2025 JUPEB ECONOMICS PAPER
ECN 001: PRINCIPLES OF ECONOMICS I
Question 1
The table below shows the total utility derived by a consumer from consuming bottles of water:
| Bottles consumed | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Total Utility (utils) | 30 | 55 | 75 | 90 | 100 | 105 |
(a) Calculate the marginal utility at each level of consumption. [3 marks]
(b) At what point does diminishing marginal utility set in? [2 marks]
© Using the data, plot the total utility and marginal utility curves on separate diagrams. [5 marks]
(d) If the price of each bottle is ₦50 and the consumer has ₦250 to spend, determine the consumer’s equilibrium quantity using the equimarginal principle. [5 marks]
Question 2
Read the following passage and answer the questions that follow:
“In recent years, the Nigerian government has implemented price ceilings on certain essential commodities including rice and cooking gas, in response to rising food inflation. While this policy was intended to protect low-income consumers, many economists have argued that price ceilings, when set below equilibrium, create unintended market distortions including shortages, black markets, and deterioration in product quality.”
(a) Using a demand and supply diagram, illustrate and explain the effect of a price ceiling set below equilibrium price. [5 marks]
(b) Why do price ceilings often lead to black markets? Explain with reference to Nigeria. [4 marks]
© Suggest three alternative government policies that could protect consumers without distorting the market. [6 marks]
ECN 002: PRINCIPLES OF ECONOMICS II
Question 3
The table below presents macroeconomic data for a hypothetical economy:
| Year | Real GDP (₦bn) | Price Level (Index) | Unemployment Rate (%) | Government Spending (₦bn) | Tax Revenue (₦bn) |
|---|---|---|---|---|---|
| 2019 | 800 | 100 | 8 | 200 | 160 |
| 2020 | 740 | 108 | 12 | 240 | 148 |
| 2021 | 760 | 115 | 11 | 260 | 152 |
| 2022 | 810 | 122 | 9 | 255 | 170 |
| 2023 | 850 | 130 | 7 | 250 | 190 |
(a) Calculate the budget balance for each year and classify it as surplus, deficit, or balanced. [5 marks]
(b) Identify the year in which the economy was in recession and justify your answer. [2 marks]
© What type of fiscal policy was the government pursuing in 2020? Explain. [3 marks]
(d) Calculate the percentage change in real GDP between 2019 and 2023. [2 marks]
(e) Comment on the relationship between unemployment and real GDP across the five years. [3 marks]
Question 4
A student argues: “Nigeria should abolish all taxes because they reduce disposable income and discourage economic activity.”
(a) Do you agree or disagree with this statement? Justify your position with economic reasoning. [5 marks]
(b) Explain the three canons of taxation as propounded by Adam Smith, and assess their relevance to Nigeria’s tax system. [6 marks]
© Distinguish between a proportional, progressive, and regressive tax system, stating which is most appropriate for Nigeria and why. [4 marks]
ECN 003: APPLIED ECONOMICS I
Question 5
Study the data below and answer the questions that follow:
Nigeria — Selected Development Indicators (2022)
- GDP per capita: $2,184
- Human Development Index (HDI): 0.535 (ranked 163rd of 191 countries)
- Poverty headcount ratio (below $1.90/day): 40.1%
- Adult literacy rate: 62%
- Life expectancy: 53.4 years
- Unemployment rate: 33.3%
- Inflation rate: 21.3%
(a) Using the data above, assess Nigeria’s level of economic development. [5 marks]
(b) Explain four limitations of using GDP per capita alone as a measure of development. [4 marks]
© Suggest three more comprehensive measures or indices that better capture economic development beyond GDP. [6 marks]
Question 6
Consider the following statement:
“Corruption is the single greatest obstacle to economic development in Nigeria. Until it is decisively addressed, no development plan will succeed.”
(a) To what extent do you agree with this statement? Discuss with economic evidence. [8 marks]
(b) Identify and explain two other structural obstacles to Nigeria’s development aside from corruption. [4 marks]
© Outline three institutional reforms Nigeria must implement to combat corruption effectively. [3 marks]
ECN 004: APPLIED ECONOMICS II
Question 7
The diagram below describes a labour market scenario:
In 2023, the Nigerian National Assembly proposed raising the national minimum wage from ₦30,000 to ₦70,000 per month. Labour unions argued this would lift millions out of poverty. Employers’ associations countered that it would trigger mass retrenchment, especially among SMEs. The CBN warned of potential inflationary consequences.
(a) Using a labour market diagram, illustrate the effect of raising the minimum wage above equilibrium. [4 marks]
(b) Analyse three arguments in favour of the proposed ₦70,000 minimum wage. [6 marks]
© Analyse three arguments against the proposed ₦70,000 minimum wage. [6 marks]
(d) Recommend the most economically sound approach the government should adopt, justifying your answer. [4 marks]
Question 8
Match each macroeconomic policy action in Column A with its most likely effect in Column B, then for any three of your matched pairs, write a paragraph explaining the economic mechanism linking the action to its effect.
