first term ss 1

ECONOMICS
SCHEME OF WORK

WEEKTOPIC

1. Meaning of Economics and Related Concepts: Definitions, scope, importance and methodology
of Economics. Economics as a social Science.
2. Meaning of Economics and Related Concepts : Wants, Scarcity, Resources, Choice, Scale of
Preference, opportunity Cost, etc
3. Basic Tools of Economic Analysis: Tables, Graphs and Charts, Measures of Central
Tendency: Mean, Median and Mode
4. Concept of Demand and Supply: Price System, Demand schedules and curves. Law of demand
and factors affecting demand
5. Concept of Supply: definition, supply schedule and curves, Factors affecting supply.
Determinants of equilibrium price
6. Theory of Production: Meaning, Types and Factors of Production.
7. MID-TERM BREAK
8. Theory of Production: Division of labour and specialization –advantages, disadvantages and
limitations of division of labour.
9. Theory of Production: Scales of Production –advantages and disadvantages of large scale
production
10. Basic Economic Problems of society: Definition of Economic System. What to produce, How to
produce, for whom to produce and Efficiency of resource use.
11. Revision
12. Examination.

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WEEK 1
MEANING OF ECONOMICS AND RELATED CONCEPTS

Content

1. Definitions, scope, importance of Economics

2. Methodology of Economics.
3. Economics as a social Science.

Sub-Topic 1: Definitions, Scope and Importance of Economics

Meaning of Economics

Economics has many definitions. The reason is that Economists see the subject from different points of
view.

Adam Smith: He is regarded as the father of Economics because he laid the foundation of Economics
as a discipline/subject. In his book titled “The wealth of nations” written in 1776, he defined Economics
as “an inquiry into the nature and causes of the wealth of Nations”.

Other notable Economicts are Alfred Marshall (1890), John Stuart Mill (1843); Professor Alfred
Pigou; Lord Keynes, H.J. Davenport; Professor Paul Samuelson, Professor Sam Aluko of Nigeria,
Professor Lionel Robbins etc.

Economics has many definitions. The most widely accepted definition is given by Professor Lionel
Robbins which says “Economics is a science which studies human behaviour as a relationship between
ends and scarce means which have alternative uses”. His definition is widely accredited because it
embraces the following terms:

(i) Economics is a Social Science because it deals with human behaviour and the activities of the
people in the society.

(ii) Ends: These are needs which are desired by the consumer to give satisfaction. Examples are
cars, clothes, foodstuffs, handsets, books etc.

(iii) Scarce means: “Means” are resources which are scarce relative to the demand for them.

(iv) Alternative uses: The scarce resources can be put to so many uses. For example land can be used
for farming or construction of houses, factories.

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SCOPE OF ECONOMICS

Economics covers the actions and activities of individual households and firms (microeconomics); and
the actions and activities of the government (macroeconomics) in relation to production, distribution,
consumption, money and exchange of goods and services.

Evaluation:

a. Who is the father of economics and why?

b. Define Economics

c. What area does economics cover?

Sub-Topic 2: Importance of Economics and Economics as a Social Science

IMPORTANCE OF STUDYING ECONOMICS

We study economics for the following reasons

Allocation of resources:

(i) It enables the individuals, households, firms, and the government to know how limited resources
can be used effectively and efficiently.

(ii) Reduction of resource wastage: Economics helps to reduce wastage in resource allocation.
Economic decision-makers channel their resource to areas where they are mostly needed.

(iii) Solution to basic economic problems: The study of Economics provides students with basic skills
for analyzing economic problems

(iv) Technique of reasoning and critical thinking: Economics teaches the techniques of reasoning
and power of critical thinking.

(v) Provision of basic tools for analysis: Economics equips the economic agents with the tools of
economic analysis to understand and solve current issues and economic problems confronting
the society e.g. oil glut, oil spillage, oil theft, unemployment etc.

(vi) Rational decision-making; economics enables individuals, and other economic agencies to be
rational or reasonable in the application of scare resources to satisfy unlimited wants. A normal
individual takes decisions in the most acceptable and beneficial ways.

(vii) Helps government economic policies and development: economics helps us to weigh the
economic policies of the government, determine their advantages and disadvantages and offer
the right suggestions on the way forward e.g. problem of unemployment, ‘white-elephant’
projects, inflation, budget etc.

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ECONOMICS AS A SOCIAL SCIENCE

Economics is not a physical, pure or natural science subject like Physics, Chemistry or Biology
because its experiments are not carried out with chemicals in the laboratory or with plants in the
farm. Rather, its scientific nature stems from the fact that Economics has laws; and again its
theories and principles are analyzed based on scientific techniques, like observation, selection and
classification of data, analysis and generalization; just like the pure sciences. Its theories and
principles can be verified with facts and figures.

In the strict sense of the word, Economics is a Social Science. This is because it studies human
behaviour, which though cannot be tested in laboratory setting, but can be observed and tested by
applying them to real life situation.

EVALUATION

1a. Give the most accepted definition of Economics

b. Who gave the definition?

2. What does the following mean? (i) Ends (ii) scarce means (iii) alternate uses

3a. Is Economics a science or a social science? Make a defense of your argument.

4. Why do we study Economics?

WEEKLY ASSIGNMENT

1. Economics is a/an (a) physical science (b) social science (c) pure science (d) art subject (e)
applied science

2. Economics is often described as a science because it (a) adopts the use of laboratory
experiments (b) involves accurate prediction of human beings (c) deals with observations and
field work (d) uses scientific methods to explain observed phenomena (e) makes use of
controlled experiments

3. The study of economics enables individuals to: (a) change jobs (b) evade taxes (c) accumulate
huge wealth (d) make rational decisions (e) be stingy

4. The main concern of Economics is to (a) allocate scarce resources to satisfy human wants (b)
satisfy all human wants (c) redistribute income between the rich and the poor (d) control the
growth of the population (e) fight inequality among nations

5. Economics is regarded as a social science because (a) economists are sociable (b) economics
socializes a person (c) the study of economics adopts the scientific method (d) economists adopt

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 the scientific method in the study of human behaviour. (e) all economists are socialist.

6. Economics is called a social science because it is (a) a branch of the social studies (b) a study of
the ways a man devices to satisfy his unlimited wants from limited resources (c) a dismal
science in the Mathusian sense (d) governed by scientific laws (e) the study of human wants by
means of scientific method of observation.

7. Economics may be defined as (a) the study of money and banking (b) the study of markets and
prices (c) the study of production and distribution (d) the study of human behaviour in the
allocation of scarce resources (e) the study of employment of labour, land and capital.

8. Which of these statements is not true of Economics as a discipline? (a) It is a social science (b)
It is analytical (c) It is concerned with people’s material well being (d) It assumes unlimited
human wants (e) It assumes unlimited human resources.

ESSAY QUESTIONS

1. Why is it difficult to find an acceptable definition of Economics?

2. Give a reason why Economics is a (i) science (ii) social science.

3. What areas does Economics cover?

4. Mention four prominent economists and state their definitions.

5. Give five reasons for studying Economics?

PRE-READING ASSIGNMENT

Read about Basic Concepts in Economics

WEEK-END ACTIVITES

Find out reasons why Economics is a science and a Social Science.

REFERENCE TEXTS

1. Fundamentals of Economics for SSCE by R.A.I. Anyanwuoa

2. Comprehensive Economics for SSS BY Johnson Ugoji, Anyaele
3. Essentials Economics for SSS by Cole Esan Ande. 2011 edition
4. Bounty Economics for SSS by B.A. Adeleke, Ishaya Lawanson Bounty Press, 2010.

6|Page
WEEK 2

MEANING OF ECONOMICS AND RELATED CONCEPTS: BASIC CONCEPTS OF

ECONOMICS

Content

Concepts of wants, Scarcity, Scale of Preference, Choice

and Opportunity Cost

Sub-Topic 2: Basic Economic Concepts

These are:

a. Wants
b. Scarcity
c. Scale of Preference
d. Choice
e. Opportunity Cost

a. WANTS
Wants may be defined as mere desire, needs, wishes or ends of human beings not backed by
ability to pay. The basic needs of man are food, shelter and clothing. Human wants are many
and insatiable but the resources to satisfy them are scarce and limited. Examples of wants are
houses, cars, shoes, air-conditioner, books, hand-sets, computers properties etc.

b. SCARCITY
Scarcity is the limited supply of resources to satisfy unlimited wants. It is a fundamental
economic problem because individuals, firms and the government are all faced with limited
resources to satisfy competing and unlimited wants. For example, asa student, if you are told to
list all that your heart desires, you will find out that you do not have the resources to satisfy all
your wants. This is the essence of choice-making.

c. CHOICE
Choice arises as a result of scarcity of resources to satisfy man’s numerous and unlimited
wants. Since it is impossible to produce everything a person wants, choice has to be made a
among competing wants by picking the most pressing wants based on the available resources.

d. SCALE OF PREFERENCE
A scale of preference refers to a list of unsatisfied wants arranged in order of priority or
importance. This aids decision-making. The most pressing needs are ranked first followed by
the less pressing ones.

