2023 JUPEB ECONOMICS PAPER
ECN 001 – Principles of Economics I
Question 1
Discuss the relationship between elasticity of demand and total revenue of the seller. (15 marks)
Question 2
(a) Explain what is meant by indifference curve and marginal rate of substitution. (8 marks)
(b) Discuss the basic properties of an indifference curve. (7 marks)
ECN 002 – Principles of Economics II
Question 3
The economy model of a country is characterized as follows:
- Consumption function, C = 85 + 0.5Yd
- Investment Function, I = 85
- Government Spending, G = 60
- Net taxes, T = 40 + 0.25Y
Solve for the following:
(a) Equilibrium income (3 marks)
(b) Equilibrium consumption (3 marks)
© Net taxes (3 marks)
(d) What type of budget is the economy operating? (3 marks)
(e) By how much will output increase when investment spending increases by 50%? (3 marks)
Question 4
(a) With the aid of a well labelled diagram, explain the circular flow of income in a three-sector economy. (8 marks)
(b) If the income of civil servants earning ₦75,000 per month increases by 40% and their consumption expenditure consequently increased from ₦52,000 to ₦65,000 per month:
i. Calculate the multiplier (4 marks)
ii. By how much will the national income be increased if the total consumption expenditure increased by ₦20,000. (3 marks)
ECN 003 – Applied Economics I
Question 5
(a) Explain the term ‘demographic transition’. (5 marks)
(b) Discuss the implications of Malthusian population theory. (10 marks)
Question 6
(a) Examine the effects of increasing population on the Nigerian economy. (10 marks)
(b) How could the trend be curtailed? (5 marks)
ECN 004 – Applied Economics II
Question 7
(a) Using a diagram, explain what is meant by recessionary gap? (5 marks)
(b) What policies might government use to correct recessionary gap? (10 marks)
Question 8
Use the information below to answer the questions that follow.
Nigeria Economic Outlook
(Passage about Nigeria’s 2016 recession and 2017 economic outlook — Source: African Economic Outlook (AEO) 2017)
i. What do you understand by the term ‘economic recession’? (2 marks)
ii. With good examples, explain the term “economic shocks” and how they can affect the Nigerian economy. (2 marks)
iii. With good examples and illustration, explain the term expansionary fiscal policy and how it can affect an economy. (3 marks)
iv. Mention 4 macroeconomic objectives that all governments can pursue. (4 marks)
v. Aside from the above, given reasons for economic recession in Nigeria, explain some other reasons that can cause economic recession especially in West Africa. (4 marks)
ANSWERS
ECN 001
Question 1
TR = P × Q. Relationship depends on Price Elasticity of Demand (PED):
- Elastic (PED>1): price fall → TR rises; price rise → TR falls.
- Unit elastic (PED=1): TR unchanged with price change.
- Inelastic (PED<1): price fall → TR falls; price rise → TR rises.
Sellers maximise revenue at unit elasticity — lower price for elastic goods, raise price for inelastic goods.
Question 2
(a) Indifference curve: a curve showing all combinations of two goods giving equal utility/satisfaction to a consumer. MRS: rate at which a consumer gives up one good for an additional unit of another while maintaining the same utility (MRS = MUx/MUy); it diminishes along the curve.
(b) Properties: downward sloping, convex to the origin, cannot intersect, higher curves = higher satisfaction, continuous/smooth, does not touch the axes.
ECN 002
Question 3
Yd = Y − T = 0.75Y − 40
C = 85 + 0.5(0.75Y − 40) = 65 + 0.375Y
(a) Y = C + I + G → Y = 65+0.375Y+85+60 → 0.625Y = 210 → Y = 336
(b) C = 65 + 0.375(336) = 191
© T = 40 + 0.25(336) = 124
(d) T(124) > G(60) → Budget Surplus
(e) New I = 85×1.5 = 127.5, ΔI = 42.5. Multiplier k = 1/(1−MPC(1−t)) = 1/(1−0.5×0.75) = 1.6. ΔY = 1.6×42.5 = ₦68
Question 4
(a) Three sectors: households, firms, government. Households supply factors to firms for factor payments; households pay taxes and receive transfers; firms pay taxes and receive government expenditure. Injections (I, G) = Withdrawals (S, T) at equilibrium.
(b) i. MPC = ΔC/ΔY = (65,000−52,000)/(75,000×0.4) = 13,000/30,000 = 0.433. Multiplier k = 1/(1−0.433) ≈ 1.76
ii. ΔY = k × ΔC = 1.76 × 20,000 = ₦35,200
ECN 003
Question 5
(a) Demographic transition: the process by which a country moves from high birth/death rates to low birth/death rates through four stages — pre-industrial, early transitional, late transitional, post-industrial. Nigeria is currently in stage 2–3.
(b) Malthus: population grows geometrically, food grows arithmetically, causing a food-population gap — checked by positive checks (famine, disease, war) or preventive checks (moral restraint, late marriage). Implications: food shortage, poverty trap, resource pressure, wage suppression, need for population control and agricultural investment. Criticism: underestimated technology (Green Revolution) and demographic transition.
Question 6
(a) Effects: unemployment, pressure on infrastructure, environmental degradation, food insecurity, urban congestion, increased government expenditure, low per capita income, high dependency ratio, security challenges, slow human capital development.
(b) Curtailing measures: family planning programmes, female education, poverty alleviation, rural development, incentive/disincentive policies, youth empowerment, stronger healthcare access.
ECN 004
Question 7
(a) Recessionary gap: the shortfall of actual (equilibrium) national income below the full-employment level of income — shown on a Keynesian cross diagram as the gap between actual AD and the AD needed to reach full-employment output (Yf).
(b) Policies: Expansionary fiscal policy (increase G, cut taxes, raise transfer payments); Expansionary monetary policy (cut interest rates, buy securities, lower CRR/liquidity ratio); Supply-side policies (education/training, deregulation, subsidies); Exchange rate policy (currency devaluation to boost exports).
Question 8
i. Economic recession: a significant, widespread, prolonged decline in economic activity, typically two consecutive quarters of negative GDP growth — marked by rising unemployment and falling output. Nigeria’s 2016 recession recorded GDP growth of −1.5%.
ii. Economic shock: an unexpected event disrupting normal economic functioning. Examples: supply shock (2014–2016 oil price crash cutting Nigeria’s oil revenue), demand shock (COVID-19 collapsing demand), security shock (insurgency disrupting oil/agric output), exchange rate shock (naira devaluation raising import costs/inflation).
iii. Expansionary fiscal policy: government raises spending and/or cuts taxes to boost aggregate demand, especially during recession — increased spending creates jobs and raises income (multiplier effect); tax cuts raise disposable income and consumption. Nigeria used this in 2016 by allocating about 30% of budget to capital expenditure. Effects: raises national income, reduces unemployment, stimulates private activity, may worsen budget deficit if debt-financed.
iv. Macroeconomic objectives: full employment, price stability, economic growth, balance of payments equilibrium.
v. Other causes of recession in West Africa: over-dependence on primary commodities, political instability/coups, corruption/poor governance, external debt burden, climate change/natural disasters, weak financial systems, structural dependence on imports.