2024 NECO ECONOMICS: 2025 NECO Economics (Econs) Verified Answers (4561)

(3)

(i) Marginal Cost:

Marginal cost is the additional cost incurred when producing one more unit of a good or service. It is calculated by taking the change in total cost that comes from producing an extra unit. Marginal cost helps firms decide the optimal level of production to maximize profits, as it should ideally equal marginal revenue (the revenue from selling one more unit).

(ii) Wants:

Wants are desires for goods and services that people wish to have. Unlike needs, which are essential for survival, wants are not necessary but enhance comfort and quality of life. They are influenced by personal preferences, culture, and socio-economic status and are unlimited, which means they can never be fully satisfied.

(iii) Scarcity:

Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It means that there are not enough resources to produce enough goods and services to satisfy all human wants. Scarcity necessitates the need for choices and prioritization in the use of resources.

(iv) Choice:

Choice refers to the decision-making process individuals and societies use to allocate their limited resources among competing uses. Because resources are scarce, choices must be made about what to produce, how to produce, and for whom to produce. Every choice involves trade-offs, as choosing one option means giving up 'copied from e x a m p l a z a . c o m free' others.

(v) Opportunity Cost:

Opportunity cost is the value of the next best alternative that is foregone when a decision is made. It represents the benefits that could have been received by taking a different decision. Opportunity cost is a critical concept in economics because it highlights the cost associated with every choice and the inherent trade-offs in decision-making.

(4)

(PICK ANY FOUR)

(i) What to Produce:

Societies face the fundamental decision of what goods and services to produce with their limited resources. This problem arises because resources are finite, but human wants are virtually unlimited. Deciding what to produce involves evaluating the needs and desires of the population, considering both consumer goods (like food, clothing, and housing) and capital goods (like machinery and infrastructure). The aim is to produce a mix of goods that maximizes societal welfare.

(ii) How to Produce:

Once the decision of what to produce has been made, societies must determine how to produce these goods and services efficiently. This involves choosing the appropriate combination of labor, capital, and technology. The objective is to minimize production costs while maintaining or improving quality. This decision is influenced by the availability of resources, the level of technology, and the need to preserve the environment.

(iii) For Whom to Produce:

This problem addresses the distribution of the produced goods and services among the population. Societies must decide who will receive the output based on various criteria, such as income, wealth, and social policies. This distribution affects the overall equity and fairness in society. In market economies, distribution is often determined by purchasing power, meaning those with higher incomes can afford more goods and 'copied from e x a m p l a z a . c o m free' services.

(iv) Efficient Use of Resources:

Efficient resource use involves maximizing the output obtained from the available resources. This requires careful allocation and management to ensure that resources are not wasted and are used in the most productive ways. Efficiency can be improved through technological innovation, better management practices, and optimal resource allocation. The goal is to produce the maximum possible output with the given inputs, ensuring that resources contribute to their highest valued uses and that the opportunity cost is minimized.

(v) Economic Stability:

Maintaining economic stability is crucial for the well-being of a society. This involves managing economic fluctuations and avoiding severe inflation or deflation, high unemployment, and economic recessions. Governments and central banks play a vital role in stabilizing the economy through monetary and fiscal policies. Measures such as interest rate adjustments, government spending, and taxation are used to influence economic activity and maintain a stable growth path. Stability ensures a predictable economic environment, which is conducive to investment and long-term planning.

(vi) Economic Growth:

Economic growth is the process of increasing a country’s output of goods and services over time. It is measured by the growth rate of real Gross Domestic Product (GDP). Sustainable economic growth improves living standards, 'copied from e x a m p l a z a . c o m free' reduces poverty, and provides more resources to meet the needs and wants of the population. Achieving growth requires investments in capital, education, research and development, and infrastructure. It also involves fostering innovation, improving productivity, and creating a favorable business environment.

(5a)

Utility refers to the satisfaction or pleasure that a consumer derives from consuming goods and services. It is a measure of the usefulness or value that an individual receives from a particular product or service. Utility is subjective and varies from person to person, depending on their preferences, needs, and circumstances.

(5b)

(PICK ANY THREE)

(i) Form Utility:

Form utility is created by transforming raw materials into finished products that are more useful to consumers. It involves changing the physical form of a product to make it more desirable. For example, turning wheat into bread or cotton into clothing enhances its utility for consumers.

(ii) Place Utility:

Place utility is created by making goods and services available at locations where they are needed or wanted by consumers. It involves the transportation and distribution of products to convenient locations. For instance, having a retail store in a residential area or delivering products directly to customers’ homes increases place utility.

