Economic Lectures for West African Examination Council (W.A.E.C) for Senior Secondary Schools

Author: Iloka Benneth Chiemelie

Published on: 1/12/2013

SS1 REVISION

Good morning guys.          

                   

Whatz up with you people? Hope you all had a great weekend. BECKY! You are late again.

BECKY – Sorry sir. It was the bike man, he didn’t come on time.

LECTURER – Ok no problem. Just get yourself a seat and listen up. Mutiay please wide the chalk board. Today we will be starting up with the nature and scope of economics. As you know, your WAEC is fast approaching and we need to cover every topic quickly. please pay attention and ask questions in areas where you don’t understand. Do you get me?

CLASS – Yes Sir!!!

NATURE AND SCOPE OF ECONOMICS

For your WAEC, this is an area that doesn’t seem to appear in theoretical parts. This area is normally in the objectives section because the topic of discussion is simple and common.

Economics is a global subject that deals with the study of man, how he manages his resources and ways he can make amends for scares resources. However, there are many definitions for economics because numerous economists seem to view the subject from different angle. Such economists and their definitions are:

Adam Smith – This guy is famously known as the founder of economist, and he defined economics as an inquiry into the nature and cause of wealth of a nation. That is, why some countries are richer than others, and how these countries generate their wealth.

J.S. Mill – He defined economics as the science of production and distribution of wealth in its practical form. That is why some people are richer than others in a given society and how these individuals produce their wealth, as well as how wealth is distributed among people in a society. The only difference between this guy and Adam is that Adam focused on national differences, while Mill focused on individual differences. Adam defined economics as how some countries are richer than other countries, while Mill defined it as how some individual are richer than other individuals.

Alfred Marshall – He established a relationship between man and material welfare by defining economics as the study of mankind in relation to his daily activities in life (business related activities). That is, economics is not all about money, but also about man (human resources management) who makes these monies.

Professor Lionel Robinson – This guy has the most widely accepted definition for economies. I think it’s because he is a professor lol. He defined economics by stating it as:

1.      A social science that studies human behaviour;

2.      Human wants are unlimited (different people want different things)’

3.      Resources for satisfying human wants are limited and this is because;

4.      Scarce resources can be put to alternative (other uses). Thus, the more a specific resource is allocated for a particular use, the less that particular resource will be available for other uses. For example, if we have 10 tubers of cassava and we want to produce Garri, Fufu (Apku) and Cassava flour, and we use 3 tubers to produce Garri, the less (only 7 tubers left) we will have to produce Fufu (Apku) and Cassava flour.

Naija (Nigerian / Broken) English: If no be say we dey class, I for bet say Prof Lionel Robinson dey chop apku well well. If not, wetin make him know say the more cassava we use for Garri, the less we will have for Apku?

THE SCOPE OF ECONOMICS

Notwithstanding the differences in definition by numerous economists, all the economists concur that:

1.      Economics is a social science which studies human behaviour and man’s activities in relation to production, distribution, exchange and consumption of goods and services. That is how man produces goods, sales the goods, use the money (profit) made to satisfy other wants.

2.      Economics studies how people economic challenges, and how they undertake their daily business activities. This means how man reacts when he is poor (he tries to find means of making money) and when he is rich (invests the money to make more money or misuse it)

3.      Economics deals with how scarce resources are being distributed in a society.

4.      Economics is all about “what is happening”, “what happened”, “what will happen”, and not “what should happen.”

  

BASIC ECONOMIC CONCEPTS

Wants – Means the goods and services which man would like to consume. They include all the things we would like to have in life such as cars, big houses, snickers shoes, phones, and holiday to Obudu Cattle Range.

Resources – This is the means or tools used to produce the goods and services for satisfying human wants. It includes productive resources: land, labour, capital and entrepreneurs, as well as time and money.

Scarcity – This is the main economic problem facing countries and individuals as well. Our wants are unlimited as different people desire different things, but the resources needed to produce them are limited and a particular resource might be required for production of different goods. For example, Cassava is the key raw material needed for the production of Garri, Fufu (Apku) and Flour. Therefore, countries are faced with the problem of how to put these scarce resources to alternative uses. By scarce in economics, we mean limited in supply.

Choice – Since the resources for satisfying our multitude of wants are limited, human beings are faced with the issue of choice. That is, having to choice between resources in order to satisfying the most pressing needs. During the process of choosing between how to commit our limited resources, we tend to make decisions that we regret rather. Therefore it must be said that human actions are not perfectly rational. But this is not an economic issue; rather it is more of ethics. Economics deals with the choice we make and consequences or benefits we get from making such choice.

Scale of preference – In order to ensure that we gain the most out of our limited resources, individuals, countries and companies arrange their wants in order of importance from the most to least importance. A scale of preference is a list of unsatisfied wants arranged in order of relative importance. For instance, a shopping scale of preference for groceries can be as illustrated in the Table (1) below

Table (1) Miss Divine’s Scale of Preference for groceries shopping

1	A bag of rice
2	2 medium size tin tomatoes
3	5kg of fish
4	One litre of groundnut oil

Opportunity cost – This is also referred to as Real Cost or True Cost of a decision. This defined in economics as an alternative forgone or sacrificed. For example, in Miss Divine’s groceries scale of preference above, she might have decided to purchase fish instead of bush meat because bust meat (alternative sacrificed / forgone) is more expensive. Because our resource are limited and scare, we are always faced with the decision of what to purchase at present in order to gain the highest satisfaction level from our decision.  For example, if a student has ₦100 and wishes to purchase a book and a school bag, if both items cost ₦80, the student can only purchase one item. If the student decides to purchase the book as it’s more important, the opportunity cost of his decision is the school bag he did not purchase.

IMPORTANCE OF ECONOMICS

1.      Economics helps us understand how to use our scarce resources to satisfy our unlimited wants.

2.      It helps us to build ourselves with economic principles and equip ourselves tools that will be used to analyse economic issues facing us and the society we live in, in order to be able to make better economic decisions.

3.      It helps the individual to develop the power of critical thinking and contribute his own quota for the growth of the society.

4.      It helps us to develop the right objectives through rigorous criticism of procedures and materials in order to achieve better outcomes in our business process.

BASIC ECONOMIC PROBLEMS FACING A SOCIETY

If you remember, I told you earlier on that the resources needed to satisfy our wants are limited and they are also capable of being put to alternative uses. This means that, while the resources are not many, one particular resource can also be used to produced many products; making the availability of that resource even lesser. As such, the society faces numerous problems due to the limited availability of resources for production. Such problems are:

Problem of what to produce – since the resources are scarce, producer must decide on what to produce at any given point in time. The decision will be based mainly on demand and necessity of the product. For instance, more wool will be used to produce sweaters in the winter (cold) than in the summer (hot) seasons. This is because, the demand for sweater is higher at winter and people need it to defend themselves from cold related issues and sicknesses.

How much to produce – once the decision of what to produce has been made, the next is to decide on the quantity of that product to be produced. This decision depends on the quantity of such goods and/or services demanded, as well as the availability of the productive resources (land, labour and capital) and efficiency of the production system. For example, if 20 bags of rice are required for consumption at a particular time, the possibility of producing the required amount depends on the availability of land, labour (manpower) and capital (money) for cultivation, and also the efficient use of this resources to avoid waste as it can result in reduce production possibility.

