2014 - JAMB Economics Past Questions and Answers - page 3

Here's the breakdown:

• Price Index: A price index measures the average price of a basket of goods and services over time relative to a base year.
• 175% Price Index: A price index of 175% means that prices have increased by 75% compared to the base year (175 - 100 = 75).
• Value of Money and Inflation: When the price level increases (inflation), the purchasing power or value of money decreases. In other words, you can buy fewer goods and services with the same amount of money.
• Therefore: If prices have risen by 75%, the value of money has fallen by approximately 75%.

The major disadvantage of the localization of industry is the risk of structural unemployment. Here's why:

• Localization of industry means industries concentrate in specific geographic areas.
• Structural unemployment arises when there is a mismatch between the skills of the workforce and the jobs available. If an industry declines in a localized area, many workers with specialized skills for that industry may become unemployed, and it may be difficult for them to find new jobs in other industries within the same area or require them to relocate.

The other options are less directly related to the disadvantages of industrial localization:

• B. over-utilization of installed industrial capacity: This isn't generally a direct disadvantage of localization. It might be a result of high demand in a localized area, but it's not a primary negative.

The most important factor determining the location of an industry is its proximity to the market. This is because being close to the market minimizes transportation costs, ensures easier access to consumers, and allows for quicker response to market demands.