WAEC Economics 2012 Past Questions & Answers

In Economics, a fundamental principle is that human wants are endless and can never be completely satisfied. As soon as one desire is fulfilled, another one emerges, which is why we describe wants as being insatiable or unlimited. This contrasts with the resources available to satisfy these wants, which are limited.

Common mistake: Students often mistakenly choose 'scarce' because they confuse human wants with the resources needed to satisfy them; it is the resources that are scarce, not the wants themselves.

The correct option is A because it properly defines the two types of cost. Money cost is simply the amount of money, like Naira, that you pay to buy an item. Real cost, on the other hand, is the same as opportunity cost, which is the value of the next best alternative you had to sacrifice or give up to get that item.

Common mistake: Students often mix up the two terms, leading them to incorrectly choose option C, which wrongly states that money cost is the opportunity cost.

The Production Possibility Curve (PPC) shows the maximum combinations of two goods an economy can produce with its limited resources. Because resources are scarce, to produce more of one good, you must move resources away from the production of the other good. This trade-off, known as opportunity cost, means that an increase in the output of one good will always lead to a decrease in the output of the other.

Common mistake: Students may wrongly choose option C if they confuse moving along the existing curve with an outward shift of the entire curve, which represents economic growth.

In economics, a table is a basic tool used to present data in an organized way. It consists of rows that run from left to right (horizontally) and columns that run from top to bottom (vertically). This arrangement makes it easy to see and compare information, such as a demand or supply schedule.

Common mistake: Students may confuse a table with a graph or chart, but while graphs and charts visually represent data (e.g., with bars or lines), only a table specifically arranges the raw data in a grid of rows and columns.

A normal demand curve slopes downwards from left to right because it graphically represents the law of demand. This law states that there is an inverse relationship between the price of a good and the quantity demanded, assuming other factors are constant. Therefore, as the price decreases (moving down the vertical axis), the quantity demanded increases (moving right on the horizontal axis), creating a downward slope.

Common mistake: Students often confuse the demand curve with the supply curve, which slopes upwards from left to right, and might incorrectly select option D.

Income elasticity of demand measures how the quantity demanded of a good responds to a change in a consumer's income. Inferior goods are goods that people buy less of as their income increases; for example, someone might buy less 'okrika' clothes and more new clothes when they get a better-paying job. Because an increase in income leads to a decrease in the quantity demanded, the relationship is inverse, resulting in a negative co-efficient.

Common mistake: Students might mistakenly choose 'Positive' because they confuse inferior goods with normal goods, for which demand rises as income rises.

Cross elasticity of demand is calculated by dividing the percentage change in the quantity demanded of one good (Schnapps) by the percentage change in the price of another good (Whisky). In this question, we divide the 30% increase in quantity demanded of Schnapps by the 20% rise in the price of Whisky. The calculation is 30% / 20%, which gives us 1.5.

Common mistake: A common mistake is to incorrectly divide the percentage change in price (20%) by the percentage change in quantity demanded (30%), which would lead to an incorrect answer.

Joint supply occurs when two or more goods are produced together from the same source, meaning an increase in the production of one leads to an increase in the supply of the other. Palm oil and palm kernel are both derived from processing the same palm fruit. Therefore, when more palm fruit is processed to get palm oil, the supply of palm kernel also increases automatically.

Common mistake: Students might mistakenly choose 'competitive supply', but this applies when resources used to produce one good can only be used to produce another at the expense of the first, which is the opposite of this situation.

A vertical supply curve shows that the quantity supplied remains constant regardless of any change in price. Elasticity of supply measures the responsiveness of quantity supplied to price changes. Since the quantity does not respond at all (the change is zero), the elasticity co-efficient is 0, which is described as perfectly inelastic supply.

Common mistake: Students sometimes confuse a vertical line (perfectly inelastic) with a horizontal line (perfectly elastic), or they mistakenly associate the 'upright' nature of the line with a high value instead of zero change in quantity.

The value of money refers to its purchasing power, which is the amount of goods and services it can buy. When the price of an apple doubles, it means that the same amount of money can now buy only half the number of apples it could before. This decrease in purchasing power means that the value of money has fallen.

Common mistake: Students might incorrectly choose 'rising' because they confuse the rising price of goods with the value of the money used to buy them, but these two have an inverse relationship.