WAEC Economics 2023
Questions & Answers

A student might incorrectly pick option A or D by assuming resources are limitless or that economics can satisfy everyone. Because resources are limited, choices must be made about how to allocate them efficiently, meaning economics is the study of how individuals and societies make choices under conditions of scarcity. Common mistake: Confusing the presence of unlimited human wants with unlimited economic resources.

One might mistakenly select secondary or primary production if they confuse storage with manufacturing or raw material extraction. Tertiary production involves services that support the production and distribution of goods, such as storage and warehousing, which facilitate the movement of goods from producers to consumers without changing their form. Common mistake: Assuming all physical handling of goods constitutes manufacturing rather than service provision.

A student might mistakenly choose semi-finished goods or fuel, thinking they are fixed assets. Working capital refers to current assets used in day-to-day operations, such as fuel, cash for wages, and semi-finished goods inventory, whereas equipment is a fixed capital asset used over a long period and is not part of working capital. Common mistake: Failing to distinguish between short-term operating assets and long-term fixed assets.

A student might mistakenly choose option A or B by focusing narrowly on abundance or theoretical definitions. An economic system addresses the problem of scarcity by determining how limited resources are allocated to satisfy unlimited wants, choosing among alternative uses to achieve the best possible outcomes. Common mistake: Confusing the broad goals of economic study with the operational mechanism of resource allocation in a system.

A student might pick 7.5 by incorrectly averaging the middle two numbers without checking the exact frequency. The median is the middle value in a sorted list. When you sort the marks as 5, 6, 7, 7, 7, 8, 8, 9, 9, with 9 values total, the median is the 5th value, which is 7. Common mistake: Forgetting to sort the raw data in ascending order before locating the middle position.

A student might select complementary or competitive demand by confusing relationships between different consumer products with factor inputs. Derived demand occurs when the demand for a factor like labor or capital stems from the demand for the final product it helps produce, such as how the demand for steelworkers derives from the demand for cars. Common mistake: Confusing cross-product demand relationships with the producer-driven demand for inputs.

A student might select price elastic or unit price elastic assuming demand always responds somewhat to price movements. Perfectly price inelastic demand means quantity demanded does not change at all with price changes, resulting in a vertical demand curve, which is typical for necessities like insulin for diabetics. Common mistake: Assuming all goods exhibit at least some degree of responsiveness to price changes.

A student might pick elastic demand or fairly inelastic demand by misinterpreting how tax burdens are shared. The tax incidence depends on elasticities, and if demand is perfectly inelastic, buyers bear the entire tax burden as they continue purchasing the same quantity regardless of the price increase caused by the tax. Common mistake: Confusing seller tax absorption with buyer-dominated tax incidence under inelastic conditions.

A student might mistakenly choose a fall in quantity demanded or a decrease in revenue by assuming price cuts always lower total earnings. For elastic demand where elasticity is greater than 1, a price decrease leads to a proportionally larger increase in quantity demanded, resulting in higher total revenue since total revenue equals price multiplied by quantity. Common mistake: Forgetting that total revenue moves in the direction of the larger percentage change between price and quantity.

1) Distractor check: Options like complementary supply or abnormal supply might catch your eye if you confuse how multiple goods relate, but they do not describe items fulfilling the same specific want. 2) Reasoning to the answer: Multiple goods or services that can satisfy the same need or want act as substitutes, which is defined as a composite supply. Different sources of light such as a candle, lantern, and gas lamp can all serve this exact purpose, where an increase in the supply of one affects the others competitively. 3) Common mistake: Confusing composite supply with joint supply where goods are produced together rather than satisfying the same alternative want.

1) Distractor check: You might lean toward a drop in kerosene supply or rising costs if you mix up production directions, but petrol and kerosene are linked through a single refinement process. 2) Reasoning to the answer: In joint supply, products are produced together from the same process, exemplified by refining crude oil. When the supply of petrol increases, it implies more refining takes place, which jointly increases the supply of kerosene as well. 3) Common mistake: Assuming that producing more of one joint product reduces the output of the other.

1) Distractor check: A student might choose a rightward shift if they confuse removing a subsidy with granting one. 2) Reasoning to the answer: Subsidies lower production costs and shift supply to the right. Removing them increases costs, shifting the supply curve to the left, which reduces the quantity supplied at each price. 3) Common mistake: Forgetting that removing a subsidy has the opposite effect of implementing one.

1) Distractor check: A test-taker could mistakenly select reducing consumption if they confuse utility maximization with diminishing returns. 2) Reasoning to the answer: Consumer equilibrium occurs when MUx equals Px for all goods. If MUx is greater than Px, the consumer gains more utility per naira from X than its cost, so they should consume more X until equilibrium is restored. 3) Common mistake: Thinking a higher marginal utility means you should cut back instead of buying more until prices and utilities balance.

1) Distractor check: Options indicating a decrease or constant state might appeal if you forget how shifts affect intersections. 2) Reasoning to the answer: An increase in demand shifts the demand curve rightward, intersecting the unchanged supply curve at a higher equilibrium price and quantity. 3) Common mistake: Mixing up the direction of price changes when demand shifts right.

1) Distractor check: One might incorrectly guess luxury or inferior goods due to general price controls, but governments target specific socioeconomic targets. 2) Reasoning to the answer: Price ceilings, which are maximum prices set by the government, are applied to essential goods like food or rent to make them affordable and prevent shortages for low-income groups. 3) Common mistake: Believing price ceilings are meant to protect producers of luxury items.

1) Distractor check: Options like P, Q, or R represent earlier stages where total product is still rising or reaching its peak. 2) Reasoning to the answer: Marginal product is negative when total product is decreasing, which occurs after the point of diminishing returns in stage III of production, typically at point S on the total product curve. 3) Common mistake: Choosing a point on the rising or flattening sections of the total product curve instead of the downward-sloping tail.

1) Distractor check: A student might jump to financial or technological economies if they misread location-based benefits as internal firm growth. 2) Reasoning to the answer: External economies of scale arise from a firm's location in an industrial estate, benefiting from shared infrastructure, skilled labor pools, and supplier networks without internal firm growth. 3) Common mistake: Attrributing external industrial estate benefits to internal firm expansion.

1) Distractor check: Sloped or vertical curves might catch your attention if you confuse fixed costs with variable costs or total output axes. 2) Reasoning to the answer: Total fixed cost remains constant regardless of the output level, resulting in a horizontal line on the cost-output graph, as fixed costs like rent do not vary with production. 3) Common mistake: Drawing total fixed cost as upward sloping because they confuse it with total cost.

1) Distractor check: An unwary student might think fixed costs or average fixed costs are the primary targets of factory staffing changes. 2) Reasoning to the answer: Factory workers' wages are classified as variable costs, which change with output or employment levels. Retrenching workers reduces variable costs, though it may affect production capacity. 3) Common mistake: Labeling direct factory labor as a fixed cost rather than a variable cost.

1) Distractor check: Perfect elasticity or marginal cost exceeding marginal revenue might look like technical profit conditions if misread. 2) Reasoning to the answer: Abnormal profit occurs when price, or average revenue, exceeds average total cost at the profit-maximizing output where marginal revenue equals marginal cost, allowing economic profit above normal returns. 3) Common mistake: Confusing the condition for profit maximization with the condition for abnormal profit.