Economics Paper 2, WASSCE (PC), 2016

Question 7

    (a) Explain the following terms:

(i)         transfer payment;

(ii)        intermediate products;

(iii)       subsistence production;

(iv)       per capita income.

(b) Outline any four reasons the per capita income figures are not ideal for comparing the economic welfare of nations.



This question was not very popular among the candidates. Candidates were expected to explain transfer payment, intermediate products, subsistence production, per capita income and outline reasons why per capita income figures are not ideal for comparing economic welfare of nations. The few candidates who attempted this question had poor understanding of the terms in the (a) part of the question and could not adequately explain their points in the (b) part , hence their performance was quite poor.
The candidates were expected to answer thus:
(a)(i) Transfer payments refer to any monetary payment for which the payer receives no  good or service in return e.g. student grants, pension payment.         



     (ii) Intermediate products are products which are used for further processing, manufacturing or resale.                                                             

   (iii)    Subsistence production refers to products which are consumed by their producers especially in agriculture, and which do not enter the market for sale.

   (iv)    Per capita income refers to the total income of a country per person. OR It is obtained by dividing the gross domestic product by the total population.

(b)(i)    Differences in the composition of output make comparison unrealistic where there is a very large subsistence sector.

     (ii)   National income measurements do not reveal real incomes since they are measured at market prices.

     (iii)  Differences in the internal values of currencies make comparison unrealistic since each country has her own unique exchange rate .

     (iv)  Differences in income distribution within countries make comparison unrealistic e.g. A country may have a high per capita income, but income may be in the hands of a rich few.

     (v)   Differences in working conditions among nations are not taken into account in the computation of national income. If more women work in the formal sector in one country, the  national output would increase.

    (vi)   Leisure which is an important aspect of welfare is not covered in national income accounting.

     (vii) The needs of countries vary. Countries with high per capita incomes may be producing military weapons which in the absence of war do not contribute to welfare.

    (viii)  Differences in the population of countries will affect the calculation of the per capita income in various countries.