,000 26,000
7. Other long term capital 254,000 289,000
8. Start term capital 221,000 238,000

Calculate the:

(a) balance of trade

Solution

Balance of Trade = visible import – visible export 

: B.O.T = visible import – visible export 

= $52,000 – $40,000

= $12,000

 

(b) balance on current account

Solution

Balance on current account =  Receipt of items – payments of items 

Receipt of (visible /invisible goods) 

= $52,000 + 4,000 + 20,000 + 2,500 + 22,800

= $101300 

Payment of (visible /invisible goods) 

= $40,000 + 8,000 + 5,000 + 7,500 + 7,000 

= $67,500 

Balance on current A/C = $101300 – $67,500 = $33,800

 

(c) balance on capital account

Balance on capital account = Receipt of capital inflow – payment of capital outflow

Receipt of loan and investment = $50,000 + $254,000 + 221,000 = $525,000

Payment of loan and investment = $26,000 + $289,000 + $238,000 = $553,000

∴Balance on capital a/c = $525,000 – $553,000 = -$28,000

 

(d) balance of payment

Balance of payment = Balance on current a/c + Balance on capital a/c = 

$33,800 + (-$28,000) = $5,000

Question 2

Price ($) Quantity Supplied (Gallons)
6 200
12 300
18 400
20 500
24 600

(a) If the price of palm oil falls from $20.00 to $18.00, calculate the price elasticity of supply.

Solution

ep = \(\left ( \frac{Q_0 \: – \: Q_1}{Q_0} \right)  \: \div \: \left (  \frac{P_0 \: – \: P_1}{P_0} \right)\)

Price of palm oil falls from $20 to $18. Calculate the price elasticity of supply.

Qo = Original Quantity

Q1 = New Quantity

Po = Original Price

P1 = New Price

ep = \(\left ( \frac{500\: – \: 400}{500} \right)  \: \div \: \left (  \frac{20 \: – \: 18}{20} \right)\)

= \( \frac{100}{500}   \: \div \: \frac{2}{20}\)

= \( \frac{100}{500}   \: \times \: \frac{20}{2}\)

= \( \frac{20}{10}  \)

= 2

 

(b) Interpret your answer in question 2(a) above.

Answer

The supply of palm oil is elastic because the coefficient is greater than one. ep ˃ 1.

 

(c) Study the extract below and answer the following questions.

Answer

The price of palm oil remains at $6.00 per gallon and an increase in the price of a related product causes an increase in the supply of palm oil:

(i) Give a graphical presentation to illustrate this change.

Answer

(ii) Indicate the type of supply for the two products.

Answer

These two products are jointly supplied (Complementary supply).

 

(d) State reasons that can cause a change in supply.

Answer

The reasons that can cause a change in supply are:

(i) A rise in the cost of production

(ii) Price of other commodities

(iii) Government’s policy

(iv) Technological development

(v) Weather

(vi) Natural disaster

(vii) Goal suppliers

(viii) Number of producers

Question 3

(a) Define occupational mobility of labour

Answer

Occupational mobility of labour refers to the ease and willingness of labour to move from an occupation or profession to another. There are two types namely:

 

(b) Identify any four barriers to occupational mobility of labour.

Answer

The barriers to occupational mobility of labour are:

(i) Age: Labour may be too old to learn new skills.

(ii) Remuneration: Differences in wages and salaries may prevent labour from moving from one job to another.

(iii) Sex: Discrimination on account of male or female may prevent mobility.

(iv) Custom, culture and religion

(v) Length of time in training

(vi) Natural intelligence

(vii) The general condition of service

(viii) A trade union or professional association.

 

(c) State any two factors that will make labour efficient

Answer

The factors that will make labour efficient are:

(i) Improved standards of education and training

(ii) Improvement in the quality and amount of food, clothing, and shelter.

(iii) Higher wages and better method of payment

(iv) Provision of adequate social services e.g. constant supply of electricity

(v) Better working condition

(vi)  Specialisation

(vii) Improvement in other factors of production

(viii) Optimum working hours/ days in a week

Question 4

(a) What is crop farming?

Answer

Crop farming refers to the growing and harvesting of food and cash crops such as yams, cassava, rice, seeds, cotton, vegetables, and groundnuts, among others for human consumption.

 

(b) Outline any four measures that can be adopted to increase crop production in your country.

Answer

The measures that can be adopted to increase crop production in Nigeria are:

(i) The farmers should have more access to soft loans so as to increase their investment in agriculture.

(ii) The income of the farmers should be improved

(iii) The farmers should be educated through formal and non-formal education.

(iv) There should be an improvement in the provision of social amenities in the rural areas.

(v) Storage facilities should be provided for farmers at a cheaper rate.

(vi) Mechanised farming should be introduced.

(vii) An adequate supply of farming input.

(viii) The transportation of agricultural produce should be improved.

(ix) The government should discourage rural-urban migration.

 

(c) State any two contributions of the industrial sector to agriculture in your country.

Answer

The contributions of the industrial sector to agriculture are:

(i) Industrial sector absorbs excess labour from the agricultural sector.

(ii) It provides ready markets for agricultural raw materials such as cocoa for beverage, cotton for textile, etc

(iii) It manufactures fertilizers and agrochemicals

(iv) It manufactures farm implements such as hoes, cutlass, tractors, etc.

(v) Industrial sectors promote research and training in the use of their products.

