Economics 2011 Jamb Examination

When demand increases while supply remains constant, buyers are willing to purchase more at every price level. This creates excess demand, causing the equilibrium price to rise. As sellers respond to the higher price, the equilibrium quantity also increases.
Therefore, both equilibrium price and quantity will rise when demand increases without a change in supply.

Total output continues to increase as long as marginal product (MP) is positive. When MP becomes zero, total output reaches its peak because additional input does not increase output any further. Beyond this point, total output starts to decline if MP becomes negative.
Hence, total output is maximum when MP equals zero.

The consumer reaches equilibrium when the marginal rate of substitution (MRS_xy) equals the ratio of the prices of the two goods. Mathematically, equilibrium occurs when:\[ MRS_{xy} = \dfrac{P_x}{P_y} \]This means the rate at which the consumer is willing to substitute one good for another equals the market rate of exchange determined by prices.
Thus, MRS_xy equals the ratio of the two prices.

A minimum price set above the equilibrium price prevents sellers from charging lower prices. At this higher price, supply exceeds demand because producers are willing to supply more while consumers demand less. This imbalance leads to a surplus in the market.
Therefore, minimum price legislation reduces demand and creates surplus.

In a mixed economy, inflation can be controlled by increasing productivity, which expands output and stabilises prices. Higher productivity ensures that goods and services are produced efficiently, matching or exceeding demand, thereby reducing inflationary pressures.
Hence, increasing productivity is an effective way to control inflation.

The production possibility curve (PPC) assumes that technology and resources remain constant. However, this assumption limits its realism because technological progress and changing resource availability can shift the PPC outward over time. Therefore, the PPC does not account for technological development.
Thus, one limitation of the PPC assumption is that it shows no indication of technological development.

The arithmetic mean considers all observations equally, making it sensitive to extreme values or outliers. A few very high or very low figures can distort the mean, making it unrepresentative of the dataset’s general trend.
Hence, a major disadvantage of the arithmetic mean is that it is affected by extreme data.

Consumer sovereignty refers to the power of consumers to determine what goods and services are produced through their purchasing choices. Producers respond to consumer preferences in a market economy, shaping overall demand patterns.
Therefore, demand patterns are determined by the market based on consumer sovereignty.

Consumer surplus is the difference between what a consumer is willing to pay for a good (based on marginal utility) and what they actually pay (market price). It measures the extra benefit gained from paying less than the maximum willingness to pay.
Thus, consumer surplus represents the excess of marginal utility over price.

An oligopoly is a market structure dominated by a few large firms that control a significant share of the market. Each firm is aware of the actions of the others, leading to interdependence in pricing and output decisions. This structure is different from monopoly (single seller) and perfect competition (many sellers).
Therefore, the defining characteristic of oligopoly is the presence of few sellers.