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 For example, a student might rank his wants in following order according to their level of
importance:
1. Pair of school uniform
2. Exercise books
3. Wrist watch
4. Dictionary
5. Scientific calculator
6. An arm chair

If he is to choose between items 1 and 4, he chooses the first. Scale of preference of individuals,
firms and the government differ from time to time.

Importance of Scale of Preference

i. It helps individuals to rank their needs in order of importance.

ii. It helps us to manage our resources properly.
iii. It helps both individuals and government to identify the most important needs.
iv. It enhances optimum allocation of resources.
v. It helps individuals, firms and government in the efficient utilization of resources.
vi. It helps economic agents to maximize their satisfaction.
vii. It helps individuals to make rational decision.

Sub-Topic 2: Basic Economic Concepts (Contd)

OPPORTUNITY COST

For an economist, the cost of something is not just the cash

payment, but all of the value given up in the process of acquiring
the thing. For example, the cost of a university education
involves tuition, and text book purchases,
and also the wages that would have been earned during the time
at university, but were not. Indeed, the value of the time spent in
acquiring the education – how much enjoyment was lost – is part
of the cost of education

Opportunity cost is also known as real or true cost or the alternative forgone. It means the satisfaction
of one want at the expense of the other he fails to enjoy. It is the sacrifice made in order to enjoy
something else. For example, a student wants to buy a book and a shirt, each costing N200. Since he is
limited by his resources of N200, he will need to choose between the book and the shirt. If he
eventually decides to buy book, the opportunity cost of the book he buys is the shirt he forgoes. Hence
opportunity cost is alternative forgone.

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RELEVANCE/IMPORTANCE OF OPPORTUNITY COST

Opportunity cost is important to individuals, firms and the government in many ways:

Importance of Opportunity Cost to Individuals

I. It makes individuals to make wise choice between competing wants

II. It enables individuals to make maximum use of scarce resources relative to their unlimited
wants.

Importance of Opportunity Cost to Firms

I. It enables the firm to make rational decisions about production process

II. It helps the industries in deciding the techniques of production whether to adopt capital
intensive or labour intensive method of production

Importance of Opportunity Cost to Government

I. It assists the government in the preparation of budget, since it helps in the efficient allocation
of scarce resources to certain sectors of the economy.
II. It helps in making certain decisions, e.g. the priority areas that may require immediate
attention, such as medical and education.

RESOURCES

This refers to the means, or input or factors of production with which human wants can be satisfied. It
includes productive or economic resources like land, labour, capital and entrepreneurship, which are
used for producing goods and services. Other examples are time and money. Resources are scarce or
limited in supply relative/compared to the demand for them.

Types of Resources

(i) Economic Resources: They are resources that have opportunity cost. Their supply
is inadequate relative to the demand for them. Producers are willing to forgo
certain wants in order to obtain them.

(ii) Non-economic Resources: They are items whose supply is inexhaustible or greater
than demand for them. It does not have opportunity cost. They are ‘free’ goods.
Examples are air, water.

(iii) Natural Resources: these are minerals in the soil e.g. coal, crude oil,

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EVALUATION

Write short notes on the following basic economic concepts

(i) Want

(ii) Resources

(iii) Scarcity

(iv) Scale of preference and

(v) Opportunity cost

WEEKLY ASSIGNMENT

OBJECTIVE TEST

1. Which of the following statement is not necessarily true?

a. Human wants are unlimited.

b. Without scarcity of resources, there will be no economics
c. It is not difficult to find means of satisfying all our wants.
d. Human wants are of varying importance.

2. Opportunity cost is a measure of _____

a. The time it takes to carry out an action

b. Forgone alternatives
c. Tb money spent in the purchase of a commodity
d. The intrinsic satisfaction derived from the purchase of a commodity

3. Scarcity in Economics means that resources ______________

a. are not enough to share among producers

b. needed to satisfy human wants are limited in supply.
c. are never enough to share among consumers
d. required to meet our essential wants are unlimited.
4. Choice is necessary because resources are/can

a. Available
b. Be found everywhere
c. Constant
d. Scarce

5. The decision to consume more of one product will under normal circumstances imply that

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 a. More of another product will be consumed
b. Less of something else will be consumed
c. No other product will be consumed
d. Enough resources are available

6. Master Abayomi needs a Television and a refrigerator. Each costsN10,000, the exact amount
he has. If he buys the television, the refrigerator would be regarded as the

a. Normal cost
b. Inferior item
c. Alternative forgone
d. Supplementary item
7. A scale of preference (a) is a list of goods and services to be purchased in order of priority (b)
(c)shows the monthly income of an individual (d) shows consumers’ preference for luxurious goods.

8. In Economics, an economic problem exists whenever (a) there is unemployment and inflation (b)
there is scarcity and choice (c) there are no buyers for our goods (d) raw materials are imported.

9. Choice is necessary because (a) goods are many and varied and one must therefore choose (b)
one cannot consume everything (c) resources are scarce relative to want (d) wants are limited
and resources are unlimited.

10. Which of these is the real cost of satisfying any want in the sense of the alternative that has to
be forgone? (a) Variable cost (b) Opportunity cost (c) Total cost (d) Prime cost.

ESSAY QUESTIONS

1. To Economists, all things are scarce – Discuss

2. Explain the concept of opportunity cost. b. Show how relevant it is to the individual, the firm
and the government.

3. Show how the basic concepts in Economics – wants, scarcity, choice, scale of preference and
opportunity cost, are inter-related.

4. Distinguish briefly but clearly between

(a) Opportunity cost and money cost

(b) How is the concept of opportunity cost relevant to the economies of West African
Countries.

5. Distinguish between: (a) Economic resources and non-economic resources (b) Want and demand.

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 PRE-READING ASSIGNMENT:

Read about Basic Tools of Economic Analysis.

WEEKEND ACTIVITY

Indicate whether each statement is true or false

1. The government of the United States of America is so rich that it does not worry about
opportunity cost.

2. Air, though useful is of no interest to the Economist.

3. Scarcity is usually measured in absolute terms.

4. A commodity that cannot be physically transferred from one place to another is not an
economic good.

5. An Economist is a miser.

REFERENCE TEXTS

1. Fundamentals of Economics for SSS by R.A.I. Anyanwuocha. Chapter 1 pages 3-6.

2. Bounty Economics for SSS by B.A. Adelekan et al chapter 1 page 3-11.

3. Exam Focus on Economics for SSCE by A.A. Aderinto et al chapter 1 pages 1-5.

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WEEK 3

BASIC TOOLS FOR ECONOMIC ANALYSIS

Content

1. Graphs, Charts and Tables

2. Measures of Central Tendency

Sub-topic One: Graphs, Charts and Tables

Introduction

Economic relationship can be expressed in two major ways. These are:

A. Verbal statement: This is the expression of economic relationship in statement. For example,
one could say “the number of bag of rice demanded depends on its price”
B. Mathematical expressions
Mathematical expressions are used to explain verbal statements in economics in order to make
concise and accurate predictions. It can be explained below:
(a) Symbolical Statement: This is the use of algebraic expressions to express functional
relationships. For examples, the quantity of a commodity depends on its price. This can be
expressed using functional relationships in mathematics:

Where is quantity demanded of commodity m

Pm is price of commodity m

(b)Statistical Tools (Geometric expression and Arithmetical expression)

These are tools like tables, graphs and charts which are used to illustrate a body of data in
economics. We shall treat these entire one after the other.
i. Geometric expression: This involves the use of charts and graphs.
ii. Arithmetic expression: This involves the use of table etc.

Tables

A table is an orderly arrangement of data in rows and column.

Advantages of Tables

(i) It presents data in an orderly manner.

(ii) Volume of data is reduced to show only important features.
(iii) It summarizes data to make it more understandable.
(iv) It makes comparison between different classes of data possible

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(v) Further analysis and prediction of data is made possible
(vi) The required figure could be easily located through table.

