Economics 2020 Jamb Examination

The average propensity to consume (APC) is calculated as the ratio of total consumption to total income.
Using the formula: \( APC = \dfrac{C}{Y} \)
Substituting the values: \( APC = \dfrac{400}{500} = 0.8 \)
This result means that for every unit of income earned, 80% is spent on consumption, showing a relatively high consumer spending tendency.

Collectivism is an economic principle in which the state owns and manages the means of production and major enterprises.
This system aligns directly with socialism, where resources are controlled collectively for the benefit of society rather than for private profit.
Therefore, state ownership and collective management are key features of a socialist economy.

Production efficiency occurs when a firm uses the least-cost combination of inputs to produce a given level of output.
This means minimising waste, selecting the optimal mix of labour and capital, and ensuring that no resources are being used inefficiently.
It does not necessarily involve reducing workers or increasing fixed factors but achieving maximum output at minimum cost.

A scale of preference ranks wants in order of priority, helping individuals choose which needs to satisfy first when resources are limited.
Because resources are scarce, decision-makers must compare alternatives based on importance, making their scale of preference the primary determinant of their choices.
Income and status may influence decisions but do not fundamentally direct the selection among alternatives.

The law of diminishing marginal utility states that as a consumer consumes more units of a commodity, the additional satisfaction (marginal utility) derived from each extra unit eventually decreases.
Total utility may continue to rise for a time, but the extra utility gained from each new unit will fall.
Thus, marginal utility declines even though total utility may still increase initially.

Entrepreneurs organise factors of production, take risks, and innovate. Their reward for bearing risk and managing business activities is profit.
Salaries reward labour, interest rewards capital, and rent rewards land, making profit the specific return to entrepreneurial effort.

When wages rise, workers have greater purchasing power, increasing demand for goods and services.
If this increased demand exceeds available supply, prices begin to rise, causing demand-pull inflation.
Higher wages therefore contribute directly to inflationary pressure in an economy.

A progressive tax system imposes higher tax rates as income increases.
This means the tax rate rises more steeply with rising income. Among the curves shown, curve Y reflects this upward-sloping relationship, representing increasing tax burden with increasing income.
Therefore, curve Y best illustrates a progressive tax structure.

A proportional tax maintains the same tax rate regardless of income level.
This creates a straight-line relationship in which the tax rate does not increase or decrease as income changes.
Curve Z displays this constant-rate behaviour, making it the correct representation of a proportional tax.

A fiduciary issue refers to the portion of a country's currency that is backed not by gold or other precious metals but by the government's authority and trust.
This means the money is accepted because people have confidence in the government that issues it, not because it is convertible into gold.
Modern paper currencies are largely fiduciary in nature.