How to produce – the third question is the best production technique to be adopted. this questions arises when there are more than one way for producing a particular good and/or service. The question is answered by determining the most efficient and effective production system to be used. The more efficient method (in terms of high productivity at a lower cost) will be used for the production.

For whom to produce and how products will be distributed – another question to be addressed by produced is the particular market segment to produce for and how they will distribute the goods to this particular market. Production is mainly focused on the market section with higher demand and distribution process depends on the type of goods and/or services. The expensive products are mainly for the high income earners, while the cheap one are for the low-income earners and poor people in the society.

Efficient use of resources – since the resources are limited, proper management is necessary to reduce or possibility eliminates wastage, and this question addresses this issue. Questions much be asked by the producer as resources are being allocated for production and how these allocated resources are being fully put into the production process they were meant for.

Production is considered inefficient if a re-allocation of the production resources will yield higher productivity of a particular product without decreasing the productivity of any other product. On the same hand, goods and services are insufficiently distributed if a re-distribution of such good and/or service will satisfy more wants of people, without decreasing the satisfaction level of other people.

How much to consumer now and save for the future – once the goods and services have been produced, the issue of how much to consume now and save for the future will appear in the society’s decision making sheets. The society must decide the quantity to consumer now and save for the future. The decision will be based on the fact that the more they consume now, the less they will have for consumption in the future and the less they consumer now, the more they will have for consumption in the future.

Problem of unemployed resources – the aspect of economic which deals with this problem is called macro-economics. The issue is that sometimes, people who are capable of working and desires to work are not being employed and the society must address how to handle this issue. The issue of unemployment is normally high during periods of trade depression – that is when demand is low. This issue can be solved by raising demand. The ways to raise demand in a society include discounted pricing, increasing purchasing power through increased income packages and reduced tax.

  

BASIC TOOLS FOR ECONOMIC ANALYSIS

Mathematical and statistical tools are necessary in economics. Mathematical tools are used to understand the implication of theories which will aid prediction, while statistical tools are used when testing the theories against real world observations. This statement will be elaborated in this section.

MATHEMATICAL TOOLS

MATHEMATICAL REPRESENTATION OF ECONOMIC RELATIONSHIP

Economic relationships can be expressed in a number of ways such as:

Verbal statement – mathematical technic is not necessary in this section. For instance, anybody could state that the demand for rice depends on the price per bushel of rice.

Mathematical Expressions

Symbolic expression – this involves the use of algebraic expressions to show functional relationship. For instance, one could represent the above verbal statement as:

R_d = ƒ(R_p), where

R_d = quantity of rice demanded

R_p = price per bushel of rice

Geometric expression – this involves the use of charts and graphs to represent relationship.

Arithmetic expression – this involves the use of tales to represent relationship

TABLES

This is an orderly arranged list of information, data or facts, which are normally set out in lows and columns and used to analyse or summarize a large quantity of data in a condensed (reduced) form.

Uses of tables

Normally in your WEAC, examples will not be more than 5. Therefore, if you are able to memorize at least 5 examples, you are on track to success.

1.      A table presents original data in an orderly and condensed manager

2.      Makes access to data easier as they are already summarized.

3.      Important data are brought to easily because they have already been summarized in relation to their significance level.

4.      It makes comparison between related data easier.

5.      A table makes the location of required figures easy

Features of a good table

1.      It must have neat layout and easy to understand

2.      It must an explanatory title or heading

3.      There is a row title – which shows the type of items contained in the row

4.      There is a column title – which shows the type of items contained in the column

5.      The units in which the items are expressed in should be indicated and explained.

Examples of a table

Table (2): the name, gender, age and state of origin of students in SS3 at Danny-T Model High School

Name	Gender	Age	State of Origin
Rebecca	Female	15 years	Jos
Mutiay	Female	15 years	Ibadan
Divine	Female	18 years	Cross River
Benjamin	Male	17 years	Benue
Chinaza	Male	16 years	Ebonyi

Source: Danny-T Model High School, Ekonde, Edor, Cross River

From the above (2), you can see that the features of a good table such as title, row, column and source are contained. The table makes explanation easier because you can easily see their ages, names, gender and state of origin, as well as describe the relationship between male to female students (there are three female students and two male students).

CHARTS AND GRAPHS

Data which has been collected and tabulates (such as the table 2 above) can also be put into charts and graphs in order to make further impressions on the eye and express clear relationship in terms of ratio. There are various types of charts and graphs

Pie chart – this is a circle that is divided into sections to represents the ratio of different data. The circle contains the sum of all data analysed.

Examples – the population of 6 towns in Nigeria in 2012 is given as follows:

Name of town	Population in thousand
Edor – Cross River	20
Nike  - Enugu	25
Abor – Anambra	10
Lafia – Taraba	15
Lokoja – Kogi	20
Ezzamgbo – Ebonyi	18

Represent this information in a pie-chart.

Solution –

1.      Determine the sum of all population (Ed0r +Nike….+Ezzamgbo) = 108

2.      Determine the appropriate angle to represent each town and its calculated by

Using the above formula, the degree (percentage of each town) in the circle can be calculated as: Edor = 20/108 × (100/1) = 18.5%

Task – calculate the percentage of the remaining towns.

This can be used to plot the pie chart a

Figure (1): pie chart of 6 towns in Nigeria

BAR CHARTS

As the name implies, it is used to represent and summarize data in the form of bars. There are three types of bar charts.

Simple bar chart - this form of bar chart represent data in form scaled lengths of bars which are evenly spaced out. For instance, the above population of 6 towns in Nigeria can be represented in simple bar chart below.

Figure (2): Simple Bar chart representation of towns in Nigeria

Component bar chart – this is used when the data to be represented involves more than one category. The method involves divided a simple bar chart into different section, where each section corresponds to the magnitude of item represented.

Examples – the table below represents the number of crop harvested by Mr. Obi on November 2012.

Year	Maize	Cassava	Yam	Total of crops
2010	20	20	15	55
2011	30	25	20	75
2012	45	50	25	120

Represent the above in a component bar chart.

Figure (3) component bar chart of Mr Obi’s crop harvest

Multiple bar chart – in a multiple bar chart, the component value are drawn in as separate bars adjoining each other. It is a variation of the component bar chart and is also used to show relationship between variables where more than one data is to be analysed. The above crop harvest by Mr Obi can be represented in a multiple bar chart below.

Figure (4) multiple bar chart of Mr Obi’s crop harvest

GRAPHS

A graph is divided into co-ordinates of four quadrants (parts). Each quadrant makes up 90 degrees as illustrated below. The upper sections are positive while the lower sections are negative. Graphs are normally plotted in X and Y axis, representing elements being compared (e.g. price of a good and quantity of that good demanded). 

Qualities of a good graph

1.      It should have clear titles

2.      The vertical axis is called the Y-axis and the horizontal axis is called the X-axis

3.      It should be drawn to scale, and the scale should be stated.

4.      A good graph has an indication of the unit of measurement

5.      Curves must be distinct and not overcrowded and source of data should be indicated where necessary.

Example of a graph

Draw a graph to illustrate the relationship of quantity of milk bough by Mrs Israel at Edor market as illustrated in the table below.

Price	Quantity bought per month (in Tins)
10 Naira	100
20 Naira	80
30 Naira	60
40 Naira	60
50 Naira	20
60 Naira	0

Solution

Let Y-axis = price, and X-axis = quantity bought

  

Figure (5): Example of a graph 

HISTOGRAM

A histogram is graph of frequency distribution that is presented as a set of rectangular bars that have their bases as the intervals between the class boundaries and their areas proportional to the frequency of the classes. The value of the variables is scaled at the X-axis while the frequencies are scaled at the Y-axis.

