WAEC Economics Past Questions & Answers - Page 3

The answer is inelastic demand. When the demand for a commodity is inelastic, the buyers are less sensitive to changes in price. This means that they will continue to buy the same amount of the commodity even if the price increases. As a result, the burden of the tax will be borne by the buyers.

The fixing of maximum prices by government is mainly on selected essential goods. This is because the government wants to ensure that these goods are affordable for everyone, especially the poor.

Inferior goods are goods that people demand less of as their income increases. Luxury goods are goods that people demand more of as their income increases. Imported capital goods are goods that are used to produce other goods.

The government is less likely to fix maximum prices on these goods because they are not essential for everyone's survival.

Here are some examples of selected essential goods that the government may fix maximum prices on:

Food
Water
Electricity
Medicine
Housing
The government may also fix maximum prices on other goods that are considered to be essential, such as gasoline and public transportation.

The goal of fixing maximum prices on essential goods is to prevent prices from rising too high, which could make these goods unaffordable for some people. This can help to protect the poor and vulnerable from the effects of inflation.

However, there are also some potential drawbacks to fixing maximum prices. For example, it can lead to shortages of goods, as suppliers may be reluctant to sell their goods at a lower price. It can also lead to black markets, where goods are sold at prices above the maximum price.

The government must carefully consider the pros and cons of fixing maximum prices before making a decision

If the supply of petrol increases, the supply of kerosene will rise. This is because petrol and kerosene are jointly supplied, meaning that they are produced from the same source. When the supply of petrol increases, it means that there is more crude oil available to be used to produce kerosene. As a result, the supply of kerosene will also increase.

The cost of crude oil production has no bearing on the supply of kerosene. The cost of production will only affect the supply of kerosene if it becomes too expensive to produce kerosene. However, in this case, the supply of kerosene would fall, not rise.

Liquidity refers to how easily an asset can be converted into cash without loss of value. Cash is the most liquid asset because it can be used to purchase goods and services immediately. Shares, bonds, and cheques are less liquid because they cannot be converted into cash as easily.

The average revenue curve of a firm in a perfect market is the same as the demand curve of the firm. This is because in a perfect market, the firm is a price taker, meaning that they cannot influence the market price. As a result, the firm's demand curve is also the market demand curve, and the average revenue curve is equal to the demand curve.