Graphs

Information on tables is presented on graph sheets to show trends and implication of such
data. It is referred to as line graph.

Features of a good graph

A good graph must have the following:

(i) A clear and comprehensive title or heading.

(ii) Vertical and horizontal axes. Horizontal axis is called the X–axis, which
represents the ‘independent variable’. Vertical axis is called the Y-axis, which
represents the ‘dependent variable’ [the reverse is the case in the theories of
demand and supply]
(iii) Graphs are drawn to scale. The scale determines the accuracy of graphs
(iv) Unit of measurement e g cm, m, kg, N S Km etc
(v) Graphs must be fully and properly labelled.

Charts

Charts are also graphical representations of data

Types of Charts:

(i) Bar chart

(ii) Pie chart
(iii) Histogram
(iv) Pictogram

1. Bar chart

There are three types of bar charts, they are (i) Simple bar chart (ii) Component bar
chart (iii) Multiple bar chart

(i) Simple bar chart: Data presented in a table can be represented in a simple bar chart.
The bar charts are represented by scaled length of bars, which show the value of each
data. An equal space differentiates a data from the other. The bars are usually drawn
vertically, but may also be drawn horizontally.
Example: the population of five towns in 2010 is as follows:

Town Population

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 (Thousand)

IJEBU 50
ILORIN 160
ILESA 100

IFE 80
IJEBU-JESA 10

Bar Chart Drawn Vertically

061
Population
(thousand)
140

120

100

80

60

40

20
0
Ilobu Ilorinn Ilesa Ife Ijebu-jesa
Towns
Simple bar chart showing population of 5 towns

Bar Chart drawn Horizontally

(ii) Component bar chart: Component bar chart: This is used when data involves more than one
item. Each bar represents the total value of all the items. A bar is divided into section or
component. Each component to its value of the total. Each bar is differentiated from the other
with colours.

Example: A trader produced some crops for five years. The value is presented in the table below.
Illustrate the data in a component bar chart.

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 Year Maize Yam Rice Total
(kg)
2008 10 15 5 30
2009 25 20 10 55
2010 15 30 20 65
2011 20 10 40 70
2012 10 20 10 40

Scale: Let 2cm represent 10kg

70

Value 06
of
crops 50
(kg)
40
KEY
30 eciR
Yam
20
Maize
10

0
2008 2009 2010 2011 2012

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 Component bar chart showing value of crops produced

(iii) Component Bar Chart: It is also used to show data comprising two or more items. This
helps in comparison of data. The difference here is that the component values for a time
are drawn as separate bars lying side by side each other. No total value is used here.

Example: the amount of sale three brands of multi drink from January to May 2013 is as
follows. Present the data in a multiple bar chart.

Month Sales (in thousands)

Maltonic Multina Hi-malt
January 40 35 25
February 10 20 30
March 15 10 20
April 20 30 50
May 30 40 60

Pie Chart

A pie chart is a circle which is divided into sectors by radial line. The circle represents the total mass of data
under consideration while the various sectors represent the proportion of the different variables of
components of the data.

Example:

The pie chart here represents the hypothetical output of farmers in a country in a particular year. The total
output of the crops was 72,000 tonnes

1170 Cocoa

rebbuR 068

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1020 Beans

550Rice
 a. Calculate the quantity of each product
b. Which crop contributed the least and what quantity?
c. Which crop has the highest output

Solution:

a.

Name of Value in Degree Workings Quantity

products
Rubber 860 17,200
Cocoa 1170 23,400
Beans 1020 20,400
Rice 550 11,000
TOTAL 360 72,000
b. Rice contributed the least. The quantity was 1100 tonnes.

c. Cocoa contributed the highest.

EVALUATION

1. The following is the price of kerosene in some West African countries in January, 2000.
Represent it on a bar chart.

Country Naira/litre
Nigeria 150

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 Cameroon 100
Niger 120
Togo 80
Burkina Faso 110

2. The number of boys and girls in selected four classes of a school are stated below. Represent in
a bar component chart.

Class Boys Girls Total

SS 1B 20 10 30
SS 2A 25 15 40
SS 2C 15 20 35
SS 3D 10 25 35

3. The population of three sections of an economy in three years is stated below. Represent this in
a multiple bar chart.

Section 1980 1981 1982

North 50000 70000 40000
West 40000 30000 60000
East 30000 40000 50000

Sub-Topic 2: Measures of Central Tendencies (Measures of Location or Averages or position)

Meaning

Measures of Central Tendency are forms of averages. They summarize the mass of data presented in a
distribution. They include: Mean, Median and Mode

Mean

It is the average of variables or items in a data. It is the most common kind of average. It is calculated
by dividing the sum total of the items by the number of items in the group.

Mathematically, the formula for calculating mean is

Where
= mean
X = values of the different items
n = number of items
f = frequency

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∑x = summation of x

∑f = summation of frequency

Note: we use for few sets of values

for large volume of data

Data with few items

Example 1: The ages of seven students of SS 2A are 12, 15, 16, 17, 18, 13, 14. Calculate their mean age.

Solution: = 15 years

Data with more items

Example 2:

A town consists of 20 households with the following annual incomes (in hundreds)

60 40 100 80 120

80 80 100 40 120

80 80 40 40 140

80 140 60 80 160

Solution:

X Frequency fx

40 4 160
60 2 120
80 6 480
100 2 200
120 2 240
140 2 280
160 1 320
∑ 20 1800

= = N90.00

MEDIAN

The median is an average which is the middle value when figures are arranged in order of magnitude.
However, when data is given, it should be re-arranged either in ascending or descending order.

The formula for median is where n is the number of items when the items are a bit many.

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Example

Find the median of the following numbers: 2, 5, 7

Median = 5

15, 11, 8, 21, 17, 3, 8

Solution:

Arranged the data in descending order =21, 17, 15, (11), 8, 8, 3 OR

Ascending order = 3, 8, 8, (11), 15, 17, 21

Median is = = 4th item

Median = 11.

Median of Even Numbers

From the following set of numbers, state the median 19, 18, 14, 14, 15, 13, 18, 19, 19, 19, 21

Solution: Arrange in ascending order

13, 14, 14, 15, (18, 18), 19, 19, 19, 21

n = 10

Median =

= 5.5 = 5th and 6th items.

Add items 5 and 6 and divide by 2

= 18

MODE

Mode of a set of numbers is the number which appears most often. It is the number with the greatest
frequency.

It is bi-modal for two and tri-modal for three modes.

Example: the scores obtained by 10 students in a test are 80, 30, 50, 20, 70, 50, 70, 30, 60 and 50.

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Calculate the mode.

Solution: arrange the numbers in ascending order.

Marks Frequency
20 1

30 2

50 3

60 1

70 2

80 1

The highest frequency is 3. Therefore 50 is the modal mark.

Advantages of Mean

(i) It is easy to calculate

(ii) Easy to understand
(iii) It is useful for further statistical analysis
(iv) It makes use of all the data in the group
(v) It can be calculated with high accuracy

Disadvantages of Mean

(i) It can be influenced by extreme values

(ii) It cannot be calculated graphically
(iii) It can lead to disturbed/distorted result.
(iv) Its value may not correspond with a single item.
(v) It may have decimal or fractional values e.g. the mean number of girls in a school may be
7.4 or 6.02

Advantages of Median

(i) Its calculation is very easy.

(ii) It is simple to understand.
(iii) Values are not affected by extreme values.
(iv) It can be obtained graphically.
(v) It does not involve serious calculations.

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Disadvantages of Median

(i) Arrangement of data is often tedious

(ii) If the items are few, it is not likely to be representative of all data
(iii) It cannot be used to determine the total value of all the items
(iv) It is not suitable for further statistical analysis
(v) It tends to ignore extreme values
(vi) Judgment based on the value of the median may be misleading

Advantages of Mode

(i) It is very easy to understand

(ii) It is easy to calculate
(iii) It is not influence by extreme values
(iv) It can be used for non-numerical data
(v) It is a more approximate average to know common values

EVALUATION

1. The raw scores of 20 students of Utopia High School who took part in an examination in
Economics are given below. The pass mark is 40%.
(a) What is the mean score of the students’ marks?
(b) How many students passed the examination?
(c) What percentage of the students failed the examination?
(d) What is the range of the score?
(e) How many students scored below the mean score? (WAEC NOV 2009 Question 1)
2. What are the advantages and disadvantages of (i) mean (ii) median (iii) mode
3. Use this table to answer question 1 and 2

Scores(x) 0 2 4 5 6 7 8
Frequency (f) 7 11 6 7 7 4 3

(1) Find the mode (a) 2 (b) 3 (c) 4 (d) 5 (e) 6

(2) The media is (a) 2 (b) 3 (c) 3 (c) 4 (d) 5 (e) 6 WAEC June 1998 objective questions 3 and 4).