Example of a histogram

x	0	1	2	3	4	5	6
f	4	3	5	5	7	8	9

Figure (5) histogram of the data presented above.

TOOLS FOR STATISTICAL ANALYSIS

Importance of statistical tools

1.      It helps economics to measure the quantitative relationship between economic variables.

2.      They are used to summarize or put more meaning to a mass of data by helping us to clearly understand the data.

3.      Statistical tools aid decision making under conditions of uncertainties.

4.      They are used for the testing of theories.

5.      Help to determine the cause and effect of economic situations.

SOME BASIC TERMS

Population

This is a group of the same kind of times, which can be either living or non-living, and are under study in a given problem situation. For examples, a group of organs, cows, or cups.

Sample

It is a part of population that is studied for the purpose of making scientific statement about the population. Since the world is very wide, economists have to test their hypotheses using small samples of a population as the testing of the whole population will not be possible. For instance, if we want to determine the importance of mobile phones to farmers in Nigeria, we can conduct a test on only farmers in Jos and adopt the finding to be applicable to all farmers in Nigeria. This is because, it will be virtually impossible to conduct a similar study from all farmers in Nigeria.

MEASURE OF CENTRAL TENDENCY

Means or arithmetic mean

It is represented by the symbol ẍ. Arithmetic mean is determined by adding (summing up) all the values of all the items in a distribution and dividing the sum by the number of items in the group. For ungrouped data, it is determined by using the formula  

where x = value of the different items in the distribution and n = number of the items. The symbol ∑ is a Greek word representing “the sum of”.

Example of arithmetic mean

Find the means of the following set of number:

2, 3, 3.5, 4, 5, 6.5

∑x = (2 + 3 + 3.5 + ^…… +5) = 24

Number of items: n = 6

Arithmetic mean =  

Mean of frequency distribution

The demand for oranges by 10 customers (for one month) is shown below.

4,4,5,5,5,6,7,7,7,7,8,8,8,9,9,9,10,10,10,10,10,11,12,12,12,13,14,15,15

Determine (find) the mean quantity of organs consumed using the frequency table.

Solution 

Number of oranges consumed (x)	Frequency (f)	Number of oranges consumed multiplied by frequency (fx)
4	2	8
5	3	15
7	4	28
8	3	24
9	3	27
10	5	50
11	1	11
12	3	36
13	1	13
14	1	14
15	2	30
	28	∑fx = 256

For ungrouped frequency distribution, the mean is calculated by using the formula:

Where ∑ƒ = total of observation

           ∑ƒx = sum of (frequency multiplied by number of variable)

Therefore:  

Median

This is the middle value obtained by arranging the numbers in their order of magnitude, starting from either the smallest or largest numbers. When two numbers are in the middle, the median is determined by dividing the sum of the numbers with two.

Example 1:

1,2,5,3,4 find the median of the numbers

Solution = 3 (because it is the number in middle after arrangement).

Example 2:

2,2,3,7,6,6,4 find the median of the numbers

Solution = (4+6) / 2 = 5

Median of a frequency distribution

Calculate the median from the frequency distribution table below.

X	1	2	3	4	5	6	7
f	4	3	5	5	7	8	9

Solution

(x)	(f)	Cumulative frequency (cum. (f))	Position of (x)
1	4	4	1,2,3,4
2	3	7 (i.e. 4+3)	5,6,7
3	5	12 (i.e. 7+5)	8,910,11,12
4	5	17	13,14,15,16,17
5	7	24	18,19,20,21,22,23,24
6	8	32	25,26,27,28,29,30,31,32
7	9	51	33,34,36…….51
	51

Therefore, the mean therefore 51÷2 = 25.5 and this falls within 6. Thus, 6 is the mean value.

Mode

This is the value with the highest frequency in a distribution. 7 is the mode in the table above.

Let’s have 20 minutes break before we start the next chapter.

Ok welcome back.

I hope you guys are getting a clue of what we have been discussing? Well let’s move to the next topic.

PRODUCTION

To a lay man, production involves manufacturing or creating something tangible (like yoghurt, biscuits, chairs etc.). But production in economics is more than producing tangible things.

Production in economics is the creation of utility. This is the creation of wealth in the form of goods and services that can be used to satisfy human wants. It can also be used to describe any form of activity that involves human efforts which can be used to satisfying human wants.

FORMS OF PRODUCTION

Transforming raw materials into semi-finished goods and finished goods – this involves the creation of goods for consumption (e.g. transforming flour into baked cakes) or creation of goods that will be used to create other goods ( transforming iron ore into irons that will be used in the production of iron doors).

Changing the position of goods within a geographical location – this involves distributing the goods from the producer to the final consumers. For instance, distribution of biscuits from a producer to retail stores can create utility (satisfy distributors wants of getting a job). Production is not considered complete unless the produced goods reach its final consumers.

Changing the position of goods in production line - this involves stocking goods for future use. For instance, Garri are stored during rainy seasons for consumption in dry season as the soil requires water (rain) for Garri to grow properly. Thus, cultivation of cassava is common in the rainy season than in the dry season.

Provision of services - direct services of service agents such as lawyers, teachers, doctors, actors etc. are necessary for production to be complete. For instance, doctors take care of ill workers; teachers can educate workers on new skills and lawyers are necessary for signing contracts between business partners.

AREAS WHERE PRODUCTION TAKE PLACE

Industry – such production activities include manufacturing, mining, agriculture, building and construction.

Commerce – this includes transportation and distribution of raw material for production or finished goods for consumption

Services – they are used to enhance production process. Services include teaching, administration, law, medical services, banking, transportation, accounting etc.

PURPOSE OF PRODUCTION

The purpose of production is to satisfy human wants. Any good that is produced which is not used for this purpose if considered a waste. If goods are not consumed, time, effort and resources have been wasted in producing such goods. The basic wants of man are food, clothing and shelter. However, man is demanding more than this as a result of change in the societal scope. People nowadays want other luxurious things such as cars, watch, phones etc. the definition of these basic needs have also changes as people can demand different foods based on their income (e.g. rich men eat on the table, with champagne and many assorted meats on their foods, while the poor might be eating on the floor with just water and no meat in their foods).

An increase in production leads to increase in consumption. The level of consumption can also be used to measure people’s standards of living. The higher the level of consumption, the higher the standard of living, and increasing the volume of production is one major aim of economics in countries.

MODE OR SYSTEM OF PRODUCTION

This is also known as the classification of industry, where industry in this area is used on a broad scene to describe any form of human activity. The mode of production takes different forms as described below.

Primacy production

This is the extraction of resources for natural sources to provide raw materials for production of other goods and foods for direct consumption. It is carried out by primary industries such as agriculture, mining, fishing, forestry and quarrying.

Secondary production

This involves the transformation of raw materials into finished goods. It is undertaken by secondary industries which are made of construction and manufacturing industries.

Tertiary production

They are concerned with the provision of direct and general services such as transportation, banking, rental services, insurance, legal and teaching services. The industries that undertake this function are referred to as tertiary industries.

FACTORS OF PRODUCTION

Factors of production are referred to as productive resources or agents of production. They are those factors that must be combined together in order for production of goods and/or services to take place. They include land, labour, capital and entrepreneur.

