Economics 2022 Jamb Examination

The price mechanism operates through demand and supply forces, allowing prices to adjust until equilibrium is reached.
This adjustment regulates how much consumers are willing to buy and how much producers are willing to supply.
Because its main function is to coordinate the actions of buyers and sellers by regulating supply and demand, it is best described by option A.

In a free market system, the government does not intervene in the allocation of goods. Instead, prices rise or fall depending on scarcity and demand.
This price movement helps ration scarce goods by signalling how much should be demanded or supplied.
The price mechanism therefore performs the primary rationing function.

A scale of preference is a list of wants arranged according to their importance.
Consumers cannot satisfy all wants due to limited resources, so they prioritise their choices.
This arrangement enables rational decision-making and highlights which wants will be satisfied first.
Therefore, it represents consumers' wants in order of priority.

Any point inside the production possibility curve (PPC) represents underutilisation of available resources.
This means labour, capital or land is not being used to full capacity.
Points on the curve show efficient use, while points outside are unattainable with current resources.
Thus, unemployment of resources occurs when production lies within the PPC.

Natural resources such as land, minerals and air are provided by nature and not created by human effort.
This distinguishes them from man-made resources that require labour and capital.
Although they may command a price in the market, their defining feature is that they originate freely from nature.

Marginal cost refers to the additional cost a firm incurs when producing one more unit of output.
It is calculated by taking the change in total cost divided by the change in output.
This measure helps firms determine optimal production levels and influences pricing decisions.
Thus, it is the cost of producing the extra or last unit.

Under perfect competition, the firm is a price taker and sells its product at a constant market price.
This results in a horizontal average revenue (AR) and marginal revenue (MR) curve at the market price level.
The diagram shows a horizontal curve, which is characteristic of perfect competition.
Therefore, PN represents the AR or MR curve of a perfectly competitive firm.

Using the elasticity of demand formula:\[ E_d = \dfrac{\%\text{ change in quantity demanded}}{\%\text{ change in price}} \]Change in quantity: from 20 to 30\[ \%\Delta Q = \dfrac{30 - 20}{20} = 0.5 \]Change in price: from 4 to 5\[ \%\Delta P = \dfrac{5 - 4}{4} = 0.25 \]Thus,\[ E_d = \dfrac{0.5}{0.25} = 2.00 \]This indicates highly elastic demand because quantity responds more than proportionally to price changes.

Goods of ostentation, also known as Veblen goods, are luxury goods purchased for prestige.
As the price rises, consumers may buy more to signal higher social status.
This behaviour causes an upward-sloping demand curve, contrary to the normal law of demand.
Therefore, the demand curve for ostentatious goods is positively sloped.

Goods are in competitive demand when they serve as substitutes for each other.
An increase in the demand for one leads consumers to switch away from the other, reducing its demand.
This occurs because both goods satisfy similar wants, creating competition between them.
Thus, the correct description is competitive demand.