Column A — Policy Actions:
i. CBN raises the Monetary Policy Rate from 18% to 22%
ii. Federal government reduces import duties on raw materials
iii. Government introduces a conditional cash transfer programme for rural poor
iv. CBN sells Treasury Bills worth ₦500 billion in the open market
v. Government increases capital expenditure on rural roads by 40%
vi. FG introduces a 5% levy on all luxury good imports
Column B — Likely Effects:
A. Reduction in cost of domestic production and potential increase in output
B. Withdrawal of liquidity from the banking system, reducing money supply
C. Increased aggregate demand among low-income households, stimulating local markets
D. Higher borrowing costs, reduced investment, potential slowdown in economic activity
E. Improved agricultural productivity and reduction in rural-urban migration
F. Improved current account balance and discouragement of conspicuous consumption
[15 marks]
ANSWERS
ECN 001
Question 1
(a) MU: 30, 25, 20, 15, 10, 5 (for bottles 1–6 respectively)
(b) Diminishing marginal utility sets in from the 2nd bottle (MU falls from 30 to 25).
© TU curve: rises but at a decreasing rate (concave). MU curve: straight declining line from 30 to 5.
(d) Budget ₦250 ÷ ₦50 = 5 bottles affordable. Consumer equilibrium = 5 bottles, TU = 100 utils (6th bottle would cost ₦300, exceeding budget).
Question 2
(a) A price ceiling set below equilibrium (Pc < P₀) causes quantity demanded to exceed quantity supplied → shortage (Qd − Qs).
(b) Shortages create arbitrage opportunity — traders buy at Pc and resell at higher prices; weak enforcement/corruption allows this; excess demand pushes buyers to pay above ceiling. E.g., Nigerian petrol and cooking gas price controls historically caused black markets.
© Alternatives: direct subsidies to producers, targeted cash transfers to poor households, investment in domestic production capacity to raise supply.
ECN 002
Question 3
(a) Balance = Tax Revenue − Govt Spending: 2019: −40 (deficit); 2020: −92 (deficit); 2021: −108 (deficit); 2022: −85 (deficit); 2023: −40 (deficit). All years show deficits.
(b) 2020 — Real GDP fell (800→740), unemployment rose (8%→12%), price level rose — signs of recession.
© Expansionary fiscal policy — spending rose (₦200bn→₦240bn) while tax revenue fell, widening the deficit to stimulate demand.
(d) % change = (850−800)/800 × 100 = 6.25%
(e) Inverse relationship (Okun’s Law) — GDP and unemployment move oppositely in every year shown.
Question 4
(a) Disagree — taxes fund public goods, correct market failures, redistribute income, and enable fiscal stabilisation; solution is optimal tax design, not abolition.
(b) Canons: Equity (pay according to ability — Nigeria’s PIT is nominally progressive but poorly enforced), Certainty (amount/time/method should be clear — multiple taxation in Nigeria undermines this), Convenience (collected conveniently — PAYE works well in formal sector, less so informal sector).
© Proportional: same % rate regardless of income. Progressive: rate rises with income (Nigeria’s PIT). Regressive: rate falls as income rises (VAT). Progressive tax is most appropriate for Nigeria given high inequality.
ECN 003
Question 5
(a) Indicators show Nigeria is a low-to-middle income developing country — low GDP per capita, medium-low HDI, high poverty, low literacy, low life expectancy, and severe unemployment/inflation.
(b) Limitations: ignores income distribution, excludes non-material welfare, ignores the informal economy, no environmental accounting.
© Better measures: Human Development Index (HDI), Multidimensional Poverty Index (MPI), Genuine Progress Indicator (GPI).
Question 6
(a) Largely agree — corruption misallocates oil revenue, inflates infrastructure costs, deters FDI, erodes human capital, and causes major revenue loss; though other factors (infrastructure, insecurity) also matter.
(b) Other obstacles: inadequate infrastructure (chronic power deficit raising business costs), ethnic/religious fragmentation (instability, resource conflicts, insecurity).
© Reforms: strengthen anti-corruption agencies (EFCC/ICPC independence), enforce public asset declaration, expand digital governance/e-procurement to reduce discretion.
ECN 004
Question 7
(a) Minimum wage set above equilibrium (Wm > W₀) creates unemployment: quantity supplied (Ls) exceeds quantity demanded (Ld), gap = Ls − Ld.
(b) In favour: poverty alleviation/improved living standards, stimulation of aggregate demand via multiplier effect, reduction of income inequality.
© Against: unemployment among low-skilled workers (especially SMEs), inflationary pressure (wage-price spiral), state government fiscal incapacity to pay.
(d) Recommended: phased increase (e.g., ₦50,000 immediately, reaching ₦70,000 over 24–36 months), regional wage differentiation, SME support packages, investment in labour productivity.
Question 8
Matches: i→D, ii→A, iii→C, iv→B, v→E, vi→F
- i→D: Higher MPR raises bank lending rates → costlier borrowing → reduced investment/consumption → slower growth (contractionary transmission).
- iii→C: Cash transfers raise disposable income of poor households with high MPC → increased local spending → multiplier effect stimulates local business and income.
- v→E: Better rural roads cut transport costs and produce spoilage → raises farm incomes, lowers consumer prices, reduces incentive for rural-urban migration, and creates construction jobs.