JAMB Economics 2009 Past Questions & Answers

Opportunity cost is defined as the next best alternative that is given up when a choice is made. In this question, Musa chose to buy a book. The alternatives he had to forgo, or give up, were the shirt and the bag. Therefore, the opportunity cost of buying the book is both the shirt and the bag he could have bought instead.

Common mistake: Students often mistakenly choose A or D, thinking that opportunity cost is only a single item, but it represents all the alternatives that were sacrificed for the chosen option.

A market economy is an economic system where decisions about production and prices are driven by supply and demand. 'Consumer sovereignty' is a core feature of this system, meaning that consumers are like kings because their choices about what to buy ultimately determine what goods and services are produced by firms seeking profit.

Common mistake: Students might mistakenly choose 'full employment exists' because it is often presented as a major goal of any economic system, but it is not a guaranteed feature of a market economy which naturally experiences business cycles and unemployment.

Privatization is the policy of selling government-owned companies and assets to private individuals and firms. This reduces the government's role in the economy and increases the influence of private ownership and market forces. A market economy is defined by private ownership and control of the means of production, so privatization is a direct move towards this type of system.

Common mistake: Students might mistakenly choose 'mixed economy' because Nigeria is one, but the question asks about the *direction* of the move, which is specifically towards more market principles.

Rent is the cost of using land for farming. When the rent for land becomes high, it directly increases the total cost of producing maize. This increase in cost is an unfavorable or 'negative' impact on the farmer's business, as it reduces the potential profit they can make from selling the maize.

Common mistake: Students might choose 'positively' by interpreting it to mean the cost figure increases, but in this context, 'negatively' refers to the adverse effect a higher cost has on the producer's business and profitability.

The unemployment rate is calculated by dividing the number of unemployed people by the total active population (or labour force) and then multiplying by 100 to get a percentage. In this question, the number of unemployed is 5 million and the active population is 50 million. Therefore, the formula is $(5,000,000 / 50,000,000)$ x 100, which simplifies to $(1/10)$ x 100, giving a result of 10%.

Common mistake: Students might mistakenly calculate the employment rate (45 million employed / 50 million active population = 90%) instead of the unemployment rate, leading them to choose option D.

An ogive is the specific statistical name for a cumulative frequency graph. It is a line graph that plots the running total of frequencies against the upper class boundaries, which helps economists easily find values like the median from the data.

Common mistake: Students often mistakenly choose 'a histogram' because it also represents frequency data, but a histogram shows the frequency of each individual group, not the running total (cumulative frequency).

In the theory of demand, a distinction is made between a 'change in quantity demanded' and a 'change in demand'. A change in the price of the product itself causes a change in quantity demanded, which is shown as a movement along the same demand curve. All other factors, such as consumer income, taste, or the price of related goods, cause a 'change in demand', which is represented by a shift of the entire curve to the right or left.

Common mistake: Students often confuse factors that cause a movement along the curve with those that cause a shift; they might pick 'income' or 'taste', but these factors shift the entire demand curve instead of causing a movement on it.

The demand curve for most goods is negatively sloped, following the law of demand. However, certain luxury goods, known as Veblen goods or articles of ostentation, are an exception. For these goods, a higher price increases their prestige and status, causing wealthy consumers to demand more of them. Since both price and quantity demanded move in the same direction (both increase), the demand curve slopes upwards from left to right, which is a positive slope.

Common mistake: Students often mistakenly choose 'negatively sloped' because this is true for normal goods, but they forget that luxury goods (Veblen goods) are a key exception to the law of demand.

Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price. The correct formula is always the percentage change in quantity demanded divided by the percentage change in price. Option D correctly states this relationship, with quantity demanded on top (the numerator) and price at the bottom (the denominator).

Common mistake: Students often mistakenly choose option A because they remember the two components but mix up their positions; it is crucial to remember that the change in quantity demanded is always the numerator.

The cardinal utility theory is an approach to understanding consumer choices based on the idea that satisfaction can be measured. The word 'cardinal' refers to numbers that can be counted (1, 2, 3), so the core assumption is that the utility a person gets from a good can be measured in specific units, often called 'utils'. Therefore, the statement that utility is measurable is the fundamental principle of this theory.

Common mistake: Students often confuse cardinal utility with ordinal utility, which assumes that utility can only be ranked but not measured, leading them to incorrectly choose option B.