LAND

This includes all forms of natural resources that a country has been blessed with. They include soil, forest, water, mineral dispositions and fishing grounds. Land is perceived to be a passive resource because it is useless without application of human efforts. The reward obtained from using land for production is called rent.

QUALITIES OF LAND / DIFFERENCES BETWEEN LAND AND OTHER FACTORS OF PRODUCTION

Land is a gift of nature and have no cost of production – since man did not do anything to bring land into existence, it is considered to be a gift of nature and does not incur any production cost. This is different with other factors of production as they must be obtained and as such incur production cost.

Land is immobile – they cannot be moved from one place to another as they are fixed within a geographic location. On the other hand, labour and capital can be moved from one location to another. E.g. employers and investors can change their current workplace location in search of better opportunities at other areas.

Land is fixed in supply (or quantity) – this implies that the total resources in a land are fixed. For instance, the amount of oil in Nigeria is fixed and once they have been all exhausted, Nigeria will no longer have oil wells. However, labour and capital are not fixed. They can be created with demand in increased supply of such factors of production.

Land varies in quality and value within a geographic location – some lands are good for production (fertile) and construction of houses, while other are not fertile and unstable for building houses. Some land contains more resources than others as well. E.g. Nigeria has more oil deposits than Ghana and Cameroun. But this is different with labour and capital as they can be the same in different geographical areas. For instance, a cocoa farmer can produce 10bgas per month in both Nigeria and Cameroun.

Land is subject to the law of diminishing return – the law of diminishing return when a resource is constantly used, at a point the value obtained from using such resource will be reduced. This is also applicable with land. For instance, if we continue to cultivate in a particular land, at a point the nutrients will be exhausted and cultivation will not yield similar fruitful harvest like the previous once. It can also be applied in fish harvest, where continuous harvest can lead to extension of certain species or absence of fish in the pond or river.

  

IMPORTANCE OF LAND AND ITS CONTRIBUTION TO ECONOMIC ACTIVITIES IN WEST AFRICA

As highlighted above, land comprises of natural resource contained within a certain geographical area and the value varies in different areas. Therefore, land is of high economic importance in West Africa as discussed below.

It can be used for agricultural activities - the survival of humanity is dependent on availability of foods and land is highly important in this area as it is used for the production of foods required for human sustainability. For instance, the water is used for the production of fish and watering the soil and the soil is used for the production of agricultural foods.  

It provides areas for forestry and wildlife resources – forest provide timber resources which are used in the production of other goods such as houses, tables and chairs, while wild life can be used for production of meats and tourism in a country. Therefore, land is important in this area as these resources can be sold to obtain economic growth for the country where it is highly endowed. For instance, Obudu Cattle Range in Nigeria is a common tourist location and the cattle are sold as meat for consumption in the markets.

Land is important in mining and quarrying activities - mining and quarrying activities involve the extraction of natural resources such as diamonds, gold and crude oil from the soil or water. Land is important in this area as countries that are gifted with these natural resources have the potential of making high economic gains by selling their to other countries or areas where they are on high demand.

Land is important for manufacturing activities – the materials (e.g. cray and gravel) which are used for the production of houses or production of consumer foods (agricultural products) are available on land.

Land is used as transportation mediums – roads and railways are constructed on the soil, while bodies of water such as lakes, rivers, seas and oceans are used for transportation purposes (water transportation) as well.

LABOUR

Labour is defined as all human efforts which are used in the production process for an expected reward. They can be physical or mental, skilled or unskilled, scientific or artistic. For instance, a labour inputs physical efforts in the field, while a banker inputs mental efforts in the office.

TYPES OF LABOUR

Skilled labour – it is a type of labour which has undergone a high level of specialized training. Examples include surgeon, accountants and lawyers.

Semi-skilled labour – this are form labour which have undergone certain forms of training but these are not specialized as the skilled labour. For instance tailors, carpenters and masons.

Unskilled labour – this is the form of labour that does not require any form of training such as cleaners, porters and labourers.

IMPORTANCE OF LABOUR

1.      Labour provides the necessary manpower required for production of goods and services.

2.      It is an active factor of production as it needed for other factors of production to useful.

3.      Labour is required in the industries for operating machines and carrying out of the various production process.

4.      Labour is required for cultivating the ground and agriculture productions that are used for satisfying human wants.

CAPITAL

Capital is used to refer to all man-made production assets. They include all man-made wealth or goods used to produce other goods. They are goods which are not wanted for direct satisfaction, but for the production of other goods. Examples include machineries, production tools, factories, raw materials fuel and money. Capital just like land is a passive factor because it is useless without the application of labour.

TYPES OF CAPITAL

Fixed capital – are made up of the long-term resources used in the production of goods or services. They require maintenance after long-term use and do not change its form in the production process. Examples include factory buildings, office equipment and machineries.

Circulating or working capital – this comprises of capitals that change their forms are used up in the production process such as raw materials, cash etc.

Social capital – it comprises of those capitals that are socially owned within a community such as road and pipe-borne water which are also used for production process.

IMPORTANCE OF CAPITAL

1.      It is used to facilitate the production of goods and services.

2.      It makes works much easier and fastens production process.

3.      It increases production output as it is faster than human efforts.

4.      It improved quality of product through higher accuracy.

WEALTH

1.      It is defined as the total stock of goods or skills possessed at any given time.

2.      Qualities of wealth

3.      They must have monetary value

4.      They must be utilizable, that is they must be capable of being used for satisfying human wants.

5.      They must be limited in supply (scarce).

6.      They must be marketable, which implies that they must be capable of being bought or sold.

7.      Their ownership must be capable of being transferred from one person to another.

TYPES OF WEALTH

Personal wealth – they are wealth owned by an individual such as clothes, jewelleries and cars.

Business wealth – they include all the resources that aid production such as building, machinery and raw materials. They are known as capital goods or producers goods.

Social wealth – they include all the things owned collectively by all members of a society such as schools, town halls, government offices, public libraries etc.

RELATIONSHIP BETWEEN WEALTH AND CAPITAL

All capitals are wealth but not all wealth are capital. Capital is defined as a form of wealth or resources used in the production of other goods. From this definition, it can be seen that capital is a form of business wealth. However, wealth some types of wealth such as jewelleries and clothes (personal wealth) are not used for the production of goods.

ENTREPRENEUR

Entrepreneurs are the main coordinators of the production process. They combine all other factors of production (land, labour and capital) in a way that it results to maximum production at the least possible cost. Entrepreneurs bear the business risk and make decisions in business management. They also provide capital for the business process.

ECONOMIC FUNCTIONS OF AN ENTREPRENEUR

Risk taking – business process has numerous risks which cannot be insured against (such as natural disasters like that can cripple the business process), and it is the responsibility of the entrepreneur to bear the risk as he is the one providing capital for the business. Another type of risk is those related to production. For instance, is an entrepreneur produces a product and the product is on high demand, he will make profits. However, is the products are on low demand, he will make loses as they have already been produced.

Provision of capital – it is also the responsibility of the entrepreneur to provide capitals for the business process. In order for production to be complete, land must be put into utility by labour and all labours performed demand rewards in the form of cash and support in the form of equipment and machineries. This is also the job of entrepreneur to make such capitals available for production.

Controls, manages and takes decision within the business – it is the responsibility of an entrepreneur to make decisions in the business, draft means to ensure that such decisions are implemented and control the implementation process in order to ensure high output.

WHAT IS A PRODUCT?