WEEKEND ASSIGNMENT

(1) The most frequently occurring value in a given data is the (a) mode (b) median (c) mean (d)
range (WAEC objective June 2002, questions 3).

(2) The diagram here is

(a) bar chart (b) pie chart (c) ball chart (d) histogram (e) histo-
chart s-WAEC
ry 06-71 objective,
June 1994 questions 14.
Above 60 yrs

1-16yrs

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Use the diagram below to answer questions 3 and 4.

The total number of fruits consumed by a family in a year is 720. This is represented by the chart
here.
1200 orange

ananab006

1000 carrot

800mango

(3) The quantity of banana consumed by the family is (a) 20 (b) 120 (c) 200 (d) 240 (e) 300
(4) The sum total of the quantity of mango and orange consumed by the family is (a)120 (b) 200 (c)
300 (d) 400 (e) 5200
(WAEC Objective June 1996 questions 4).
5. Present the following in a table.
The price per bag of rice and quantity demanded at various prices are as follows N 150: 10
bags; N 140: 20 bags; N 130: 30 bags ; N 120: 40 bags; N 110:50 bags; N 100: 60 bags N 90: 70
bags;N 80: 80 bags.

6. Express the above statement mathematically.

(i) The quantity supplied of a commodity depends on its price
(ii) The quantity demanded of a commodity depends on its level of income.

PRE-READING ASSIGNMENT

Read about Measures of Central Tendency

WEEKEND ACTIVITY

1. Mention types of charts

2. Economics make use of ____ and ____ for Economic Analysis

24 | P a g e
REFEERNCES

1. Comprehensive Economics for SSS by J.U. Anyaele

2. Fundamentals of Economics by R.A.I. Anyawuecha

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WEEK 4
CONCEPT OF DEMAND AND SUPPLY

Content
++++++++++
1. Price System
2.
3.
Definition, Demand Schedule and Curves
Law of Demand
++++
4. Factors affecting demand

Sub-topic One: Price System

Price System

This refers to the mechanism by which prices of goods and services are determined by the forces of
demand and Supply

Function of Price System

1. It determines the allocation of scarce resources: if resources become scarce, their prices will be
high. Therefore only those who essentially need them will afford to buy them.
2. It influences production pattern: through prices that consumers are willing to pay, suppliers
are able to identify commodities that are in high demand and are able to adjust their
production pattern. This is done to make high profits

Concept of Demand

Demand may be defined as the quantity of a commodity which a consumer is willing and able to buy at
a given price and at a particular period of time. In the ordinary meaning of demand, it is known as
“want or desire”. But in Economics, demand is not mere desire or want. It is the quantity of a
commodity people want, and at the same time, able to buy at a particular price.

For instance most people want to buy cars, buy a good house, but since they cannot afford to pay for
these, their desire will not constitute demand.

Demand Schedule

A demand schedule means an orderly, tabular presentation that shows the quantity of a commodity
demanded at various prices in a given period of time. It can be individual demand schedule or market
demand schedule.

Individual Demand Schedule: This is the table showing the quantities of commodity bought by an

26 | P a g e
individual at different prices. Below is an example of individual demand schedule.

Mrs. Bell’s Demand Individual Schedule for Loaves of Bread

Price per loaf of bread Quantity demanded per month

50 5
40 10
30 15
20 20
10 25

Market Demand Schedule: When all individual demand schedules are added together, we have a
Market Demand Schedule. It is the combination of all the quantities of a commodity that a group of
consumers demand for at a particular time. For example, below is the market demand for Mrs. Bell,
Mr. Raph and Mr. Stone.

Market Demand Schedule for loaves of Bread

Price per loaf(₦) Quantity Demanded by: Total Quantity

Mrs. Bell Mr. Raph Mr.Stone Purchased.
50 10 5 15 30
40 20 10 20 50
30 30 15 25 70
20 40 20 30 90
10 50 25 35 110

Demand Curve

Demand curve is a graph which shows the relationship between the price and quantity demanded of a
product at a particular time. The price of the commodity is plotted on the vertical Y-axis while the quantity
demanded is plotted on the horizontal X-axis. We have individual demand curve and market demand curve.

Individual Demand Curve:- This is the graph of a demand schedule showing the number of units of a
commodity that a buyer is able and willing to buy at given prices over a given period of time. It is downward
sloping from left to right. Below is an example of individual demand curve.

Market Demand Curve:- This is the graph which shows the total market schedule. It is a graph which
represents the quantities demanded by the aggregate of all individuals in the market.

27 | P a g e
 Market Demand Curve for loaves of Bread
Price (₦) D
60
50
40
30

20
10
D
0
20 40 60 800 100 120
Quantity Demanded

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 The Law of Demand

The Law of demand states that, the higher the price of a commodity, ceteris paribus (i.e. all other
things being equal), the lower the quantity demanded; and the lower the price, the higher the quantity
demanded. This law means that a rational consumer will buy more of a commodity if its price is
lowered and less if its price is increased. This law holds for most
commodities, except for some special cases like giffen good. Giffen
goods are goods that still command high demand despite increase
eht era dnamed dna ylppuS in their prices. That is the quantity demanded by consumers will
not be reduced because of increase in price. Example of giffen
fo sloot latnemadnuf tsom goods are salt, specified drugs, etc.
.sisylana cimonoce .

tsoM EVALUATION

cimonoce fo snoitacilppA 1. Define demand.

2. State the laws of demand.
ylppus evlovni gninosaer
3. Explain demand curve
ro mrof eno ni dnamed dna
Factors Affecting Demand
.rehtona Factors affecting demand: The factors affecting demand are:

1. Price of the commodity

2. The prices of other commodities
3. Change in real or disposable incomeof the consumer
tenretnI morf tprecxE 4. Taste and fashion.
5. Government policy.
6. An expectation of future changes in prices.
7. Weather conditions and the season.
8. The size of the population and the age distribution of
population.
9. Taxation on commodities.

1. The Price of the Commodity

Whenever the distribution of real or disposable income increases,
the demand for those goods which are purchased by the consumers
who are now earning higher income will surely increase. On the
other hand, if incomes should reduce, demand will also reduce.
2. Government Policy
Government policy may affect demand either adversely or
favorably as the case may be. Some government policies may
encourage demand while others may discourage it e.g. if the
government of Nigeria subsidizes for a particular commodity , the
price of that commodity will decrease, and thereby encourage

29 | P a g e
 consumers to increase their demand for that commodity.

3. Taste and Fashion.

A change in taste and fashion will adversely affect the demand. A consumer would usually
purchase more of the commodities he likes or prefers. If the change in taste favours a commodity,
the demand for it will be high, while a change in taste against a commodity will lead to a lower
demand for it.
4. The Prices of related Commodities.
The relationship between two goods can be substitute or complementary. If there is an increase in
the price of a commodity, the demand for its substitute will increase. This means that there is
positive (direct) relationship between two substitute goods. Examples are margarine and butter,
coffee and tea, fish and meat, etc. On the other hand, if the price of a commodity increases, the
demand for its complement will reduce. This means there is negative (inverse) relationship
between two complementary goods. Examples are touch-light and battery, car and petrol, lantern
and kerosene, etc.
5. An Expectation of Future Changes in prices.
A promise by the government to increase personal incomes, lower taxes, raise import duties, or
improve exchange rates for the local currency can encourage credit buying among consumers of
various products irrespective of the fact that such promises are yet to be implemented.
6. Weather Condition and the Season
The condition of weather and climate usually affect the demand for certain products positively or
negatively. For example, umbrellas and raincoats will be demanded more during the rainy season
than in the dry season.
7. The Size of the Population and the Age Distribution of Population.
The size of the population will surely determine the level of demand for a particular commodity.
If there is a change in the size of population, it would bring about a change in the number of
consumers. If the population increases, there is tendency to be an increase in demand for food and
other essentials of life and vice versa.
8. Taxation on Commodities
When taxes and tariffs changes and also duties paid on goods and services; there are resultant
changes in demand for them. Once there is increase in taxes of certain goods, demand for them
will be affected. In other words, demand for goods and services will fall.
9. Change in Real Disposable Income
Whether there is increase in the structure of income either real or disposable, there will be definite
change in demand for goods and services. For instance, in the case of lecturers and researchers, it
should be expected that a rise in their incomes will translate to the purchase of products such as
computers, internet connectivity and satellite television subscriptions.

