2016 - WAEC Economics Past Questions and Answers - page 2

Price elasticity of supply or demand measures the responsiveness to the supply of a good or service after a change in its market price.

If sellers expect that the price of the good will be decreasing in the future, then they are likely to sell more today. This causes an increase in supply and a rightward shift of the supply curve. 

A price floor is the lowest legal price a commodity can be sold at. Price floors are used by the government to prevent prices from being too low. When a market reaches a price floor, it results in an excess supply because quantity supplied at the price floor exceeds the quantity demanded.

Division of labor is immensely important in our economic system because it allows for work to be done much more quickly and efficiently than it would be without the division of labor. Division of labor is when tasks are split up into specialized separate tasks. it brings about increased output and while minimizing cost

The long run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs

A firm will choose to implement a shutdown of production when the revenue received from the sale of the goods or services produced cannot even cover the variable costs of production. In that situation, the firm will  experience a higher loss when it produces, compared to not producing at all. 

As long as price is above average variable costs, the firm should stay in business to minimize its losses in the short run.

In a perfect competitive market, price discrimination occurs when identical goods and services are sold at different prices by the same provider. In pure pricediscrimination, the seller will charge the buyer the absolute maximum price that he is willing to pay.