Economics - Post-UTME Study Guide
Economics in the Post-UTME tests scarcity, demand and supply, elasticity, production, money and banking, and national income. The exam favours clear definitions plus the ability to read a simple model.
Core rules
- Scarcity forces choice; opportunity cost is the value of the next best alternative forgone.
- Law of demand: price and quantity demanded move in opposite directions, other things equal.
- A change in price causes movement along a curve; a change in income, taste or related-good price shifts the curve.
- Price elasticity of demand (PED) = percentage change in quantity demanded ÷ percentage change in price.
- Factors of production: land, labour, capital and entrepreneurship; each earns rent, wages, interest and profit respectively.
- GDP measures output produced within a country; GNP measures income of a country's nationals.
Worked example
If price rises by 10% and quantity demanded falls by 20%, PED = −20 ÷ 10 = −2. Taking the absolute value, demand is elastic because 2 > 1. The reasoning matters: a small price rise produces a proportionately larger fall in quantity, so total revenue tends to fall when price rises.
Traps
Do not call a shift in demand a change in quantity demanded. Do not ignore the negative sign when interpreting complements and substitutes. Do not confuse GDP with GNP. Inflation is not simply a rise in one price; it is a sustained rise in the general price level.