WEEKEND ASSIGNMENT

Objective

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 1. A demand schedule is _________
(a) A table containing the price of goods.
(b) A table showing the relationship between price and quantity demanded of a
commodity.
(c) A table showing the consumer demand in order of importance
(d) The quantity of goods the consumer is prepared to buy
(e) The market demand
2. The following are factors affecting the demand for a commodity except___________ (a)
Change in income (b) Taste and fashion (c) Change in Price (d) Population (e) mobility of
labour.
3. The law of demand states that:
(a) As price increases, quantity demanded remains constant.
(b) Demand increases as price increases.
(c) As price falls, quantity demanded also falls
(d) As price falls, quantity demanded increases
(e) Demand and supply remain constant whether price falls or increases.
4. Demand in Economics is synonymous to__________
(a) Needs (b) Wants of the consumers (c) all goods demanded in the market. (d) Wants
supported with ability to pay. (e) all consumer goods

5. The supply and demand for goods and services are influenced by the (a) super market (b)
entrepreneur (c) mechanism of the law (d) price mechanism (e) government.

6. A demand curve slopes downward because of (a) an increase in the money income of the
consumer (b) a decrease in the money income of the consumer (c) the substitution effect and the rise in
real income of the consumer (d) the rise in the demand for the complementary goods (e) the increase in
the demand for factors of production.

7. The main function of price mechanism is to (a) limit consumer demand (b) enable producers
make profits (c) allocate scarce resources among competing ends (d) ensure consumer sovereignty

8. In drawing an individual‘s demand curve for a commodity, which of the following is NOT kept
constant? (a) individual’s money income (b) price of substitute goods (c) price of complementary
goods (d) price of commodity under consideration.

Essay Questions:

1. Write out the laws of demand.

2. Distinguish between demand schedule and demand curve. (SSCE 2012)
3. Explain five factors affecting demand
4. What effect does a change in income of consumers has on the demand for a commodity?

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WEEK 5
CONCEPT OF SUPPLY

Content

1. Definition of supply, Supply Schedule and Curves

2. Law of supply
3. Factors affecting supply
4. Determinants of equilibrium Price
Sub-topic One:
Concept of Supply
Supply may be defined as the quantity of a good or service which a producer is willing and able to
offer for sale at a particular period of time and at a given price. Supply does not mean the total
number of products made but the amount of goods and services a producer is able to offer for sale at a
particular period of time and at a given price.
For example, vehicles stored in the inventory of the manufacturers which are not offered for sale at
that point in time are not part of supply of motor vehicles.

Supply schedule:- A supply schedule like demand schedule may be defined as a table showing the
relationship between price and the quantity that is offered for sale at a particular period of time.

We have two types of supply schedule

(1) Individual supply schedule

(2) Market supply schedule

(1) Individual Supply Schedule:- This is a table which shows the various quantities of a commodity
which a seller of that commodity is willing to sell at different prices, at a particular period of time.

Let’s examine quantities of yam offered for sale at different price by Mr. Adeolu

Mr. Adeolu’s Supply Schedule for yam.

Price (N) Quantity supplied

55 35

50 28

45 21

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 40 14

35 7

Market Supply Schedule:- When many suppliers’ individual schedules are combined, we have a
Market Supply Schedule. For example let’s assume other farmers, Mr. Adeola and Mr. Ige, also
combined their supply schedules with Mr. Adeolu’s, we will have a market schedule as shown below:

Hypothetical market supply schedule for Yam

Price per tuber Quantity supplied per Month Total Quantity

of yam Mr. Adeolu Mr. Adeola Mr. Ige Supplied
55 35 36 38 109

50 28 32 33 93

45 21 28 28 77

40 14 24 23 61

35 7 20 18 45

Supply Curve

A supply curve can be described as one which shows the relationship between the price of a
commodity and the quantity of that commodity that is offered for sale at a particular period of time.

The information in the schedule above can be presented in a graph. This then becomes the Supply
Curve.

(2) Individual Supply Curve: - This is a curve which shows the various quantities of a commodity
which a seller of that commodity is willing to sell at different prices, at a particular period of time.

Y
55 S

50

Price 45

40

35
S
Market Supply Curve X
S 0 7 14 21 28 35
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Quantity Supply
 55
Price
50

45

40
S
0 X
20 40 600 80 100 120

Quantity supplied

Law of supply

The law of supply states that, the higher the price of a commodity, (ceteris paribus) all other things
equal, the higher the quantity supplied. Also the lower the price the lower the quantity supplied.

This law means that sellers will only be motivated to offer more of their good or service for sale with
increase in the price of that commodity

Sub-topic Two: Factors Affecting Supply

These are:

a. Changes in the prices of inputs

b. Changes in the prices of substitute goods and services

c. Climatic conditions

d. Future price expectations

e. Government policies

f. Changes in Taxation and subsidies

g. Changes in the number of producers in a market

h. Technological change

34 | P a g e
 1. Changes in the prices of inputs: - If the price of raw materials, electrical power, fuel, rents,
wages and salaries, interest rates increases or decreases it will cause the supply of the product
to decrease or increase as the case may be.

2. Changes in the prices of substitute goods and services: - an increase in the prices of good or
service relative to its substitute will shift producer’s attention to increasing the production of
such a good.

3. Climatic conditions: - changes in the weather condition can affect the supply of agricultural
products. Good weather like good rainfall will surely increase the supply of farmers’ output,
and on the other way, bad weather such as excessive flood will reduce the output of the
farmers.

4. Future price expectations: - when the supplier has the expectation about the future behaviour
of the prices of some goods, this may affect supply. For example if producers expect the price
of beans to increase, they will change from producing maize and produce beans. As a result the
supply of beans will increase while that of maize will fall.

5. Government policies: - the Federal Government of Nigeria has been encouraging the
production of cassava in her bid to raise its status as a significant export crop. When
government policies discourage the importation of certain goods it may encourage local
production of such products and this can translate to enhanced supply.

6. Changes in taxation and subsidies: - increase in taxes paid by producers discourages supply in
that the imposition of more taxes adds more cost to producers. In another way, the granting of
subsidies will reduce cost of production and increase the supply.

7. Changes in the number of producers: - the more the sellers in a market the more the supply of
goods in that market. Markets with a larger number of sellers are more competitive and all the
competitors push their products into the market continually.

8. Technological change: - the current state of technology defines the production and product
distribution capacity in a market as well as their costs. Improvement in technology often
implies higher productivity, greater marketing efficiency and lower costs.

Determination of Equilibrium Price and Quantity

In a free market economy, prices are determined by the forces of demand and supply. This is also known as
Price Mechanism or Price System.

Equilibrium Price:

35 | P a g e
This is the price at which demand equals supply. It is the price at which the quantity of a commodity that
consumers are willing to buy equals the quantity of that commodity that suppliers are willing to sell.
Therefore

At Equilibrium,

Demand = Supply

Equilibrium Price can be illustrated using the demand and supply schedules below:

Price (N) Quantity Quantity

Demanded Supplied
10 60 20
15 50 30
20 40 40
25 30 50
30 20 60

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The Equilibrium Point, Point E on the graph, is the point at which demand equals supply. At this point,
Equilibrium price is N20, while quantity demanded and quantity supplied equals 40 unit. If the price is fixed
above the equilibrium price, there is excess supply because sellers are willing to supply at a higher price
while consumers are willing to purchaser less quantity at a higher price. This tends to pull down prices
towards the equilibrium price

Also, if any price is fixed below the equilibrium price, consumers will be willing to purchase more of the
commodity at lower prices but suppliers are willing to supply less at lower prices. This will eventually push
up the prices towards the equilibrium price.

Use of Demand and Supply Functions to Determine Equilibrium Price and Quantity

Example 1: The demand and Supply functions of a commodity are given below:

Quantity demanded (Qd) = 40 – 4p

Quantity Supplied (Qs) =12p -24. Where p is Price in naira

a. Determine the equilibrium price and quantity bought and i=sold

b. If the price of the commodity is fixed at N6.00, what is the magnitude of excess supply?