(iii) Time Utility:

Time utility is created by making goods and services available at the time when they are needed or desired by consumers. It involves storing products and ensuring they are accessible when demand arises. For example, selling winter clothing during the winter season or offering 24/7 customer service enhances time utility.

(iv) Possession 'copied from e x a m p l a z a . c o m free' Utility:

Possession utility is created by transferring ownership or the right to use a product or service to the consumer. It involves facilitating the purchase process, making it easy for consumers to acquire and use the product. Examples include providing financing options, accepting various payment methods, and offering legal ownership documentation.

(v) Information Utility:

Information utility is created by providing consumers with the necessary information about a product or service. It involves educating consumers on the benefits, features, and usage of the product, which helps them make informed purchasing decisions. Examples include advertising, product labeling, and customer support services.

(5c)

(PICK ANY TWO)

(i) Total utility is the overall satisfaction or pleasure obtained from consuming a certain quantity of goods or services WHILE marginal utility is the additional satisfaction or pleasure obtained from consuming one more unit of a good or service.

(ii) Total utility is calculated as the sum of the utilities derived from all units consumed WHILE Marginal utility, on the other hand, is the change in total utility that results from consuming an additional unit of the good or service.

(iii) Total utility generally increases as more units are consumed, but it does so at a decreasing rate if marginal utility is diminishing WHILE Marginal utility can be positive, zero, or 'copied from e x a m p l a z a . c o m free' negative. It is positive when the additional unit adds satisfaction, zero when it has no effect, and negative when it reduces overall satisfaction.

(iv) Total utility reaches its maximum point when marginal utility is zero. Beyond this point, if marginal utility becomes negative, total utility will start to decrease WHILE Marginal utility is derived from the slope of the total utility curve, reflecting the rate of change in total utility with respect to the quantity consumed.

(6a)

(PICK ANY ONE)

Public finance is the study of how governments raise revenue, allocate resources, and manage public expenditure to influence the economy. It involves analyzing government taxation, spending, budgeting, and debt management. Public finance aims to understand how government policies affect economic efficiency, income distribution, and macroeconomic stability.

OR

Public finance is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

OR

Public Finance deals with the financial activities of government concerning revenue, expenditure and debt operations and their effects on the economy. It tries to analyse the impacts of these financial activities of government on individuals and corporate bodies.

(6b)

(PICK ANY FIVE)

(i) Economic Stability:

One of the primary objectives of fiscal policy is to stabilize the economy by reducing the volatility of economic cycles. This involves using government spending and taxation to counteract inflation, control deflation, and manage unemployment levels. By doing so, fiscal policy aims to achieve steady economic growth and prevent economic crises.

(ii) Full Employment:

Fiscal policy seeks to achieve and maintain high levels of 'copied from e x a m p l a z a . c o m free' employment. Governments use expansionary fiscal measures, such as increased public spending and tax cuts, to stimulate economic activity and create jobs. Conversely, contractionary measures may be used to cool down an overheating economy.

(iii) Economic Growth:

Promoting sustainable economic growth is a key objective of fiscal policy. Governments invest in infrastructure, education, and technology to enhance productivity and foster long-term economic development. Fiscal policies are designed to create a favorable environment for investment and innovation, thereby driving economic expansion.

(iv) Redistribution of Income:

Fiscal policy aims to reduce income inequality by redistributing wealth through progressive taxation and social welfare programs. Higher taxes on the wealthy and targeted public spending on social services such as healthcare, education, and housing help to provide a safety net for the less privileged and promote social equity.

(v) Efficient Resource Allocation:

Fiscal policy is used to allocate resources in a manner that maximizes social welfare. By prioritizing public expenditures on essential services and infrastructure, governments ensure that resources are used efficiently to meet the needs of society. Additionally, subsidies and incentives may be provided to encourage the development of certain industries or regions.

(vi) Price Stability:

Controlling inflation and 'copied from e x a m p l a z a . c o m free' maintaining price stability is an important objective of fiscal policy. By adjusting taxes and public spending, governments can influence the level of aggregate demand in the economy. Reducing excessive demand can help to control inflation, while stimulating demand can prevent deflation.

(vii) Reduction of Public Debt:

Managing and reducing public debt is a critical goal of fiscal policy. Excessive debt can lead to high interest payments and reduced fiscal space for essential spending. Fiscal policies are implemented to ensure sustainable debt levels through prudent budgeting, efficient tax collection, and controlled borrowing.

