WAEC Economics 2007 Past Questions & Answers

In any economic system, there are three main groups that make economic decisions. Households are the primary consumers of goods and services and also supply labour. Firms are the producers that organize factors of production to create these goods and services. The government sets the rules, provides public goods, and influences the economy through its policies, making these three the principal economic units.

Common mistake: Students might mistakenly choose option A because trade, industry, and banking are major sectors, but these are economic activities or sectors, not the fundamental decision-making units themselves.

In Economics, utility is the specific term used to describe the satisfaction, happiness, or benefit a person gets from consuming a good or service. For example, the enjoyment you get from eating a plate of jollof rice is its utility. Therefore, the satisfaction derived from the use of a commodity is correctly defined as its utility.

Common mistake: Students might mistakenly choose 'demand' because satisfaction influences demand, but demand is the willingness and ability to buy a good at a certain price, not the satisfaction itself.

In Economics, the resources used to create goods and services are called factors of production, which are land, labour, capital, and entrepreneurship. Each of these factors earns a specific reward for its contribution to the production process. The reward for labour, which is the human mental and physical effort used in production, is known as a wage or salary.

Common mistake: Students might confuse wage with profit, but profit is the reward that goes to the entrepreneur for taking risks and organizing the other factors of production.

The Malthusian theory of population focuses on the relationship between population growth and food supply. It argues that population grows geometrically (e.g., 2, 4, 8, 16), while food production only grows arithmetically (e.g., 1, 2, 3, 4), leading to 'positive checks' like famine and war. The theory is concerned with the quantity of people, not the quality or skills of the workforce, which is what 'development and growth of manpower' refers to.

Common mistake: Students might get confused by option C, as 'positive checks' sounds like a good thing, but in Malthusian theory, it refers to negative events like famine and disease that increase the death rate.

Labour, which is the human effort used in production, is considered mobile because workers can move from one job to another (occupational mobility) or from one location to another (geographical mobility). Unlike land, which is fixed in place, people can change their jobs or relocate for better opportunities. This ability to move is a key characteristic of labour.

Common mistake: Students might mistakenly choose 'fixed in supply' because they think the number of people in a country is constant in the short run, but the supply of labour can actually change through training, education, and migration.

Under-population describes a situation where a country's population is too small to fully and effectively utilize its available natural resources. This leads to a lower level of national output and income per person than is possible. In this case, the insufficient labour means resources are not being properly exploited for maximum economic benefit. An increase in population would likely lead to an increase in total output and a higher standard of living.

Common mistake: Students may confuse this with 'over-population', which is the opposite scenario where the population is too large for the available resources to support adequately.

The question asks for the term used to classify a population based on their jobs or professions. Occupational distribution is the correct economic term for categorizing the working population according to the various occupations or industries they are engaged in, such as agriculture, manufacturing, or services. This helps in understanding the economic structure of a country.

Common mistake: Students might mistakenly choose 'geographical distribution' because it is another common way to classify population, but this refers to where people live (e.g., in cities or villages), not what jobs they do.

In Economics, the total cost of production is made up of two parts. The first part is the fixed cost, which are expenses that do not change no matter how much you produce, like the rent for a factory. The second part is the variable cost, which are expenses that increase as you produce more, like the cost of raw materials. Therefore, to get the total cost, you must always add the fixed cost and the variable cost together (TC = FC + VC).

Common mistake: Students might mistakenly choose Marginal Cost because it is also related to total cost, but it represents the extra cost of producing one more unit, not the base cost that is added to variable cost.

Revenue is the total amount of money a business receives from selling its goods or services. It is calculated by multiplying the price of the product by the quantity sold (Price x Quantity). Therefore, the 'total money realized from sales' is the correct definition of revenue, before any costs are deducted.

Common mistake: Students most commonly mistake revenue for profit (Option A), but profit is what remains after subtracting total costs from total revenue.

Marginal revenue is the additional revenue a business earns from selling one more unit of a product. The formula TRn - TR(n-1) calculates this by finding the difference between the total revenue at the current level of output (n) and the total revenue at the previous level of output (n-1). This difference is precisely the revenue generated by the last or 'marginal' unit sold, which is the definition of marginal revenue.

Common mistake: Students often mistakenly choose marginal cost because its formula, TCn - TC(n-1), looks very similar, but the question clearly uses TR for total revenue, not TC for total cost.