Solution:

a. At equilibrium, Qd = Qs

40 – 4p = 12p - 24, Collecting like terms

40 + 24 =12p + 4p

64 =16p,

Divide both sides by 16

37 | P a g e
 P=4

Therefore, equilibrium price is N4.00

ii. To find Q, we substitute 4 for P in any of the functions:

Qd = 40 - 4(4)

= 40 – 16 = 24

b. To find the excess supply, substitute N6.00 for p in the two functions.
Qd = 40 – 4(6) Qs = 12(6) – 24
40 – 24 = 72 – 24
16 = 48

Thus, Excess Supply = Quantity supplied – Quantity demanded

= 48 – 16 = 32

EVALUATION

- Identify six factors which cause a change in supply of a product

- Discuss government policies as one of the factors which cause a change in supply of a product.

WEEKEND ASSIGNMENT

Objective Test:

1. The market supply curve slopes upwards from left to right indicating that

(a) at a lower price more is supplied

(b) Two commodities can be supplied at the same time
(c) At a lower price, less is supplied
(d) Producers pay high taxes
2. The law of supply states that

(a) The higher the price the higher the quantity supplied
(b) The lower the lower the price the higher the quantity supplied
(c) The higher the price the lower the quantity supplied
(d) All of the above

3. Supply may be defined as

(a) Quality of goods and services a producer is willing and able to offer for sale
(b) Total number of production
(c) Total number of goods and services

38 | P a g e
 (d) All of the above

4. Supply schedule is a table

(a)of scale of preference

(b)showing relationship between price and quantity supplied
(c)showing relationship between price and quantity demanded
(d)none of the above
5. The market price of a commodity is determined by the (a) total number of people in the market
(b) total demand of the commodity (c) quantity demanded and supplied (d) interaction of
demand and supply (e) law of demand
6. A market equilibrium occurs when (a) no buyer goes home empty handed (b) demand and
supply are increasing (c) demand and supply are equal (d) the price is fluctuating.
WASSCE, 2002

Essay Questions

(1) What do you understand by the supply of a commodity (SSCE 2008)

(2) Describe any five determinants of supply (SSCE 2008)

(3) With the aid of diagrams explain individual and market supply curve

(4) Use the diagram below to answer the questions below it.

a. What does 0P0 represent?

b. What does LM represent at the price of 0P2?
c. What happens when the price is fixed at 0P1?

5. The demand and supply equations for a commodity (in a free market) are given as:
Qd = 10 – 2p, Qs = 4p – 8
a. Given that P is in naira; Qd and Qs are in kg, Determine

39 | P a g e
 i. The equilibrium Price
ii.The Equilibrium quantity
b.
i. If the price (P) were to be N4.00, what will be the excess supply?
ii.If the price were fixed at N1.00, what will be the excess demand?

PRE-READING ASSIGNMENT

Read about Production

REFERENCE TEXTS

1. Comprehensive Economics for SSS 1,2 and 3. By Johnson UgojiAnyaele, A. Johnson

Publishers Ltd.

2. Fundamentals of Economics for SSCE 1,2 and 3 by R.A.I. Anyanwuocha AFRICANA FIRST
PUBLISHERS

40 | P a g e
WEEK 6
THEORY OF PRODUCTION

CONTENT

1. Meaning of Production
2. Types of Production
3. Factors of Production

Sub-Topic 1: Meaning and Types of Production

MEANING OF PRODUCTION

Production is any economic activity that is aimed at creation of goods and services for the satisfaction
of human wants. Production also includes the distribution of goods to the final consumers. Production
involves the creation of tangible goods such as books, vehicles furniture items, bags, footwear etc as
well as services (intangible goods) which are capable of satisfying human wants e g services of
teachers, lawyers, security officers medical personal etc.

TYPES OF PRODUCTION

Production is broadly divided into two: Direct Production and Indirect Production

i. Direct production has to do with economic activities aimed at meeting household needs. It
is usually carried out on small scale, employing mostly family labour. Examples are crop
farming, poultry, fishing etc for house hold consumption only.
ii. Indirect Production: This involves the production of goods and services on large scale for
commercial purpose. Modern equipment and skilled labour are often engaged. The
producer makes use of the proceeds of his sales to satisfy his other wants since he cannot
produce all he needs.

Production is classified into three stages:

 Primary production
 Secondary production
 Tertiary production
(a) Primary production: This refers to the production of basic raw materials to be used in their
natural form or for the production of other goods. It involves majorly the extraction of raw
material from the land, sea and air. Examples are mining, quarrying fishing and forest
activities.

(b) Secondary production: This is the stage of production where raw materials or semi-
finished goods which satisfy consumers’ want. This includes manufacturing and construction of
building, roads bridges.

41 | P a g e
 (c) Tertiary production: this involves the production of services. Those engaged in distributive
trade and service professionals complete the production process by making goods and services
produced at the primary and secondary stages reach the final consumer where and when they are
needed e g teaching, medical service, insurance, legal service, banking, etc.

EVALUATION

1. Mention the major types of production.

2. Explain step by step the three stages of production.
3. When is production said to be complete?

Sub-Topic 2: FACTORS AFFECTING PRODUCTION

Factors of production are the material inputs or resources which are needed to produce goods
and services. These are land, labour, capital and entrepreneur.

(A) LAND

Land, according to economists, is a gift of nature and includes land surfaces, mineral resources,
water and forest resources, rain, sunshine etc. The reward for lands is rent.

Features or characteristics of land

1. Land is fixed in supply: land and its natural resources are fixed in supply. They cannot be
replaced once they are exhausted.
2. Land is a free gift of nature: it is a natural endowment, not produced by human effort.
3. Land is immobile: it cannot be moved or transferred from one place to another.
4. Land differs in quality and value from place to place. The fertility of a piece of land makes
it suitable for agricultural purpose more than an infertile piece. Also, the location 0f a
piece land determines its economic value.
5. Land is subject to the law of diminishing returns especially in agricultural practice. A piece
of land that is cultivated years after year becomes less productive over time.

(B) LABOUR

Labour is the human skill, knowledge and effort (mental or manual) utilized in the production of
goods and services to satisfy human wants. Labour can be skilled, semi-skilled or unskilled.

(i) Skilled labour requires long and professional training e g engineers, construction,
accountants, lawyers, etc.
(ii) Semi-skilled labour requires less intense training e g auto mechanics, barbers, hair
dressers, caterers, tailors etc.
(iii) Unskilled labour requires minimal or no training e g traders, guards, messengers,
launderers, etc.

The reward for labour is wages and salaries.

42 | P a g e
FEATURES OR CHARCTERISTICS OF LABOUR

1. Labour is a human factor of production

2. Labour is both geographical and economical mobile
3. Labour acquire skill trough training
4. Labour is variable (not fixed) factor
5. Labour can control and combine other factor of production
6. Labour is an active factor required to put other factors together

(C) CAPITAL

Capital can be described as resources or physical assets produced by man to be used in the
production of other goods and services. It is referred to as wealth created for the creation
of further wealth. It is a man-made aid to production. Capital resources include building,
machine, agricultural tools, vehicles etc. The reward for capital is interest.

Capital may be fixed or circulating. It is fixed when it is not used up during production e g
buildings, machine, and vehicles. Circulating or working capital is used up in the course of
production or changed into other form e g raw materials, money etc.

CHARACTERISTICS OF CAPITAL

1. Capital is a man-made resource

2. Capital takes varied forms-machines money, materials etc
3. Capital can be in various forms: fixed or variable, mobile or immobile, machines,
money or other input.
4. Capital deprecates with time and can eventually become worn-out or out-dated.

(D) ENTREPRNEUR

This is the factor of production that organizes and co-ordinates the other factors of production
in required combination for efficient maximum production of goods and services at minimum
cost. This is done with a view at making profit. An entrepreneur is the owner of the business
organization. The reward of entrepreneur is profit.

FUNCTIONS OF THE ENTERPRENEUR

1. He is the risk bearer of the business organization. He takes risk and bears the out-
come, loss or profit, failure or success.
2. He is a decision maker. He takes important decisions having to do with what to
produce, how, where and for whom to produce.
3. The entrepreneur provides funds and required capital for the production.
4. He is the coordinator. He organizes, manages and directs the activities of the business.
5. He organizes and combines the factors of production in right proportions for efficient

43 | P a g e
 production at minimal cost. He determines the scale of production and seeks for
information.