A product is defined as the end result or output obtained from a production process. They are goods or services that are turned out by combining the right quantities of the factors of production. Examples include milk, holiday packages, education, biscuits, tissues, pen etc.

FACTORS THAT DETERMINE THE LEVEL OF PRODUCTION

Quantity and quality of the productive resources – the higher the quantity and quality of the productive resources, the higher the quality and quantity of goods and services produced.

Political and social stability in a country – unstable political and social factors reduces production as policies can be drafted against corporations and demand is low because of crisis (economic or social) facing the country.

Natural factors - natural disasters such as earthquakes and flood can reduce the level of production as they can damage crops planted or companies used for the production process.

Availability of infrastructure – availability of good and necessary infrastructures aid the production process as they can be used to enhance output and production quality through accuracy of production operations.

Provision of social amenities and working conditions – if there are good social amenities and working conditions, the production process will be enhance because workers will be taken good care of and this will further increase production.

THE SCALE OF PRODUCTION

Plants

It is a business establishment or the actual place were the business process is taking place. It is made up of tools, equipment, machineries and buildings used to undertake the business process.

Firm

It is an independently administered business unit that undertakes the administrating functions of manufacturing, and distributing manufactured goods or services. It comprises of one or more units of plants for undertaking its administrative functions.

Industry

It is made up of group of firms that produce similar goods or services. An example if the shoe industry, transport industry or breweries.

INTERNAL ECONOMIES AND DISECONOMIES OF LARGE-SCALE PRODUCTION

Internal economies of scale

These are the advantages which a business can achieve by increasing its output. Large businesses take advantage of their production capability to manufacture more and sale more than smaller firms. Such advantages include

Marketing economies

1.      Large firms have numerous advantages over smaller firms in the buying and selling of goods. For instance:

2.      A large firm can always buy more goods at cheaper prices and sell more than smaller firms.

3.      Since they buy in bulk quantities, large firms incur less cost per unit of transported goods.

4.      They can afford to advertise on large scale marketing campaign programs and attract more customers than smaller firms.

5.      An expansion of output and higher sales does not necessary require a proportional increase in the number of staffs.

Financial economies

1.      Large scale corporations have many advantages over smaller firms in raising necessary funds needed to support production of goods and services. For instance:

2.      Large scale can obtain higher loans easily because they have necessary collaterals for backing up their request.

3.      Large scale corporations can also raise money by sharing their shares to the public.

4.      Large firms can easily finance itself by using depreciation funds or by means of capital transfer from one department to another.

5.      Large firms can also take goods on credits more than smaller firms because they are considered credit-worthy.

Administrative economies

1.      Large firms can afford to obtain the services of the best and most talented people the workforce have to offer.

2.      Large firms have higher division of labour than smaller firms and this aid production efficiency.

Technical economies

Large firms are in better position to obtain special equipment and use them to full capacity than smaller firms. This is because; they have the financial disposition to make such happen. They can use these technically advanced tools to enhance their production process and increase their production output as well as distribution of finished goods.

Economies in research and development

Since they have more financial disposition than smaller firms, large firms are better positioned to engage in research and development scheme that will increase their production process, offer them the opportunity to better satisfy customers’ needs and increase their brand image as well as customer loyalty.

INTERNAL DISECONOMIES OF LARGE-SCALE PRODUCTION

These are the disadvantages that arise when firms undertake large scale production. Such disadvantages are:

Slow decision making process – decision making is not an individual thing in large scale production as it is experienced in small scale firms. Executive must meet top management and staffs must meet their supervisors before taking decision on how to undertake their business activities.

Less personal relationship exists between employees and top management – each department is headed by department managers, and each task has supervisors who monitor the process. Thus, employees are not accorded the personal relationship between managers and employees which is common in smaller firms.

Lack of motivation might exist in big corporations – since the workforce is made of high number of employees, some of these employees might not be fully dedicated to their work as they believe their low output will be covered by the high output of other people.

Difficulty in management and higher administrative costs – the top management is given the responsibility of managing the workforce and they experience difficulty in this task because of high volume of employees and task specialization. In order to reduce these difficulties, large scale corporation are forced to incur high administrative costs by appointing departmental executives and other personnel for managing each department.

Higher loss in terms of poor decision – if mistakes are made in the decision making process, large firms incur higher costs than smaller firms because they have higher production capability.

REASONS FOR THE GROWTH OF LARGE FIRMS

Desire to make more profits – because firms want to increase their profit level, they tend to increase their production output.

Introduction of cheap and efficient transport – with the availability of cheap transports for delivery of raw materials and distribution of finished goods, firms tend to increase their size in order to rip the full benefits of such opportunities.

Growth of division of labour and specialization – since division of labour and specialization enhances production efficiency, firms which such capability tend to increase their output in order to utilise such opportunities.

Desire to secure monopoly – with increase in competition, a firm can change its operations to large scale production in order to favourably compete in the market by producing more and selling more.

Increase in demand of goods and services – if the goods or services offered by a firm are on high demand, such firm tends to increase its production capacity in order to meet such demands.

LIMITATION TO THE GROWTH OF LARGE SCALE FIRMS

Market size – large scale production is only possible when the demand for the service or goods is high.

Capital intensive – huge capital base is required for undertaking large scale production, thus is only possible is the firms is capable to meet this capital requirement.

Increasing cost of factors of production or falling price of commodity – if the cost of factors of production is on the rise or the price of commodities are on the low, large scale production won’t be possible because it will result to loses.

Increased risk – large scale production incurs higher risk than small scale firms and some management might not be keen to increase their production capability as a result of this high risk.

Nature of business – some businesses cannot be undertaken in a large scale production. Examples are services such as travelling agencies and legal firms which must wait for customers to demand their services before producing them.

IMPORTANCE OF SMALL SCALE FIRMS IN THE ECONOMY

Serve as productive outlets for many businessmen who prefer to manage their own businesses – since some firms cannot afford the high price of large scale production, they tend to seen service from small scale firms. For instance, it is cheaper to buy a table from a carpenter in the village than to buy from a manufacturing company or shopping malls in the city.

They produce entrepreneurs that contribute to economic growth of the country – small firms are mainly run by ambition and dedicated entrepreneurs who are always committed towards the growth of their firms. This help to increase their production output, sales and directly enhance economic growth of the country.

They serve as stimulus for challenging existing firms – they pose high challenge to existing firms as they compete for customers, and as such, these firms are forced to improve their product quality and production process in order to survive the competition.

Small firms constitute an important source of innovation – since entrepreneurs are gifted with different skills and talents, they showcase such by establishing their businesses and competing with existing firms. As such, they serve as the right medium for increased innovation.

They offer employment and source of livelihood for people – in the community, their contribution for enhancing livelihood and offering employment opportunities cannot be overemphasized because; they are the most common type of firms in these communities and satisfy the daily wants of the people in these communities through their businesses process.

BUSINESS ORGANIZATION AND FINANCING

A business organization is also known as an enterprise and it an undertaking that normally involves capital investments and risk taking. Thus, there are changes of both success and failure. It is basically divided into three sections as: private enterprises – those owned and run by an individual, public enterprises – those owned and run by a government, and joint enterprise – those owned and run by both individuals and government.

