Economics 2014 Jamb Examination

Internal economies of scale occur when a firm's average cost decreases as it increases production.
This advantage comes from factors within the firm such as specialization, better utilisation of capital, and improved production techniques.
Hence, a large firm producing more efficiently than a small firm reflects internal economies of scale.

Division of labour breaks production into smaller tasks which are performed in stages.
Each worker or group of workers focuses on a specific stage, enhancing efficiency and productivity.
This structured approach ensures better skill development and reduces time wastage.

In capitalist economies, firms decide what to produce based on profit incentives and consumer demand.
Household preferences and income influence demand, but firms adjust output decisions to maximise profits and respond to market signals.

Variance measures how far individual observations are spread out from the mean.
For identifying the tallest tree, variance captures the extent of variation in tree heights, providing a more precise understanding than simple range or mean deviation.

A change in demand for a normal good results from factors other than price, such as income or preferences, causing the demand curve to shift.
This is different from a movement along the demand curve, which occurs due to price changes.

Price elasticity of demand \(E_d = \dfrac{\% \text{change in quantity demanded}}{\% \text{change in price}} = \dfrac{-5\%}{10\%} = -0.5\).
The absolute value is less than 1, indicating inelastic demand, where quantity demanded is less responsive to price changes.

A rightward shift of the budget line indicates increased purchasing power.
This occurs when consumer income rises, or when the relative price of commodities falls, allowing the consumer to afford more goods at the same budget.
Conversely, a rise in relative price or fall in income would shift the line leftward.

In a command economy, the government centrally plans production and decides the methods and processes to be used.
Individual firms or consumers have minimal influence on production decisions, which contrasts with market economies where such choices are decentralised.

Consumer equilibrium is achieved where the budget line is tangent to the highest attainable indifference curve.
This point represents the optimal combination of goods that maximises utility given the consumer's budget constraints.
From the graph, point K satisfies this condition.