EVALUATION:

1. Who is an entrepreneur? What role does he play in production process?

2. Mention the factors of production and the rewards accruable to each.

WEEKEND ASSIGNMENT

Objective Test

1. Production involves
(a) Creation of goods and services
(b) Selling of goods and services
(c) Manufacturing of goods
(d) Mining and forest
(e) All of the above
2. One of the following is not a reward of factors of production
(a) Rent
(b) Dividend
(c) Profit
(d) Wages
(e) Interest
3. The Co-coordinator of factor of production is
(a) Manager
(b) Controller
(c) Entrepreneur
(d) Economist
(e) Accountants
4. Mining, fishing and forestry come up under _______
(a) Tertiary
(b) Primary
(c) Indirect
(d) Secondary
(e) Direct
5. Which is NOT a variable factor of production?
(a) Labour
(b) Tools
(c) Money
(d) Land
(e) Raw-materials

ESSAY QUESTIONS:

44 | P a g e
 1. Explain production
2. What is the main aim of production?
3. Give five example of (i) Goods (ii) services
4. Mention the faction necessary for production to take place.
5. What is labour? What are its features?

WEEK 8
THEORY OF PRODUCTION: Division of Labour and Specialization

Content: 1. Division of Labour

2. Specialization
3. Advantages and Disadvantages
4. Limitations of Division of Labour

Sub-Topic 1: DIVISION OF LABOUR

THE ORIGIN OF MODERN DIVISION OF LABOUR

It was one of the forefathers of Economics – Adam Smith who enunciated the theory of division of
labour in 1776 in his book titled “THE WEAITH OF NATIONS”. Adams Smith visited a place where
pins were made and found that pin-making involved eighteen different processes at that time. He also
found that one man was coordinating all the processes of pin-making all alone. As a result of this
rigorous and slow process involved in the processes of making pins, that man was producing 20 pins a
day. Adam Smith came to a conclusion that if these eighteen pin-making processes were handled by
different individuals instead of one man, more pins will be produced. This idea of division of labour
thought out by Smith was then applied; as a result, 48,000 pins were produced per day. This is how the
application of modern division of labour came to existence in our present day.

DEFINITION—Division of labour may be defined as a system of breaking down production processes

into different stages so that each stage is undertaken or handled by an individual. This division of
production processes will depend on the type, size of industry and goods produced. It should be known
that in modern times, division of labour is more applicable in an industrial economy than in
agricultural economy. Example: Textile industry which is subdivided into, spinning, weaving and
dyeing, warping, beaming, drafting and denting.

EVALUATION

1. What is division of labour?

2. Why is division of labour more applicable in industrial economy than in agricultural
economy?

Sub-Topic 2: SPECIALIZATION

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Specialization may be defined as the act of an individual or a firm or a country concentrating its
resources and efforts in the production of relatively few commodities in which it has the greatest
advantage over others.

There is specialization in division of labour and division of labour is the result of specialization. The
two are interwoven. The major aim of division of labour and specialization is to increase productivity
i.e. output.

Types of Specialization

1. Specialization by products: This is when a firm, individual or government concentrates in the

production of a particular commodity.
2. Specialization by process: This is the concentration of a firm or individual or government on
an aspect or stage of production process
3. Territorial or geographical specialization: This is the concentration of a geographical area or
territorial area on the production of a product.
4. Sex specialization: This is also known as custom or race or tradition specialization. Here, a
kind of production is being carried out by the sex i.e. male or female

EVALUATION

1. What is specialization?
2. State four types of specialization and explain them.

Sub-Topic 3: ADVANTAGES AND DISADVANTAGES OF DIVISION OF

LABOUR/SPECIALIZATION

Advantages or Merits of Division of Labour and Specialization

1. Time saving: - The time which could have been spent on moving from one stage to another
would be saved if there is division of labour.
2. Increase in production: - There is greater productivity because various experts along the
production process work together.
3. They reduce fatigue :- A worker does not have to strain himself because he performs fractional
part of the production.
4. They increase the skill of worker:- Since people learn by experience, performing the same task
makes a worker more skillful in that area.
5. It leads to specialization: - A worker becomes a specialist in the course of performing the same
task over time.
6. Creation of employment opportunities:- It helps in the employment of experts to handle
various stages of production.
7. It encourages the use of machinery:- Capital in the form of machinery and tools is more fully
utilized with the introduction of division of labour.
8. Improvement in the quality of goods:- It helps to produce standard goods which possess the
same specifications like size, colour, shape and weight because they are produced by experts
with the use of machine.

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 9. Reduction in cost per unit:- Because of large production, the cost per unit of production will
reduce.
10. Economy of using tools:- Efficient use of tools and machine is possible because they are
handled by experts.

Disadvantages or Demerits of Division of Labour and Specialization

1. They make work monotonous:- The job becomes boring to a worker as a result of performing
the same task repeatedly.
2. They bring about decline in craftsmanship:- The use of machine does not give room for
workers to use their skills and talents in the production of goods. They solely depend on
machine.
3. The use of machines reduces employment opportunities:- In division of labour, machine
replaces human being. Machines are usually used with few workers; this tends to reduce the
employment level.
4. They bring about immobility of labour :- A worker stays on a single job for a long time and
makes it impossible for workers to move.
5. Increase in interdependence among individuals and industries:- Over-interdependence can
make production to stand still if one of the workers at one stage of production is absent for any
reason.

EVALUATION

1. Mention five advantages of division of labour and specialization

2. State four disadvantages of division of labour and specialization.

Sub-Topic 4: LIMITATIONS OR FACTORS THAT ENCOURAGE OR DISCOURAGE DIVISION

OF LABOUR

1. The size of the market:- Market means the extent to which goods and services are demanded.
Large market will encourage division of labour and small market will discourage division of
labour.
2. The availability of labour:- Non-availability of qualified labour makes division of labour
impracticable even if it is essential.
3. The nature of the product:- The nature of some products does not require division of labour.
Examples are barbing, driving, farming, etc
4. Availability of capital:- If there is inadequate capital, it will be difficult to employ experts at
different stages of production.
5. Technical difficulties or possibilities:- The type of machines available and methods of
production determine the possibility of division of labour.
6. Government policy:-When government policy favours the production of a particular
commodity, more of such commodity will be produced in large scale and it will encourage
division of labour.

EVALUATION

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 1. Enumerate four limitations of division of labour.
2. Explain four factors that can encourage/discourage division of labour or specialization.

WEEKEND ASSIGNMENT

1. What are the factors that may encourage or discourage division of labour
2. Explain what you understand by specialization. What are its advantages and disadvantages?

PRE READING ASSIGNMENT

Read about scale of production

WEEKEND ACTIVITIES

Find out how division of labour can necessitates exchange and limited by market

REFERENCE TEXTS

1. Fundamentals of Economics for SSCE by R.A.J. Anyanwuoa

2. Comprehensive Economics for SSS BY Johnson Ugoji, Anyaele

EVALUATION

1. Mention five advantages of division of labour and specialization

2. State four disadvantages of division of labour and specialization

WEEK 9

TOPIC: THEORY OF PRODUCTION

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Contents: Scale of production

Advantages of large scale production

Disadvantages of large scale of production

Sub-Topic 1: SCALE OF PRODUCTION/ ECONOMIES OF SCALE

By economies of scale or scale of production, we mean the growth of a firm or an industry resulting
from expansion of the volume of productive capacity which leads to increase in output and decrease in
its cost of production per unit of output.

There are two types of economies of scale

1. Internal economies and internal diseconomies

2. External economies and external diseconomies

INTERNAL ECONOMIES AND INTERNAL DISECONOMIES

Internal economies also known as the economies of large scale production are the advantages a firm
derives from the expansion of its scale of production as a result of its own single efforts. In this case, as
the size of the firm increases, there will be greater efficiency resulting in the fall in the cost per unit of
output. On the other hand, when the firm’s expansion leads to less efficiency and increase in the cost
per unit of output as a result of internal difficulties or organizational constraints, the firm is suffering
from what is known as internal diseconomies.

