2015 - WAEC Economics Past Questions and Answers - page 2

Price elasticity is a measure of the responsiveness of demand or supply of a good or service to changes in price. The price elasticity of demand measures the ratio of the proportionate change in quantity demanded to the proportionate change of theprice .

An ostentatious  Good is a good where demand is often greater when the price of it is higher.  These are goods we buy in order to 'keep up with the Jones'. The good may give little actual utility apart from the pride of owning something very few other people own.

 “Marginal utility is addition made to total utility by consuming one more unit of a commodity”.

Total Utility is Summation of Marginal Utilities: in order to get the total utility, you will have to sum up the additional/extra utility (MU) from the given levels of consumption

 6 Factors Affecting Price Determination of...

• Product Cost
• The Utility and Demand
• Extent of Competition in the Market
• Government and Legal Regulations
• Pricing Objectives
• Marketing Methods Used

A maximum price occurs when a government sets a legal limit on the price of a good or service – with the aim of reducing prices below the market equilibrium price.

Minimum Prices. It is known as minimum price or pricefloor when the government sets a minimum legal limit of aprice of a particular good or service. 

In economics, rationing refers to an artificial control of the supply and demand of commodities. 

Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service.  As a consumer consumes more units of a product, the marginal utility derived eventually drops. This relates with the law of diminishing marginal returns which states that, there will be  a decrease in the marginal output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.

Total cost refers to the total expense incurred in reaching a particular level of output.  TC (total cost) = TFC (total fixed cost) + TVC (total variablecost).

Total product is the overall quantity of output that a firm produces, usually specified in relation to a variable input. Total product is the starting point for the analysis of short-run production. It indicates how much output a firm can produce according to the law of diminishing marginal returns.

Marginal Product (MP) = Change in Total Product / Change in Variable Factor

Total Product (TP) = AP X Variable Factor

The average fixed costs AFC curve is downward slopingbecause fixed costs are distributed over a larger volume when the quantity produced increases. AFC is equal to the vertical difference between ATC and AVC. Variable returns to scale explains why the other cost curves are U-shaped.

joint-stock company is  a company whose stock is owned jointly by the shareholders.

A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares.