• MONEY
• THE CONCEPT OF COST
• REVENUE CONCEPT
• ECONOMIC SYSTEM
• LABOUR MARKET
• SUPPLY AND DEMAND FOR LABOUR
• MARKET STRUCTURE
• IMPERFECT MARKET
• INDUSTRIES IN NIGERIA
• LOCATION OF INDUSTRY

Money

Economics SS2 Second term

Week 1:  Definition of Money

                   Qualities or Characteristics of Money

                   Functions of Money

MONEY

Definition of Money

Money is anything that is generally acceptable as a medium of exchange and in the settlement of debts. Money is anything that is generally acceptable as a means of payment.

Qualities or Characteristics of Money

1. General Acceptability: Money must be generally acceptable by all in the society or country as a means of exchange. This shows the confidence people have in money.
2. Portability: The object that serves as money must be something that can easily be carried about from one place to another, which means such object has to be light in weight.
3. Relative Scarcity: Money must be relatively scarce, that is, it must not be too many so as not to lose its value.
4. Homogeneity: Each unit of money must be same in size, colour and quality and be the same nationwide.
5. Durability: The object that will serve as money must be able to last long, it must not be a perishable commodity, it must be able to stand the test of time.
6. Stability: The value of money must be stable. The stability of its value will help business to be predictable and encourage lending and borrowing of money.
7. Divisibility: Money must be capable of being divided into smaller units, e.g. ₦100, ₦50, ₦20 etc., to enable it to purchase both high and low priced commodities.
8. Recognisability: Money must be easily recognized and identified by the totality of the people in the society. It must not be easily counterfeited.
9. No Intrinsic Value: The commodity that should serve as money must have little or no value in itself as opposed to its value of exchange.

Functions of Money

Money performs the following functions:

1. Medium of Exchange: Money can serve as a medium through which money can exchange goods and services. Money can be used to buy different variety of goods and services. This facilitates the means of exchange. It came into use as a result of the inadequacies of the barter system. Money is therefore widely acceptable as payment for debts.
2. Standard of Deferred Payment: Since money can be stored, it can be accumulated to pay debts that are fixed in terms of money. Money can serve as a medium by which business transactions on credit can be settled in the future. The use of money makes it possible for payments to be deferred from the present to some future date.
3. Unit of Account: In serving as a unit of account, it becomes practically possible for individuals and companies to keep accounting record of their transactions in bank statements, ledgers and invoices.
4. Store of Value: Money is a good store of value because wealth can be stored for future use. When there is no inflation, money stored or saved retains its value for many years.
5. As a Measure of Value: The values of goods and services are expressed by prices, therefore money is used as a yardstick to measure and compare the worth of goods and services as well as occupation.

Test and Exercise:

     1. The values of goods and services are expressed as __________

     a)Money b) Prices c) Stores d) Debts.

     2. _______ is not a characteristic of money

     a) Elasticity b) Durability c) Divisibility d) Portability.

     3. Homogeneity means money must be same in (i) size (ii) colour (iii) quality.

     Which is correct a) I & II b) I, II & III c) II & III d) none of the above.

     4. Money must be _________ scarce.

     a) Very b) Relatedly c) Relatively d) Heavily.

     5.  ________ is generally acceptable as medium of exchange

     a) Barter b) Value c) Money d) Exchange.

The Concept of Cost

The Meaning of Cost of Production

Cost of production refers to the total cost incurred by a manufacturer in the cause of producing a good or providing a service. These expenses (costs of production) include but not limited to the following- the cost of labor, cost of raw materials, cost of consumable manufacturingsupplies and general overhead. Taxes levied by the government or royalties owed by natural resources extracting companies are also part of the cost of production.

From the above, it is clear that the cost of production (which can also be referred to as referred to as the production cost) include all the expenditures relating to the production of goods/services. Therefore, before a cost can qualify to be classified under the cost of production category, it must be directly tied to the generation of revenue for the company. Please note also that manufacturers deal with the cost of product of both the materials required to create an item as well as the labor needed to turn the raw materials into finished products.

The Meaning of Cost to an Accountant and an Economics

In Accounting and Business as a whole, the word “cost” is  viewed as the monetary value spent by a company in order to produce something. An Accountant is therefore interested in cost because it tells him or her the total amount of money that a company spends on the creation or production of goods or services. Taking note of the cost of production helps an Accountant or to among other things be able to figure out the cost of production per unit and as such set the appropriate sales price for the products. To determine the cost f production per unit, Accountants divide the cost of production by the number of units produced.

Different Types of Economic Costs

Fixed Costs (FC): These type of costs does not vary with changing output. Fixed costs might include the cost of building a factory, insurance and legal bills. Even if your output changes or you don’t produce anything, your fixed costs stays the same. In the above example, fixed costs are always N1,000.

Variable Costs (VC):  These are costs which depend on the output produced. For example, if you produce more cars, you have to use more raw materials such as metal. This is a variable cost.

Semi-Variable Cost: An example of a semi-variable cost is labour. If you produce more cars, you need to employ more workers to engage in the entire production and marketing activities. This is therefore a variable cost. However, even if you didn’t produce any cars, you may still need some workers to look after empty factory.

Total Costs (TC):  – Fixed + Variable Costs

Marginal Costs:  Marginal cost is the cost of producing an extra unit. If the total cost of 3 units is 1550, and the total cost of 4 units is 1900. The marginal cost of the 4th unit is 350.

Opportunity cost: Opportunity cost is the next best alternative foregone. If you invest N1 million in developing a cure for pancreatic cancer, the opportunity cost is that you can’t use that money to invest in developing a cure for skin cancer.

Economic Cost: Economic cost includes both the actual direct costs (accounting costs) plus the opportunity cost. For example, if you take time off work to a training scheme. You  may lose a weeks pay N350, plus also have to pay the direct cost of N200. Thus the total economic cost = N550.

Accounting Costs: this is the monetary outlay for producing a certain good. Accounting costs will include your variable and fixed costs you have to pay.

Avoidable Costs: Costs that can be avoided. If you stop producing cars, you don’t have to pay for extra raw materials and electricity. Sometimes known as an escapable cost.

Long and Short Term Costs 

Long Term Costs are accumulated when firms decide to change their production levels over time in response to expected economic profits or losses. This will therefore mean that there will not be fixed factors of production. On the other hand, Short Term Costs are accumulated in real time throughout the production process.

Differences between Long and Sort Term Costs

The main difference between long run and short run costs is that there are no fixed factors in the long run; there are both fixed and variable factors in the short run . In the long run the general price level, contractual wages, and expectations adjust fully to the state of the economy. In the short run these variables do not always adjust due to the condensed time period. In order to be successful a firm must set realistic long run cost expectations. How the short run costs are handled determines whether the firm will meet its future production and financial goals.

Cost curve

This graph shows the relationship between long run and short run costs.

ASSESSMENT

1. A cost that is easily traceable to a cost object is known as:
   (a) indirect cost
   (b) variable cost
   (c) direct cost
   (d) fixed cost
2. A cost that is not easily or conveniently traceable to a cost object is known as:
   (a) collective cost
   (b) indirect cost
   (c) additional cost
   (d) conversion cost
3. Which of the following terms is used to denote the response of a cost to the change in business activity?
   (a) Cost behavior
   (b) Cost trend
   (c) Cost response
   (d) Cost accumulation
4. A cost that changes in total dollar amount with the change in the level of activity is known as:
   (a) fixed cost
   (b) mixed cost
   (c) conversion cost
   (d) variable cost
5. A cost that does not change, in total, with the change in activity is called:
   (a) mixed cost
   (b) fixed cost
   (c) prime cost
   (d) unchanged cost

ANSWERS

1. c
2. b
3. b
4. d
5. b

Revenue Concept

THE MEANING OF REVENUE TO AN ECONOMICS

The term revenue refers the money obtained by a firm through the sale of goods at different prices and over a certain period of time. In other words, revenue is the total amount of money that a company actually receives for selling its products and services during a specific period of time (like a year). This total income include all the discounts and deductions for all merchandise merchandise. To put it in the purest economic terms, it is the “top line” or “gross income” figure from which costs are subtracted to determine net income.

TYPES OF REVENUE

There are three types of revenue you should know, and these include-

1. Total Revenue
2. Average Revenue
3. Marginal Revenue

Total Revenue: This is the total receipts from the sales of a given quantity of goods/services. It is exactly what its name suggests- the total income of a business. To calculate the total income, multiply the quantity of goods sold by the price of the goods. You can also calculate it as the selling price of a firm’s product times the quantity sold (i.e. total revenue = price × quantity). You can also let Total Report be the total revenue function: {\displaystyle TR(Q)=P(Q)\times Q} such “Q ” is the quantity of output sold and “P(Q)” is the inverse demand function.

Average Revenue: Average revenue is the revenue generated per unit of output sold. It plays a role in the determination of a firm’s profit. Per unit profit is average revenue minus average (total) cost. A firm generally seeks to produce the quantity of output that maximizes profit.

Marginal Revenue: Marginal Revenue is the additional revenue that will be generated by increasing product sales by one unit. It can also be described as the unit revenue the last item sold has generated for the firm. As a result, it will have to lower the price of all units sold to increase sales by 1 unit.

Marginal revenue is equal to the ratio of the change in revenue for some change in quantity sold to that change in quantity sold. This can also be represented as a derivative when the change in quantity sold becomes arbitrarily small. More formally, define the revenue function to be the following

{\displaystyle R(q)=P(q)\cdot q}.

By the product rule, marginal revenue is then given by

{\displaystyle R'(q)=P(q)+P'(q)\cdot q}.

For a firm facing perfect competition, price does not change with quantity sold ({\displaystyle P'(q)=0}), so marginal revenue is equal to price. For a monopoly, the price decreases with quantity sold ({\displaystyle P'(q)<0}), so marginal revenue is less than price (for positive {\displaystyle q}).

Typical marginal revenue R’ and average revenue (price) <R> curves for a firm that is not in perfect competition.

ASSESSMENT

1. Revenue should be recognized or recorded when the goods are sold or services are rendered to the customer, this concept is known as:
   (a) Consistency concept
   (b) Realization Concept
   (c) Materiality concept
   (d) Matching concept
2. A record maintained which is measurable in the form of money, this concept of accounting is known as:
   (a) Matching concept
   (b) Consistency concept
   (c) Money measurement concept
   (b) Materiality concept
3. The cost of goods and services used up in the process of obtaining revenue is known as:
   (a) Revenue
   (b) Expense
   (c) Liability
   (d) Expenditure
4. Which of the following is an accounting system in which events are recorded as and when they occur?
   (a) Cash Accounting
   (b) Accrual Accounting
   (c) Both Accrual Accounting and Cash Accounting
   (d) None of the above
5. If no distribution is made between capital and revenue expenditure then:
   (a) The figure of debtors and creditors will be incorrect
   (b) Cash or bank figure will be incorrect
   (c) Net profit will be incorrect
   (d) Balance sheet will not balance

ANSWERS

1. b
2. c
3. b
4. b
5. c

Economic System

 The Definition of Economics Systems 

By Economic systems, we mean the various means through which different countries in the world have chosen to distribute resources within its citizens as well as trade their goods/services with members of the global community. Economic Systems are also used by countries to control the five factors of production namely- labor, capital, land, raw materials  and entrepreneurship.  In other words, the different Economic Systems that abound have different (ad often times opposing) views as to how the factors of production should be utilized.

Types of Economic Systems and their characteristics 

1. Capitalism
2. Socialism
3. Mixed Economy
4. Welfarism

Capitalism: This is an economic system that is based on the private ownership of all the means of production. Business operations in a capitalist economy are mainly forprofit. The central characteristics of a capitalist economic system include the following-

1. Private property
2. Capital accumulation
3. Wage labor
4. Voluntary exchange
5. A  price system
6. Competitive markets

Note also that in a capitalist economic system, all business-related decision making and investments are determined by the owners of the factors of production; although the prices and the distribution of goods are mainly determined by market forces.

Socialism: Socialism is an economic system that is characterised by the social ownership and and often democratic control of all the means of production. Socialist economic systems can be divided into the following- non-market and market forms. Non-market social economic system involves the substitution of markets and money factors with engineering and technical criteria based on calculation performed in-kind.This thereby results in an economic mechanism that functions according to different economic laws from those of capitalism. On the other hand, non-market socialism aims to circumvent the inefficiencies and problems often  associated with capitalism.  Below are some of the features of a socialist economic system-

1. Public ownership of the means of production
2. Planned economy
3. Classes of society
4. The state is responsible for catering to all the needs of citizens 
5. Equal opportunities for everyone
6. Absence of competition and limited product choices
7. Pricing Mechanism

Mixed Economy: A mixed economy is defined as an economic system consisting of a mixture of either markets and economic planning, public ownership and private ownership, or markets and economic interventionism. However, in most cases, “mixed economy” refers to market economies with strong regulatory oversight and governmental provision of public goods, although some mixed economies also feature a number of state-run enterprises. The features of a mixed economic system are briefly explained below-

Resource Ownership

In a command economy, all resources are owned and controlled by the state. In a mixed system, though, private individuals are allowed to own and control some (if not most) of the factors of production. Free market economies allow private individuals to own and trade, voluntarily, all economic resources.

State Intervention

Government intervention and political self-interest play a key role in a mixed economy. This intervention can take many forms, including subsidies, tariffs, prohibitions and redistributive policy.

Some of the most universally applied mixed economic policies include legal tender laws, monetary control by a central bank, public road and infrastructure projects, tariffs on foreign products in international trade and entitlement programs.

Changing Economic Policy

One important and understated feature of a mixed economy is its tendency for reactionary and purposeful economic policy changes. Unlike in a command economy (where economic policy is very often directly controlled by the state) or a market economy (market standards arise only out of spontaneous order), mixed economies can go through dramatic changes in the “rules of the game,” so to speak.

Factors to be considered when adopting an economic system

ASSESSMENT

1. What are the limitations of a free enterprise system?
   (a) High taxation and less incentive to work hard.
   (b) Uneven distribution of resources, consumer difficulty in obtaining information, and health-risk products.
   (c) Restrictions on personal freedoms.
   (d) There are no limitations.
2. There is little or no government control in a _____________ economy.
   (a) mixed
   (b) command
   (c) free market
   (d) traditional
3. Which of the answer choices is not a characteristic of a free market economy?
   (a) Public Property
   (b) Consumer Sovereignty
   (c) Profit
   (d) Private Property
4. Which of the following is NOT a type of economic system?
   (a) free market economy
   (b) command economy
   (c) traditional economy
   (d) public market economy
5. In the former Soviet Union consumers had to wait in long lines to buy everyday items like bread. They did not have many choices and the government controlled factories. What type of economy did they live in?
   (a) command economy
   (b) mixed economy
   (c) traditional economy
   (d) free market economy

ANSWERS

1. b
2. c
3. a
4. d
5. a

Labour Market

What is Labour Market?

Simply defined, the labour market refers to the supply and demand for labour such that employees provide the supply and employers provide the demand. It is a major component of all economies, and is intricately tied in with markets for capital, goods and services. At the macroeconomic level, supply and demand are influenced by both domestic and international market dynamics, as well as other important factors such as immigration, the age of the population and education levels. Relevant measures include unemployment, productivity, participation rates, total income and GDP. At the microeconomic level, individual firms interact with employees either to hire them or to fire them as well as raising or cutting wages and work hours. The relationship between supply and demand influences the hours the employee works and compensation she receives in wages, salary and benefits.

The Concept of Labour Force

The concept of labour force is generally used to describe people working for either a single company or an the entire workforce of a particular industrial sector, region or a country. Some companies like to describe their values as their workforce because when the workforce is strong and motivated, productivity will certainly be high.

Do note that whereas labour force within corporations typically define the number of personnel working there, the labour force of a country includes both the employed and the unemployed. The labour force participation rate [LFPR] otherwise known as the economic activity rate, EAR, is the ratio between the labour force and the overall size of their cohort (i.e., national population of the same age range). The term generally excludes the employers themselves, focusing on everyone who is capable and available to be hired to work.

Factors affecting the Size of Labour Force

1) Population: The size of a population determines (to a great extent) the number of people who will be available to engage in production activities. If the population is low, the number of people capable and available to work will be low. On the other hand, if the population is high, there will be more people available to work. Meanwhile, another factor to consider as it relates to population is whether the population is young or aged. A population comprised of mostly able-bodied youths will definitely have a better workforce than those comprised of aged, dependent people.

2) Educational Qualification: Education plays a key role in determining the size of any given labour force. This is because very many of the available professions in the world require high level of academic mastery in order that one may fit into their given fields and be productive.

3) Government Policies: The Government plays a huge role in determining the size of the labour force. If government policies are favourably-disposed to business enterprises, they will be compelled (by the labour of demand) to hire more people who will facilitate the production exercise. But if [unfortunately] the policies of Government are bad, businesses will not thrive and as such a lot of people will not be absorbed by the labour market. This will in turn make the labour force small.

4) Number of available Industries: The number of available industry also determine the size of the labour force. If the industries are few, fewer people would be hired. In a country like Nigeria where they are just a few industries, we have a small labour force because very many people are out of work due to the unavailability of work.

5) Wage/Salary Scales: The remuneration of labour often serve as a factor determining the size of the labour force. It goes like this- if the remuneration is favourable, more and more people will be attracted to work. But if this is not the case, it will ultimately discourage many from working.

Efficiency and Mobility of Labour

Mobility of labour means the capacity and ability of labour to move from one place to another or from one occupation to another or from one job to another or from one industry to another. There are two types of labour mobility- geographic and occupational. A geographic labour mobility occur when labour move from one place to another in search of better-paying or better-satisfying jobs. Most people in Nigeria have family relatives who have emigrated out of the country in search of greener pastures abroad. Meanwhile, occupational labour mobility can also occur, such that people shift jobs; moving from one sector to another. There are a number of Nollywood actors who were once either doctors or bankers but along the line decided to become actors. That exemplifies occupational labour mobility.

Factors Determining Mobility of Labour

There are several factors that determine mobility of labour. Some of these factors include-

1. Education and Training
2. Outlook or Urge
3. Social Set-up
4. Means of Transport

ASSESSMENT

1. Individuals from which selection can be done after applying all recruitment strategies are classified as
   (a) labor force population
   (b) applicant population
   (c) applicant pool
   (d) labor market
2. In an organization, process of qualified individuals’ pool generation for specific jobs is classified as
   (a) staffing
   (b) recruiting
   (c) analyzing
   (d) leading
3. Supply pool outside organization to attract individuals for job is classified as
   (a) compression market
   (b) affirmative market
   (c) applicant market
   (d) labor market

4. Total number of individuals who are selected for actual evaluation are classified as
   (a) labor force population
   (b) applicant population
   (c) applicant pool
   (d) labor market
5. Subset population of total labor force population is classified as
   (a) applicant pool
   (b) labor market
   (c) labor force population
   (d) applicant population

ANSWERS

1. a
2. b
3. d
4. c
5. d

Supply and Demand for Labour

Explaining Supply and Demand for Labour

Demand for labour is a concept that describes the amount of labour that an economy or specifically a company is willing and ready to hire at a given point in time. Note that this demand may not necessarily be in long-term and is typically determined by the real wage companies are capable and willing to pay for the labour and the value such labour will bring to the company. Demand for labour increases market wages and enables more workers to enter the labour market. But the inevitable costs that come with hiring more labour may cause employers to use less labour.

Wage Determination

A wage determination is the listing of wage rates and fringe benefits which labourers are entitled. These rates are set by employers, and in most cases apply across board (specifically within sectors) such that labour forces working in certain fields are sure to receive a certain level of remuneration; irrespective of the different companies they work for. Meanwhile, competition also helps to set wage determination. A perfectly competitive labour market will have the following features

• Many firms
• Perfect information about wages and job conditions
• Firms are offering identical jobs
• Many workers with same skills

Diagram of Wage Determination

• The equilibrium wage rate in the industry is set by the meeting point of the industry supply and industry demand curves.
• In a competitive market firms are wage takers because if they set lower wages, workers would not accept the wage.
• Therefore they have to set the equilibrium wage We.
• Because firms are wages takers the supply curve of labour is perfectly elastic therefore AC = MC
• The firm will maximise profits by employing at Q1 where MRP of Labour = MC of Labour

Meaning and Types of Unemployment 

Unemployment is defined as a situation where someone within the working age bracket, healthy and able-bodied is not able to work; either out of choice or because they are unable  to be in full time employment. It is important to note however that mothers who leave work to raise children and people taking time to acquire higher education are not necessarily classified as unemployment. This is because in the meantime they are raising kids and acquiring education, they are not concurrently seeking employment because of course they are busy. One grey area however is voluntary unemployment. This occurs when the unemployed choose not to take a job a the going wage rate (e.g. wrong job, benefits too high e.t.c) They could be counted as unemployed because they are still seeking a job (they just don’t want to take one they are offered.

Types of Unemployment

• Cyclical Unemployment.
• Frictional Unemployment.
• Structural Unemployment.

A Graph Measuring Unemployment

ASSESSMENT

1. ____ is a concept that describes the amount of labour that an economy or specifically a company is willing and ready to hire at a given point in time
   (a) demand for labour
   (b) wage determination
   (c) cyclical unemployment
   (d) frictional demand
2. Demand for labour may lead to the following except
   (a) increases in market wages
   (b) enables more workers to enter the labour market
   (c) increases in costs that come with hiring more labour
   (d) reduction of a company’s value
3. The listing of wage rates and fringe benefits which labourers are entitled is known as
   (a) demand for labour
   (b) supply of labour
   (c) wage determination
   (d) equilibrium wage rate
4. A perfectly competitive labour market will have the following features except
   (a) many firms
   (b) perfect information about wages and job conditions
   (c) firms are offering identical jobs
   (d) many workers with different skills set
5. The situation where someone within the working age bracket, healthy and able-bodied is not able to work is
   (a) supply
   (b) labour
   (c) wage
   (d) unemployment

ANSWERS

1. a
2. d
3. c
4. d
5. d

Market Structure

What is Market Structure?

Market structure can be defined as the organisational framework of a market. It can also entail of the basic characteristics that make a particular market distinct and unique from the others. In this vein therefore, the focus is on those characteristics that affect the nature of the competition and pricing within a certain market. By the way, the meaning is the organised system of trading peculiar to people in certain industries. Some of the features of a market structure are highlighted below-

• Customer turnover rate 
• The extent of product differentiation
• The nature of costs
• The number of firms within the market (level of competition)
• The market shares of each of the firms; specifically the largest firm among the bunch
• The structure of buyers in the market
• The degree by which the market is vertically integrated

Types of Market Structure

Perfect Market Structure: A Perfect Market Structure, otherwise known as perfect competition, is a type of market structure where competition is rife and many producers can freely produce similar products while trying to sell same to customers. There are low barriers to entry and the demand curve is very elastic.

Features of a Perfect Competition

1. Many firms
2. Freedom of entry
3. Homogeneous product
4. Normal profit.
5. Cheap and efficient communication and transportation
6. High consumers turnover rate
7. Market shares of the largest firm is usually high

Market Equilibrium Position

A firm is said to be in equilibrium when it is most likely not going to change its level of output. At this point, it neither needs expansion nor contraction; therefore it remains the way it is. It just wants to earn maximum profits by equating its marginal cost with its marginal revenue, i.e. MC = MR.

Diagrammatically, the conditions of equilibrium of the firm are:

(1) The MC curve must equal the MR curve. This is the first order and necessary condition. But this is not a sufficient condition which may be fulfilled yet the firm may not be in equilibrium.

(2) The MC curve must cut the MR curve from below and after the point of equilibrium it must be above the MR. This is the second order condition.’ Under conditions of perfect competition, the MR curve of a firm coincides with the AR curve. The MR curve is horizontal to the X- axis. Therefore, the firm is in equilibrium when MC=MR=AR (Price).

ASSESSMENT

1. Which of the following is not a type of market structure?
   a. Competitive monopoly
   b. Oligopoly
   c. Perfect competition
   d. All of the above are types of market structures.

2. If the market demand curve for a commodity has a negative slope then the market structure must be
   a. perfect competition.
   b. monopoly.
   c. imperfect competition.
   d. The market structure cannot be determined from the information given.
3. If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous product, unlimited long-run resource mobility, and perfect knowledge, then the firm is a
   a. a monopolist.
   b. an oligopolist.
   c. a perfect competitor.
   d. a monopolistic competitor.

4. If a firm sells its output on a market that is characterized by a single seller and many buyers of a homogeneous product for which there are no close substitutes and barriers to long-run resource mobility, then the firm is
   a. a monopolist.
   b. an oligopolist.
   c. a perfect competitor.
   d. a monopolistic competitor.

5. If a firm sells its output on a market that is characterized by many sellers and buyers, a differentiated product, and unlimited long-run resource mobility, then the firm is
   a. a monopolist.
   b. an oligopolist.
   c. a perfect competitor.
   d. a monopolistic competitor.

ANSWERS

1. a
2. d
3. c
4. a
5. d

Imperfect Market

What is Imperfect Competition?

An imperfect competition is one in which the market structure shows some but not all the features of competitive or perfect market. It is a form of market situation whereby some of the important rules of a perfect market are not followed. It the direct opposite of a perfect market. In other words, an imperfect market refers to any market situation that does not meet the so called rigorous standards of a hypothetical perfectly competitive market. An imperfect market arises whenever individual buyers and sellers can influence prices and production, or otherwise when perfect information is not known to all market actors.

In the real world, most markets follow this model of competition. This is because practically, imperfection is inevitable. It is important to note that in imperfect competition, the price of goods can increase above their marginal cost and thus have consumers decrease their level of purchase.

Imperfect competition can also be defined as a situation where there are many sellers who are selling heterogeneous goods as opposed to the perfect competitive market scenario. Imperfect competition is the real world competition. Today some of the industries and sellers follow it to earn surplus profits. In this market scenario, the seller enjoys the luxury of influencing the price in order to earn more profits. If a seller is selling a non identical good in the market, then he can raise the prices and earn profits. High profits attract other sellers to enter the market and sellers, who are incurring losses, can very easily exit the market.

Types of Imperfect Market

• Oligopoly: A situation in which there are few sellers of a product.
• Monopolistic competition: A situation in which there are many sellers producing highly differentiated products.
• Monopoly: Where there are many buyers but only one seller.
• Monopsony: Where there are many sellers but one buyer.
• Oligopsony: Where there are many sellers but few buyers.

Price Discrimination

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets. Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers’ willingness to pay and in the elasticity of their demand.

ASSESSMENT

1. In a perfectly competitive market, a company demand curve is
   (a) perfectly elastic
   (b) perfectly inelastic
   (c) imperfect market
   (d) elastic
2. Buyers competent of making realistic purchases based on information given are
   (a) rational buyers
   (b) rational sellers
   (c) buyers
   (d) sellers
3. In perfect competition, every profit-exploiting manufacturer looks a market price identical to it’s
   (a) marginal revenue
   (b) marginal cost
   (c) Profit maximization
   (d) perfectly elastic
4. A absolutely competitive industry has a
   (a) perfectly elastic supply curve
   (b) perfectly elastic demand curve
   (c) negatively sloped demand curve
   (d) positively sloped demand curve
5. Point where market demands will be same to market supply
   (a) equilibrium in perfect competition
   (b) equilibrium in imperfect competition
   (c) equilibrium competition
   (c) all of answers are correct

ANSWERS

1. a
2. a
3. b
4. c
5. a

Industries in Nigeria

Introduction to Industries in Nigeria

Nigeria is one of the many developing nations of the world. As a result of this, there are quite a number of industries in the country. Although many of these industries are generally located in major cities such as Lagos, Port Harcourt and Kano, they still manage to cut across various sectors of the economy. Most of the manufacturing industries in the country include those in mining, agricultural production, rubber, wood, textiles, cement manufacturing as well as the manufacturing of other construction materials. There are also those involved in food production, footwear, petrochemicals, fertiliser, printing, ceramics, iron and steel etc. Indeed, the Nigerian economy is assorted even though some unfortunate circumstances/situations have consistently hampered growth.

The Meanings of Plants, Firm, Industry and Factory

Plant: Also called industrial plant or manufacturing plant, it refers to the necessary infrastructure/facilities used by any manufacturer in [their] daily operations.  The operation of these facilities, or the department of an organization which does so, is called Plant operationsor facility management. Please note that inasmuch as the word plant may be used interchangeably to mean business or firm, the strict economic use for the plant is in its relationship to a physical production facility. In other words, the industrial plant is not the company itself. Most times, industrial plants are built in separate places, located away from where the administrative offices of businesses are. But it can also happen that due to cost effects, plants and office blocks and built within the same locations.

Firm: Simply defined, a firm is a corporate [business] entity which may be  a  limited liability company or partnership. A firm’s major objectives are usually to sell goods/services, satisfy their customers and make profit in the process. While most firms are located in  a single place, a single firm may consist of more than one establishment; with the headquarters and  several branch offices. Firm may be typically associated with law practice, but in Economics it is also used to represent business concerns or enterprises.

Industry/Factory: Oftentimes, the terms factory and industry are used interchangeably as though they mean the same thing. In actuality, they both have different meanings. Industry for instance has to do with the production of economic goods which could be tangible products or services. In other words, industry is the integrated production activity of goods/services within a particular economy. A factory, on the other hand, is an is an industrial site made up of buildings and machinery where production activities often carry on 24/7. The two terms are actually intricately related yet very distinct; related in the sense that they both have to the do with the production of end products. But whereas industry is more encompassing, factory specifically has to do the operation of machines and the use of machines to produce goods.

Types of Industries in Nigeria

There are many types of industries in Nigeria, examples of which include-

1. Mining
2. Construction
3. Manufacturing
4. Agriculture
5. Retail
6. Education’
7. Entertainment
8. Fashion 
9. Transportation
10. Hospitality etc. 

ASSESSMENT

1. Which of these best describes Nigeria?
   (a) a developed country
   (b) a developing country
   (b) a stagnant country
   (c) none of the answers are correct
2. Industries in Nigeria are mostly located in the following states except
   (a) Lagos
   (b) Port Harcourt
   (c) Kano
   (d) Jigawa
3. _____ refers to the necessary infrastructure/facilities used by any manufacturer in [their] daily operations.
   (a) plant
   (b) stem
   (c) leaf
   (d) root
4. A _____ is a corporate [business] entity which may be  a  limited liability company or partnership
   (a) factory
   (b) plant
   (c) firm
   (d) industry
5. The integrated production activity of goods/services within a particular economy is called
   (a) factory
   (b) plant
   (c) firm
   (d) industry

ANSWERS

1. b
2. d
3. a
4. c
5. d

Location of Industry

What does “Location of Industry” Mean?

This simply has to do with the geographical spread of economic activity in an economy. Every economy in every country in the world have its own economic hub, even though some countries (such as the very developed countries) are fortunate enough to have their own locations of industries spread across. Note that there are several factors responsible for the location of industries. Locating an industry is a major business decision made by business executives. And they often make these decisions bearing the aforementioned factors in mind.  Some of these factors include but not limited to the following- proximity to raw material supplies, availability of labour,good communications and nearness to markets.  One of the good things about locating an industry is that once Once it is established in a particular area, it serves as a focal point for more economic expansion by attracting  the establishment of ancillary trades.

Factors affecting the Location of Industries

The factors affecting the location of industries are majorly divided into two namely-

1) Geographic

1. Availability of raw materials
2. Availability of electricity
3. Availability of qualified labour force
4. Good transportation network
5. Availability of water
6. Close proximity to the targeted market
7. Availability of good, affordable and flat site for locating the factory
8. A conducive climatic condition

2) Non-geographic factors.

1. Availability of the needed startup capital
2. Favourable/unfavourable government policies
3. Close proximity to banking facilities
4. Availability of insurance companies

What are the advantages and disadvantages of localization of Industries?

Advantages

1. It brings about economic development within the specific location
2. A large market for a certain type of labour is developed
3. Labour force gets trained and equipped
4. Financial facilities grow even as more banks and other financial services providers establish businesses within the area.
5. Basic amenities get developed even as overall development gets to the new area of industrialization
6. There is a stimulus for starting subsidiary companies to provide support to the main companies.
7. The reputation of a locality for particular kinds of goods widens.

Disadvantages

1. There is an over-dependence on the main industry which may not be healthy
2. Over-population may become a problem.

ASSESSMENT

1. The geographical spread of economic activity in an economy is known as
   (a) economic portal
   (b) economic hub
   (c) economic spread
   (d) economic area
2. This is not a factor responsible for the location of industries
   (a) proximity to raw material supplies
   (b) availability of labour
   (c) nearness to markets
   (d) race of customers
3. The non-geographic factors affecting the location of industries are all these except
   (a) availability of the needed startup capital
   (b) favourable/unfavourable government policies
   (c) close proximity to banking facilities
   (d) availability of water
4. One of these is not an advantage of localisation of industries
   (a) it brings about economic development within the specific location
   (b) a large market for a certain type of labour is developed
   (c) labour force gets trained and equipped
   (d) Over-population may become a problem
5. One of these is not true about setting up an industry in a particular location
   (a) it serves as a focal point for more economic expansion
   (b) it attracts the establishment of ancillary trades
   (c) it leads to the reduction of economic development of that locality
   (d) it increases the reputation of that locality for particular kinds of goods widens.

ANSWERS

1. b
2. d
3. d
4. d
5. c