(viii) Provision of Public Goods:

Fiscal policy ensures the provision of public goods and services that are not efficiently provided by the private sector. These include national defense, public safety, education, and infrastructure. Government spending on these goods enhances overall societal welfare and contributes to economic stability and growth.

(7a)

Price legislation refers to the laws and regulations enacted by a government to control or influence the prices of goods and services in the market. This includes setting minimum or maximum price limits, prohibiting price gouging during emergencies, and regulating the prices of essential goods to ensure affordability and prevent exploitation.

(7b)

(PICK ANY FOUR)

(i) Preventing Inflation:

Price control policies aim to curb excessive inflation, especially in times of economic instability. By capping the prices of essential goods and services, governments can prevent rapid increases in the cost of living, which can erode purchasing power and lead to economic hardships for consumers.

(ii) Ensuring Affordability of Essential Goods:

A primary objective of price control is to ensure that essential goods and services, such as food, healthcare, and fuel, remain affordable for all segments of the population. By regulating prices, governments can protect low-income households from price spikes and ensure equitable access to basic necessities.

(iii) Preventing Exploitation and Price Gouging:

Price control policies are implemented to protect consumers from unfair pricing practices, especially during emergencies or shortages. By setting maximum price limits, governments can prevent businesses from taking advantage of high demand to charge exorbitant prices, thereby protecting consumers from 'copied from e x a m p l a z a . c o m free' exploitation.

(iv) Stabilizing the Economy:

Price controls can help stabilize the economy by reducing price volatility and uncertainty. By maintaining stable prices, governments can foster a predictable economic environment, encouraging investment and consumption. This stability is crucial for long-term economic growth and planning.

(v) Supporting Low-Income Households:

Price control policies often aim to support low-income and vulnerable households by making essential goods and services more accessible. This includes subsidizing certain products or setting price ceilings to ensure that these households can afford basic needs without compromising their financial stability.

(vi) Ensuring Fair Competition:

By regulating prices, governments can prevent monopolistic and oligopolistic practices that can distort the market and harm consumers. Price controls can ensure a level playing field, promoting fair competition and preventing dominant firms from setting excessively high prices that can exclude competitors a

nd exploit consumers.

(8a)

(PICK ANY ONE)

A financial institution is an organization that provides financial services to individuals, businesses, and governments. These services include accepting deposits, providing loans, investment products, insurance, and facilitating transactions. Financial institutions play a crucial role in the economy by mobilizing savings, allocating resources, managing risks, and enabling the flow of money and credit in the financial system.

OR

A financial institution is a company involved in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. Financial institutions encompass a broad range of business operations within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers.

(8b)

(i) Money Market:

The money market is a segment of the financial market where short-term borrowing, lending, buying, and selling of financial instruments occur. These instruments typically have maturities of one year or less and include Treasury bills, commercial paper, certificates of deposit, and repurchase agreements. The money market is essential for managing liquidity and short-term funding needs for governments, financial institutions, and corporations.

(ii) Insurance Companies:

Insurance companies are financial institutions that provide risk 'copied from e x a m p l a z a . c o m free' management services by offering various insurance products. These products protect individuals and businesses against financial losses from specific risks such as accidents, illness, property damage, and liability. Policyholders pay premiums to the insurance company, which in turn promises to compensate them for covered losses according to the terms of the policy.

(iii) Capital Market:

The capital market is a segment of the financial market where long-term securities, such as stocks and bonds, are bought and sold. It enables governments and corporations to raise long-term funds for investment and growth by issuing these securities. The capital market provides a platform for investors to trade existing securities, ensuring liquidity and price discovery. By facilitating the flow of capital, it supports economic development and allows investors to diversify their portfolios and manage risks.

(10a)

Human capital development is the process of improving the skills, knowledge, and experience of individuals, which increases their economic productivity and benefits the economy as a whole.

OR

Human capital development refers to the process of improving the skills, knowledge, and abilities of individuals through education, training, and experience, which enhances their productivity and value in the workforce.

OR

Human capital development means developing the knowledge,

skills, and health that people invest in and accumulate throughout their lives, enabling them to realize their potential as productive members of society.

(10b)

(PICK ANY FIVE)

(i) Education: Formal and informal education systems play a crucial role in enhancing knowledge and skills. They prepare individuals for various professional roles and equip them with the theoretical and practical understanding necessary for their careers.

(ii) Training: Vocational and on-the-job training programs are essential for improving specific skills. These programs help workers become more proficient and efficient in their roles, enabling them to adapt to new technologies and methods.