Characteristics of private enterprises

1.      The business is owned and run by an individual, or a group of individuals.

2.      The individual is responsible for providing capitals needed to fund the running of the business.

3.      The main aim of setting up private enterprises is for profit making.

4.      Control and management of the business is done by the private owner or owners.

5.      The owner is also responsible for bearing business risk and all profits are for the owners of the business.

TYPES OF PRIVATE ENTERPRISES

SOLE-PROPRIETORSHIP

This is a type of private enterprise that is owned by one individual. It is also referred to as one-man business. A sole proprietorship has the following characteristics:

1.      It is owned and run by one person, but the owner can also have employees if so desired.

2.      The owner takes all the major decision making alone.

3.      He is responsible for providing the capital needed to start-up the business and run the business operations.

4.      He undertakes associated risks alone and rips all benefits alone as well.

5.      He does not have limited liabilities and the failure of the business could lead to lose of personal assets in order to settle debts.

6.      His business is not a separate legal entity and as such the owner can directly be sued for cases involving the business.

ADVANTAGES OF SOLE-PROPRIETORSHIP

It is high income incentive – since the owner is familiar about the business process and wants to make profits, he reduces all possible means of wastage and apply his best efforts to ensure that such becomes a reality.

Decision making is fast – as the owner is not under the direction of any person, he can make decisions fast and easily to enhance the business process.

It enables the owner to feel independent – since the business is owned by only him, there is a strong sense of independent experienced as the owner will not be directed by anybody on how to undertake his business activities.

There is privacy in business related affairs – since he makes up the management team alone, business process and decisions are not left open for everybody to see or visualize.

There is interpersonal relationship with employees and customers – the owner is always close to his employees in order to help guide them on how to undertake their business activities, and he also devotes much time with the customers as they come directly to him for business transactions and purchases.

It is easy to set up and run – the business does not require much training and some can be started up without any training. The capital involved for establishing the business is not very high as well.

DISADVANTAGES OF SOLE-PROPRIETORSHIP

Limited capital for financing business – since the capital must be provided by one person, it is always limited as it is not easy for one person to make available all necessary capital require to start-up a new business.

It has unlimited liability – the business owner bears all risk alone and if his business fails, he might have to sale his personal items in order to cover for debts.

The business is not a separate legal entity – the owner can be sued directly in cases related to the business and this increases his risks as legal cases involve additional expenses.

The business has uncertainty of continuity – if the owner dies, there is no guarantee that the business will continue as he might not have capable children willing to continue the business. Additionally, illnesses can also haul the business process.

It lacks the advantages of specialization – since the owner cannot be able to provide all necessary capital required to a specialized business, employees are sometimes given tasks outside their field of study and expertise, and this can reduce the quality of the products in return.

PARTNERSHIP

A partnership is an unincorporated business that is formed by a group of people between two to twenty persons that agree within themselves to run the business, and share risks and profits associated with the business. In Nigeria, the Companies’ Act limits the number of partners to twenty.

CHARACTERISTICS OF PARTNERSHIP

1.      In Nigeria, the number of partners is between two to twenty for most business and two to ten for banking related businesses.

2.      The partners normally take major decisions together.

3.      The partners bear risk and partake in profit sharing as agreed between them during the business formation period.

4.      The business is not a separate legal entity and therefore, can’t be sued on its own or on its owner’s name.

5.      The business has no board of directors as control and management of the business is in the hands of its owners.

TYPES OF PARTNERS

Ordinary partner – he takes part in contribution of capital is involves in the management of the business. He has unlimited liability.

Sleeping partner – he is only involved in the contribution of capital. He is not involved in the management process and usually has limited liability. However, he is given a fixed amount as reward no matter the amount of profit the business is making.

ARTICLE OR DEAD OF PARTNERSHIP

This is the written agreement that is drawn up by a legal practitioner and governs the management process of a partnership. It normally contains business information such as:

1.      The name if the business

2.      The nature of the business

3.      Amount of capital to be contributed by each person

4.      How profits and losses will be shared amongst partners

5.      How the partnership may be brought to an end

6.      How responsibility for the management of the business will be shared and undertaken.

7.      The method for admitting new partners.

ADVANTAGES OF PARTNERSHIP

Capital can easily be obtained – since the business partners share the responsibility of raising capital necessary for running the business, it is easier to obtain capital and the amount of capital is usually big when compared with sole-proprietorship.

It has greater continuity than sole-proprietorship – the death or illness of a member does not mean harm to the business, as other members can continue the business.

There is privacy in conducting business affairs – just like the sole-proprietorship, the partners can keep their business affairs private within themselves.

There is advantage associated with specialization – since the partnership business is usually amongst people from difference fields of study, specialization is common and as such efficiency of business process is more guaranteed than in sole-proprietorship.

Likelihood of better decision – since the decision is normally made by one person, there is the chances that it will be more efficient and effective as it will involve the combination of more than one idea.

Management still maintain close relationship with employees and customers – since the management is not that big, there is still close relationship with customers and employees as they can communicate directly with each other.

DISADVANTAGES OF A PARTNERSHIP

There is limited capital – since the maximum number of people in a partnership is limited, the amount of resources or capitals to be contributed by these partners are also limited.

There is unlimited liability for the active partners – they have to take the risk of running the business and failure might result in the active partners having to sell their personal belongings in order to cover for loses.

The business may not bear perpetual existence – although the business is expected to last longer than sole-proprietorship, its existence can also be faulted by partners deciding to quite the partnership and living other partners with little capital to run the business, which will eventually lead to collapse of the business.

The business is not a separate legal entity - as such, the partners can be sued for or against any case related to the business and they will have to bear the legal costs of such cases.

Decision takes longer time to be achieved than sole-proprietorship – this is because, decision making is done between all the partners and differences might exist in terms of opinion, which will eventually make the decision process to take longer time.

Dispute and argument may result between partners and it can threaten the survival of the business -  since different partners have different views in terms of how the business should be run, this might result in dispute and arguments and it can lead to some partners quitting the partnership and eventually the business collapsing.

PRIVATE LIMITED LIABILITY COMPANIES

Limited liability companies are of two types: the private limited liability company also known as close company or the public limited liability company also known as joint-stock company.

FEATURES OF PRIVATE LIMITED LIABILITY COMPANIES

1.      The number of owners (who are shareholders) range from two to fifty and the own as well as share business associated risks together.

2.      The business is a separate legal entity, and can be sued on its own or in the owners’ name.

3.      Shareholders have limited liability. In the event of failure, loses beard by shareholders are limited to the amount of money they have invested in the business.

4.      There is continuity of business operation as withdrawal or death of a shareholder will not affect the business process.

5.      There are board of directors who undertake the business process by making necessary decisions required to run the business.

6.      Capital is raised through the issue of shares and as such is unlimited as the company can sale any amount of share to its shareholders with increasing business growth.

ADVANTAGES OF PRIVATE LIMITED LIABILITY COMPANIES

Source of capital is higher – capital can be easily raided from existing shareholders and as such business process can easily be funded.

The shareholders have limited liability – they can only bear loses up to the amount of money they invested in the company and as such limit them from selling their personal belongings in order to fund credit expenses.

The business is a separate legal entity - and shareholders cannot be sued or held legally responsible for cases related to the business. Additionally, the business can sue offenders on its own.

The business enjoy internal economies of scale – since the source of fund is bigger, the business can undertake any form of large scale production in order to meet the demands of more customers and make more profits.

The business has greater continuity than sole-proprietorships or partnerships – since it is made up of up to 50 shareholders, there are greater changes that illness, withdrawal or 

 death of shareholders will not affect the business process.

DISADVANTAGES OF PRIVATE LIMITED LIABILITY COMPANIES

The amount of capital for the business is not as high as public companies – since the number of shareholders is limited to 50 and the company cannot sale its shares to the public, the amount generated for business is not as high as public companies.