(vi) It provides a variety of goods for the farmers to patronize

Question 5

(a) Highlight any four differences between public limited liability company and a private limited liability company.

Answer

Difference between public limited liability company and private limited liability company

Private limited liability company Public limited liability company
i. The minimum number of people that can own a private company is two (2) while the maximum number is fifty (50) The minimum number of people that can own a public company is seven (7) while the maximum is infinity
ii. A Private company can only use limited (LTD) after its name A Public company uses PLC after its name
iii. They don’t advertise its capital to the public for subscription They openly advertise and invites the member of the public to buy its share capital
iv. A member cannot freely transfer his/her share capital to another member without the consent of other shareholders. A member can freely transfer his/her share capital to another person without the consent of other members.
v. The share capital of a private company is not quoted on the stock exchange market The share capital of a public company is normally quoted on the stock exchange market.
vi. The private company does not publish its book of account for the public to inspect The public company publishes its affairs and book of accounts for the public to inspect.
vii. The company does not require a certificate of trade before it can start business The company cannot commence trade without a certificate of trade.

 

(b) Explain any four advantages of a limited liability company.

Answer

Advantages of Limited Liability Company:

(i) Limited liability: The liability of the shareholders cannot exceed the amount they invested in the company.

(ii) Perpetual existence: The death of one of the shareholders cannot bring the company to an end.

(iii) Separate legal entity: A company is distinct from its owner.

(iv)Large capital: There is always room to increase the share capital of the company.

(v) Right to transfer capital: The shareholders can transfer their shares without restriction.

(vi) Much room for expansion: There is no limit to which the company can expand due to large capital.

(vii) Access to loans: The Company can easily have access to bank loans at a reduced cost of capital.

Question 6

(a) Define gross national income.

Answer

Gross National Product (GNP): This refers to the value of goods and services produced within a country during a year plus net income from abroad. GNP = C+I+G+(X-M).

 

(b) Using appropriate examples, distinguish between:

(i) Personal income and disposable income.

Answer

Personal Income: This refers to income earned by or that accrues to individuals who carry out economic activities before allowances for personal income taxes and other deductions. While disposable income is personal income less personal income taxes. It is the income that is left after the deduction of personal income taxes.

(ii) Nominal income and real income.

Answer

Nominal income is the value of all goods and services produced expressed in terms of concurrent money income received from their production. While real money is the income expressed in terms of what it can buy. It is the nominal income deflated by the price level.

 

(c) Outline any three uses of national income statistics.

Answer

Uses of national income statistics:

  • It helps us to determine the standard of living in the country.
  • It is a measure of economic development
  • It enables us to know the contribution made by the various sector of the economy.
  • It is used for comparing the standard of living between two or more countries
  • It helps in the calculation of per capita income and per capita output.
  • It is used as an effective tool in the allocation of scarce resources.
  • It is used to determine the pattern of expenditure in a country.

Question 7

(a) What is the normal chain of distribution?

Answer

Chain of distribution is the process that manufactured goods pass before reaching the final consumers e.g.

Manufacturer/ Producer → Wholesaler → Retailer → Final consumer

 

(b) State any three functions of middlemen in the chain of distribution.

Answer

Functions of middlemen:

i. Provision of warehouse: Wholesaler renders warehouse services to producers and retailers.

ii. Bulk breaking: He breaks the bulk by buying in large quantities from the producer and sell to the retailer in smaller quantities.

iii. He gives credit facilities to the retailers’

iv. He advises the retailer on what to produce in order to meet market demand.

v. He provides after-sales services to the retailer.

vi. He assists the producers to advertise its products through handbills, etc.

vii. He passes useful information to the producer regarding the market situation

viii. He finances the producer through prompt cash payment.

 

(c) Highlight any four problems involved in the distribution of goods in West Africa.

Answer

The problem of distribution of goods in West Africa:

i. The presence of a poor transportation system does not allow for the free flow of goods.

ii. Lack of modern storage facilities to preserve the goods sold by middlemen.

iii. Hoarding: Hoarding is the deliberate attempt to withdraw goods from circulation thereby creating artificial scarcity and forcing prices up.

iv. Absence of a large market makes it unwise for the long chain of distribution.

v. Absence of ineffective price control enables the middlemen to charge high prices.

vii. The activities of unions and trade associations hamper distribution.

vii. The administrative and distribution cost of middlemen tends to increase the price of products.

8a. The specific tax is a tax usually levied according to the units or items of a commodity.

 

b. Effect of a specific tax on a commodity that has:

(i) Perfectly inelastic demand:

When the tax was imposed, supply changed from S0 to S1, but demand did not change. The supplier conveniently shifted the total tax to consumers as shown in the shaded area. If demand is perfectly inelastic, the producer shifts the entire tax to the final consumers because demand will be unaffected.

(ii) Perfectly elastic demand: If demand is perfectly elastic, the producer bears the tax burden or else he will be forced to close down due to stockpiling. The effect is a reduction in supply from S1S1 to S2S2 by the amount of tax as shown in the diagram below:

 

b.

 

c. Difference between Direct Tax and Indirect Tax

s/no Direct Tax Indirect Tax
1 It is a tax levied on the income of the individual and profit of the company It is a tax levied on goods and services.
2. It is progressive in nature It is regressive in nature
3. The rate of evasion of direct tax is high The rate of the evasion of indirect tax is low
4. It yields less revenue to the government It yields more revenue to the government
5. The collection of direct tax is not cost-effective The collection of indirect tax is cost-effective

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