EVALUATION:

1. State the types of economies of scale

2. Explain the types of economies of scale.

Sub-Topic 2: ADVANTAGES OF INTERNAL ECONOMIES OF LARGE SCALE PRODUCTION

OR ADVANTAGES A LARGE FIRM HAS OVER A SMALL FIRM

1. Technological or technical economies: - Large firm can afford to use advanced machine,
employ more workers and apply division of labour. This will lead to increase in output at a
reduced cost per unit of output.
2. Marketing economies:- A large scale firm can afford to buy raw-materials in bulk and save
packing and transport cost. They can also advertise on a large scale and at cheaper rate more
than small firms.
3. Research economies:- A large firms can afford to employ competent researchers to improve
the quality of their products at reduced cost.
4. Financial economies: - It is easier for large firms to obtain loans from banks than small firms.
They can as well issue shares and debentures from members of the public.
5. Managerial economies: - Large firms can employ workers with high managerial skills because
of their strong financial position.
6. Welfare economies: - Welfare facilities like housing scheme, canteen, medical services et.c., can

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 be provided by the large firms to their workers.
7. Training economies: - Large firms can afford to organize in-service training, lectures,
seminars and award scholarship to their workers.
8. Risk-bearing economies: - Large firms can ward off competitors and bearing business risks
better than small firms.

EVALUATION:

1. Elucidate the advantages of internal economies of large scale production.

2. Discuss the advantages a large firm has over a small firm.

Sub-Topic 3: DISADVANTAGES OF INTERNAL ECONOMIES OF LARGE SCALE

PRODUCTION OR ADVANTAGES OF SMALL SCALE PRODUCTION OR ADVANTAGES OF
SMALL- SCALE FIRM OVER LARGE –SCALE FIRM

1. The relationship between employers and employees of a large firm is more impersonal than a
small scale firm
2. It is easier for a small-scale firm to adjust to business changes than large-scale firm
3. A large-scale firm has increase business risks more than a small-scale firm
4. It requires more capital to establish, run and finance a large-scale firm than a small-scale firm

LIMITATIONS TO THE SCALE OF PRODUCTION OR LIMITATIONS TO THE GROWTH OF

FIRMS

1. The size of the market:- If there is more demand for a particular product, there will be need
to expand the production and vice versa.
2. Need to satisfy individual taste:- Standardization of products does not satisfy individual taste
and to meet this requirement, there will be limitation in the scale of production to allow
varieties of goods to be produced.
3. Complexity and the increasing cost of the organization:- The growth of a firm is accompanied
by the complexity and increase in cost as a result of many professionals that will be employed
into various units and this will reduce the growth of the firm.
4. Increased risks:- The more the expansion of the firm, the more the risk and vice versa.
Entrepreneurs prefer small scale firms in order to avoid greater risk.
5. Falling price of the commodity:- A fall in price of a commodity without increase in supply of
the commodity will force the firms to lower the scale of their production
6. The size of capital available:- Inadequate capital and other resources limit the size of
production
7. Nature of the firm’s products and nature of the business:- A firm that produces perishable
goods cannot increase its scale and vice versa.
8. The organizational ability of the managers of the firm: A firm with an ambitious and highly
skilled entrepreneur will increase in scale while the reverse is the case with a manager that is
unable to handle a large firm.

EXTERNAL ECONOMIES AND EXTERNAL DISECONOMIES

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External economies are the benefits a firm derives from increase in its output and decrease in costs
due to helps the firm receives from other firms especially in the use of their products. It simply refers
to those benefits which attributable to a firm as a result of being located close to others. External
economies are manifest more in industrial estates.

External diseconomies on the other hand, are the increased costs a firm will experience as a result of
increasing its output resulting from external effects. The advantages and disadvantages of localization
of industries are equally applicable to external economies and diseconomies.

EVALUATION

1. What is scale of production or economies of scale?

2. Discuss external economies and diseconomies.

WEEKEND ASSIGNMENT

1. What are the factors that encourage large scale production?

2. Differentiate between internal economies and external economies of scale of production.
3. What are external diseconomies?

PRE READING ASSIGNMENT

Read about economic problems of society

WEEKEND ACTIVITIES

1. In tabular form, distinguish between internal diseconomies and external economies.

2. Enumerate the factors which limit the scale of production or the growth of small firms.

REFERENCE TEXTS

1. Fundamentals of Economics for SSCE by R.A.J. Anyanwuoa

2. Comprehensive Economics for SSS BY Johnson Ugoji, Anyaele

EVALUATION

1. Mention five advantages of division of labour and specialization

2. State four disadvantages of division of labour and specialization.

WEEK 10

DATE: ………………………………

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TOPIC: BASIC ECONOMIC PROBLEMS OF SOCIETY

Content

1. Definitions of Economic System

2. What to produce?
3. How to produce ?
4. For whom to produce?
5. Efficiency of resource use

Sub-Topic 1: BASIC ECONOMIC PROBLEMS OF SOCIETY

Meaning of Economic System

Economic System refers to the system by which a nation organizes the ownership, control and
allocation of her resources in a bid to achieve national objectives. It is the system by which answers
are provided to the fundamental economic questions of what to produce, how to produce and who gets
what is produced.

BASIC ECONOMIC PROBLEMS

The basic economic problems of society arise because of scarcity of resources. The way a society
organizes itself to solve these problems determines the type of economic system it will practice. These
problems to be examined are:

a. What to produce?
b. How to produce?
c. For whom to produce ?
d. Efficiency of resource use

a. WHAT TO PRODUCE?
The question of what to produce arises because resources are scarce. Since we cannot have
everything we want, we have to set our priorities. In so doing, individuals, firms and the
government are faced with the problem deciding on the type of goods and services to produce
for society. This is what determines the allocation of productive resources in an economy. If
more resources are to produce a commodity, fewer resources will be available for production
of other commodities. The type of commodities produced depends on the needs of the society
and the available human and material resources.

b. HOW TO PRODUCE?
This problem arises because society and producers have to decide the method or technique of
producing a particular commodity. The technique adopted depends on the resources available
to the society. The country can employ labour or capital intensive techniques of production. If
it is labour intensive, more labour and less machines will be used. If it is capital intensive, more

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 machines and less labour will be used. The technique to choose depends on factors such as the
state of development in the country, employment level, government objective etc. Whichever
method is employed, it depends on the cost per unit of output produced. Problem of technique
of production are dealt with in the theory of production.

c. FOR WHOM TO PRODUCE?

This deals with the problem of distribution. How the available goods and services are to be
allocated among the various members of the society? In other words, it involves the question of
what proportion of the national product should go to the various individuals and groups in
society to ensure equity. Do we produce for the children, the working population, the rich, or
the aged?

d. HOW THE DISTRIBUTION CAN BE EQUITABLY DISTRIBUTED AND EFFICIENCY

OF RESOURCE USE.

This deals with the distribution system of the economy. Society has to ask question “How
efficiently are available resources being used”? In addition, is the society being used to full or
partial capacity? In addition, the society determines whether available products are being
efficiently allocated among consumers to maximize social welfare. Each society tries to reduce
the level of unemployment (under-utilization) of resources. If resources are efficiently used
there will be increase in the production of goods and services and make everybody better off.
The question of efficiency of production and allocation of resources comes under welfare
economics.

EVALUATION

1. State the problems every society faces.

2. How does each society try to tackle its problems

3. Does every section of the economy get all it wants? Why?

4. How can the problem of distribution and efficiency of resource use be solved?

WEEKLY ASSIGNMENT

Objective Test:

1. Which of the following problems arises where there are more than one technically possible
methods of production?

(a) Where to produce

(b) For whom to produce
(c) How to produce
(d) What to produce (WAEC objective test question 1, 2012)

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 2. The decision to produce more of one product will under normal circumstance imply that:

(a) More of another product will be produced

(b) Less of something else will be produced
(c) No other product will be produced
(d) Enough resources are available

3. A great number of economic problems arise from _________

(a) The reduction of poverty

(b) Excessive supply of goods
(c) The failure of the price system
(d) Competing demand for scarce resources

4. The concept of economic efficiency primarily implies ___

(a) Obtaining maximum output from available resources at the lowest possible cost
(b) Conserving our petroleum resources
(c) Equity in the distribution of the nation’s wealth
(d) The limited wants-unlimited resources dilemma
5. Every society strives to pursue all the following economic objectives except ____

(a) Increased production

(b) Price stability
(c) Inequitable distribution of income
(d) Sustainable growth and development
June 1999 WAEC Objective questions 3

Essay Questions:

1. Write short notes on the basic economic problems of society.

2. What basic concept in Economics does each problem represent?

REFERENCES

1. Fundamentals of Economics by R.A.I. Anyanwuocha chapter 2 pages 7-8.

2. Bounty Economics for SSS by B.A. Adelekan et al chapter 1 pages 12-13.

PRE-READING ASSIGNMENT

Read about Basic tools of Economic Analysis.

WEEKEND ACTVITY: List the basic problems of society and how to solve them.

WEEK 10- Revision

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WEEK 11-Examination

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