Shares of private companies are not easily transferable – this is because the business process is undertaking by following set guidelines which include guideline on how shares can be transferred from one shareholder to another.

They are not allowed to publicly advertise their shares or sale their shares to the public as the sale and ownership of share is limited to its shareholders.

Less personal contact with employees and customers – since the company has its own board of directors with the responsibility of undertaking the business process, there is less contact with its employees and customers as the shareholders are not involved in the business activities.

Decision making process is slow – before any major decision is undertaken, a meeting of the board of directors is required and this can take time to be drafted and conducted.

PUBLIC LIMITED LIABILITY COMPANY OR JOINT-STOCK COMPANY

This is a type of company that is owned by individuals and the government. The use of the word public implies that any member of the public is allowed to purchase shares in the business when shares are advertised for sale.

CHARACTERISTICS OF PUBLIC LIMITED COMPANIES

1.      The number of shareholders range from seven to infinity since the shares are made available to the public, any interested person can become a shares holder.

2.      The business is a separate legal entity

3.      Shareholders enjoy limited liability

4.      The business has a perpetual existence as it is owned by both the government and individuals.

5.      While the ownership of the business is divided amongst shareholders, the board of directors have the full control of the day-to-day running of the business.

6.      Capital is unlimited as it can be raised through issuing of shares to the public of bank loan.

7.      Shares are easily transferred.

8.      Public limited companies can have their accounts published to the public, usually on annual bases.

ADVANTAGES OF JOINT-STOCK COMPANIES

Business has large source of capital – capital can be raised from current shareholders or by selling its shares to the public as well as s through bank loans.

Shareholders enjoy limited liability – the risk of shareholders is limited to the amount of money invested and additional loses from the company will not be of any financial burden to them.

The business risk is smaller – this is because it is shared amongst a very large number of people.

The business has perpetual existence – since it is also owned by the government, it is bound to exist infinitely.

Shares are easily transferable – shareholders can sell their shares anytime they want and transfer the ownership to any interested person.

DISADVANTAGES OF PUBLIC LIMITED COMPANIES

The business lacks privacy – since the business is open to an infinity number of owners, and their financial performance are usually published to the public, there is little amount of privacy experienced in the business.

There might be negative attitudes amongst paid managers towards the interest of the shareholders – since the managers are not necessary shareholders, they might forfeit the overall business objective for their own selfish interest.

Shareholders cannot control the business - although they are responsible for making available all the necessary capitals needed to run the business, they exercise no control on the actual running of the business.

There is delay in decision making - decisions that affect the overall business performance are made by board of directors during their usually meeting and emergency meetings are not easily conducted. Thus, there is an experienced delay during decision making process.

Formation is costly – before a joint stock company is formed, numerous legal costs have to be incurred and the formation takes different intrinsic and difficult process to be formed.

There is no interpersonal relationship between the company and its employees or shareholder – since the company is managed by board of directors, the employees and customers are not exposed to the actual owners of the business.

HOW COMPANIES ARE FORMED

The Nigerian Companies’ Act of 1958 listed guidelines that must be undertaken before a company is formed. Some of these guidelines include and documents to be completed include:

1 The business must file a number of documents with the registrar of companies. Such documents include

a)     A memorandum of association ,

b)     An article of association,

c)      Names of the would-be directors of the company,

d)     An undertaking or declaration that the business has meet all necessary conditions for forming a company.

2 the registrar will then issue a certificate of incorporation if he is satisfied that the business has meet the necessary requirements for the formation of a company.

3 the company will know send a copy of its prospectus to the registrar. This prospectus contains how the company has raised or intends to raise the funds necessary for its star-up and running.

4 the registrar will send a trading certificate in return to authorize the business to start functioning as a company.

CO-OPERATIVE ASSOCIATION

This is a private business organization that is formed by consumers or producers who have common interests, for the purpose of protecting their own interest.

CHARACTERISTICS

1.      There is no limit to the number of membership.

2.      Profits or dividends are shared according to the amount of purchases or sales made within a specific period of time (normally per annum).

3.      They have unlimited liability

4.      The aim of such business is to help members who have invested their resources.

5.      It is a highly democratic form of business as decisions are made by considering each member’s opinion.

6.      Initial capital is raised by selling shares to its members and there is a minimum shareholding for every member.

7.      The business is not a separate legal entity

8.      The profits of co-operative associations are not taxable.

TYPES OF CO-OPERATIVE ASSOCIATIONS

Producer’s co-operative society – they are made of producers with similar interest who usually come together for the purpose of producing goods together or marketing their goods. Usually, members of this society pull their resources together and use them to increase their production capacity. A good example is agriculture co-operatives where each individual contribute resources (manpower, seeds, tractors, land etc.) to jointly produce crops for sales.

Consumer’s co-operative society – they made of members with the common interesting of either buying or marketing commodities together. They are usually not involved in the production of the commodities; rather they are concerned about jointly buying the goods together in order to reduce purchase costs and selling it together in order to increase sales volume. Once the goods are bought in bulk, they are sold to both members and non-members of the society.

Credit and thrift co-operatives – this is a form of co-operative society formed by a group of people that come together to save money together or borrow money from banks together. It is normally formed between low income earners as they seek to make more savings. The saved money is usually borrowed out to its members or the public, and they make interests from such investments which they normally share according to savings made. Borrowings are mad to its members at a very low interest rates compared with what is obtainable in the banks.

ADVANTAGES OF CO-OPERATIVE SOCIETY

1.      It provides training in self-government and business management for its members. This is because it is a democratic organization whereby each member is accorded the right to decision making and suggestion of opinions.

2.      It enables producers with smaller capital base to enjoy economies of large-scale production as they combine all their resources into one big production process.

3.      It raises the standard of living for consumers as consumers’ co-operative society but goods in bulk and sells them at cheaper rate than normal retailers.

4.      Since their profits are not taxed, consumer’s co-operative society helps to keep prices within bearing rate as they can afford to buy in bulk and sale at much cheaper prices than the middlemen.

5.      Co-operative societies encourage the habit of saving as the necessary resources are jointly contributed by the members through personal savings as is experienced with the credit and thrift co-operatives.

6.      They help to provide source of capital for agricultural and other investments because they easily borrow out money at cheaper rates than financial institutions.

DISADVANTAGES OF CO-OPERATIVE SOCIETY

1.      It is always difficult to find worthy and experienced members who are interested in the business.

2.      There have been many cases of reported fraud in the society and it is still a constant threat to the overall success of a co-operative society.

3.      The members might not be able to raise necessary fund to finance their business operations as they are mainly made up of low income earners.

4.      They can sometimes misuse their money in political issues for the purpose of gaining governmental support.

5.      The lack of taxation creates room for unhealthy competition and many people might decide to open such society because their profit will not be taxable.

PUBLIC ENTERPRISES

This is a government owned co-operations that are usually set up for the purpose of enhancing public welfare. They normally go with names such as corporations, authority, commission or board. Examples are Federal Radio Cooperation of Nigeria (F.R.C.N), Water board, National Examination Council (N.E.C.O) etc.

CHARACTERISTICS OF PUBLIC ENTERPRISES

1.      They are owned by the government and usually setup by the Act of legislation or Act of parliament.

2.      The government provides the necessary capital for running the business. The source of government fund is usually through tax payers.