(iii) Health: Good health is vital for maintaining high levels of productivity. Healthy individuals are more capable of working efficiently and consistently, which reduces absenteeism and enhances 'copied from e x a m p l a z a . c o m free' overall performance.

(iv) Experience: Accumulating work experience is critical for improving job performance. Experience provides individuals with practical knowledge and insights into job requirements, allowing them to handle tasks more effectively and make informed decisions.

(v) Creativity and Innovation: The ability to think creatively and implement innovative solutions is a key characteristic of human capital. This capability drives productivity, fosters problem-solving, and helps organizations stay competitive in a rapidly changing market.

(vi) Mobility: Flexibility to move and adapt to new job roles or locations is essential. This mobility ensures that human capital can be efficiently allocated to areas where it is most needed, optimizing the use of skills and resources.

(vii) Entrepreneurship: The capacity to develop new businesses and economic opportunities is a significant aspect of human capital. Entrepreneurial skills contribute to economic growth, job creation, and the overall dynamism of the economy. Entrepreneurs bring innovation to the market, create jobs, and stimulate economic activities through their ventures.

(11a)

(PICK ANY ONE)

Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in real gross domestic product (GDP). It reflects the expansion of a country’s capacity to produce, which can result from improvements in factors such as capital investment, labor force, technology, and productivity.

OR

Economic growth refers to an increase in the production of goods and services in an economy over a period of time, usually measured by an increase in Gross Domestic Product (GDP). It represents an expansion in the economy’s ability to produce more goods and services, which can lead to higher living standards, increased employment, and improved overall well-being.

(11b)

(PICK ANY FOUR)

(i) Stable Political Environment: Political stability creates a predictable environment for businesses and investors. Consistent policies and regulations encourage both domestic and foreign investments, reducing the risk of conflicts and disruptions.

(ii) Strong Legal Framework: A robust legal system protects property rights and enforces contracts. This legal assurance fosters a secure environment for economic transactions, promoting entrepreneurship and foreign direct investment.

(iii) Efficient Infrastructure: Infrastructure such as roads, railways, ports, and communication networks is essential. Efficient 'copied from e x a m p l a z a . c o m free' infrastructure reduces transportation and communication costs, facilitates trade, and enhances market access, attracting further investments.

(iv) Access to Capital: A well-developed financial system provides necessary funding for businesses. Ensuring credit availability, especially for small and medium-sized enterprises (SMEs), drives innovation and employment, supporting overall economic growth.

(v) Skilled Workforce: A well-educated and skilled workforce improves productivity and fosters innovation. Investment in education and vocational training ensures that the labor force can meet the demands of a growing economy and adapt to technological advancements.

(vi) Technological Innovation: Technological progress drives economic development. Governments can encourage innovation by investing in research and development (R&D) and providing incentives for private sector R&D, leading to new industries and improved productivity.

(vii) Sound Economic Policies: Effective economic policies, including balanced fiscal policies, controlled inflation, and open trade policies, create a stable economic environment. A regulatory framework that encourages investment and competition supports sustained economic growth.

(12)

(PICK ANY FIVE)

(i) Many Buyers and Sellers: In a perfectly competitive market, there are a large number of buyers and sellers. This abundance ensures that no single buyer or seller can influence the market price. The competition among sellers keeps prices low and reflects the true market value of goods and services.

(ii) Homogeneous Products: The products offered by different sellers are identical in a perfectly competitive market. This homogeneity means that buyers do not prefer one seller’s goods over another’s based on quality or features. As a result, competition is purely based on price.

(iii) Free Entry and Exit: Firms can freely enter or exit the market without facing significant barriers. This freedom ensures that resources can be allocated efficiently as firms move into profitable markets and exit unprofitable ones. It also prevents long-term abnormal profits, as new firms entering the market will drive prices down.

(iv) Perfect Information: All market participants have full and instantaneous access to all relevant information regarding prices, products, and market conditions. This perfect information ensures that buyers make informed decisions and sellers price their goods appropriately, maintaining market equilibrium.

(v) Price Takers: In a perfectly competitive market, individual firms and buyers are price takers. This means they accept the market price as given and cannot 'copied from e x a m p l a z a . c o m free' influence it through their own actions. Prices are determined by the overall supply and demand in the market.

(vi) No Transaction Costs: There are no costs associated with buying or selling goods in a perfectly competitive market. The absence of transaction costs ensures that all market participants can trade freely and that the prices reflect the true cost of production and value to consumers.

(vii) Perfect Mobility: Resources such as labor and capital can move freely in and out of the market and between different uses. This mobility ensures that resources are always employed in their most productive use, leading to optimal allocation and utilization.