3.      They are usually operated for the purpose of increasing public welfare.

4.      The risk of the business is borne by the government and tax payers who provide the funds necessary for running the business.

5.      The management of the business is done by the government that set up the business through board of directors appointed by the same government.

ADVANTAGES OF PUBLIC ENTERPRISES

1.      Government uses the business as the basic root for provision of necessary infrastructures used to enhance public life.

2.      Governments’ involvement reduces the possibility of monopoly experienced in order businesses where government does not yield any control.

3.      Government involvement helps to prevent disorder and wasteful duplication of resources as the business is managed under close monitoring system within government ministries.

4.      Government involvement makes the provision of necessary capitals easier as they can fund huge production process through taxable income from members of the public.

5.      Government involvement helps to shield control in key and sensitive areas of the economy such as telecommunication, oil and gas, education and developments.

6.      Government involvement ensures higher production and distribution standards, as well as fixed selling prices for commodities they produce. This will enhance the livelihood of people in the society.

DISADVANTAGES OF PUBLIC ENTERPRISES

1.      High degree of bureaucracy as standards of operation is set for all the production process.

2.      There have been high cases of fraud in the system as generated profits can be diverted to personal pockets.

3.      There is low level of motivation in the business as employees are guaranteed to get paid no matter their level of contribution. This usually common in government ministries with high degree of reported ghost workers.

4.      Decision making is slow and it can influence production output if the decision must be made before production is continued.

5.      Government ownership may lead to nationalization of foreign firms and reduce their withdrawal intention from the county as well as profit level.

6.      The business operation can sometimes become political as government can draft policies to cripple competitors by banning their products or inducing high taxes.

JOINT ENTERPRISES

This is a form of business organization that is formed and jointly owned by groups of individuals and the government. The process of ownership can be by government buying part of an individually formed business, or the government starting up a new business together with individuals. The purpose of this business is to combine the benefits of private and public enterprises in order to reduce the problems of complete government or individual ownership.

WAYS THE GOVERNMENT CAN PARTICIPATE IN ECONOMIC ACTIVITIES

The government is involved in the production of social amenities such as electricity, road, water and telecommunication. The members of the society pay certain amount for these services in the form of direct payment (e.g. water and electricity bills) or taxes.

The government can directly establish a public enterprise on its own for the purpose of making profit which will be used to sustain the country economically. An example is the Nigerian National Petroleum Corporation (NNPC) which is formed by the government for the purpose of extracting, refining and selling petroleum products in the country and outside the country.

The government can be involved in joint enterprises in order to promote growth of certain sectors of the economy. For instance, they can collaborate with investors to promote the agricultural sector by making available free fertilizer and seeds for plantation purposes.

The government established financial institutions to provide entrepreneurs with the necessary fund for establishing a new business. Examples include the Nigerian Industrial Development Bank, the Nigerian Bank for Commerce and Industries and the Nigerian Agricultural Development Bank.

The government provides institute training programs on different sectors of the economy. Such programs include free agricultural courses at different part of the county that teaches proper cultivation, harvest and marketing techniques.

POPULATION

Population is defined as the number of people residing (living) in a particular geographical area at a particular time.

POPULATION CENSUS

A population census is a comprehensive form of study that involves counting people living in geographical areas and grouping them according to age, sex, ethnicity, religion, occupation, nationality etc. it is usually done every 10 years.

IMPORTANCE OF POPULATION CENSUS

It is used to determine the size and rate of growth of people – in order to improve the welfare of people and create sustainable environment for the future, the government undertakes a population census in order to determine the birth rate and use it to predict the number of people to be born at a certain time. This will be used to determine the number of new schools, hospitals, housing, roads and other public facilities that will be constructed.

It helps the government to obtain adequate and relevant statistics which will be used for economic planning – for instance, the government can determine the extent of job creation by understanding the number of unemployed people in a country.

The knowledge of size as determined from the population census help in proper administration of the country such as state and local government creations.

The data provided from the population census serve as basis for the distribution of resources in the country.

Population census can influence the volume of grants and investment coming into a country. This is because, the higher the population, the higher the market size and high market size creates room for profitable investment.

Population census serve as the base for production and importation of goods and services – the number of people living in a certain area will be used to ensure efficient production and reduced wastage by producing goods and services that are just enough for these people.

CENSUS PROBLEMS IN WEST AFRICA

High cost of conducting census – it is very expensive to conduct a census and many West African countries cannot afford the huge price tags. Thus, census is normally conducted after a long period of time in West African countries.

Shortage of census personnel – in many West African countries, there are few qualified personnel that are capable of conducting census, and this cripple the possibility of frequent conduction of census in this part of the continent.

Inaccessibility of some areas – most of the villages in West Africa cannot be accessed because of poor infrastructures like road, telecommunication and media. Thus, these areas are usually not counted during census and it influences the quality of the census negatively.

Probative religious and customs belief – certain traditions make conduction of census prohibitive. For instance, Muslim women are not allowed to appear freely in public, and as such, they will not be counted during census.

Economic benefits and political problems – since the creation of states and local government depends on the population of people, people are sometimes tempted to misrepresent actual population in order to gain such benefits and this becomes an issues to the quality of census.

High degree of illiteracy – there is high level of illiteracy in West African countries as many people can’t read or write and this becomes a s problem as it raises sel-enumeration difficulties.

THE MALTHUSIAN THEORY OF POPULATION

An English man Reverend Thomas Malthus coined a theory of population which states that: “there was a constant tendency that all animated life will increase beyond its source of nourishment.” He argue that population tend to outgrow it is source of food by stating that while population increases geometrically (2, 4, 8, 16, 32 etc.), its source of food increases arithmetically (2, 4, 6, 8, 10 etc.). Therefore, at a time the population will outgrow its sources of food and it will reduce the level of standards of living within a geographical area. This theory is in line with the law of diminishing return.

Is this theory applicable?

This theory is not applicable because of numerous factors such as:

Food production increased as a result of improvement in farming techniques brought about by advancement in technology.

Countries can import goods and services from other countries due to the increasing influence of globalization.

Improvement in transportation has made the distribution of goods and services easier.

As a result of new trends, lifestyle and choice, people are now having smaller families and as such the number of people within a geographical area is not guaranteed to be geographically increasing.

Application of the theory in West Africa

While the theory is not applicable in England and the advanced countries, it is still applicable in West Africa as there have been reported cases of food shortages, increasing family size due to high birth rate, poor education, and poor farming methods and techniques and lack of good infrastructure. Therefore, the standard of living of people in certain parts of West Africa is influenced negatively and this can be seen in the high cost of goods and services, as well as the high rise of poverty and starvation related deaths.

DEMOGRAPHIC TRANSITION THEORY

This is another theory that provide historical insight into the population problem of developing countries by offering three stages that a country must pass through. These stages are:

Stage I: stable or very slow population accompanied by high or fluctuating death rate. This is because of lack of adequate infrastructures as experienced in pre-industrial society.

Stage II: rapidly growing population as a result of high birth rate and low death rate. This is an early stage of modernization were good health facilities have been provided to ensure sustainability.

Stage III: little or no population growth as a result of low r declining birth rate and low death 

rate. This is the product of full modernization as is experienced in advanced countries.

Rate of population growth can be calculated by. Where r = rate of population growth and net immigration = the differences between the number of immigrants and emigrants.

FACTORS AFFECTING POPULATION GROWTH

BIRTH RATE

This is the number of birth per thousand of a population in a year. It is influenced by the following factors:

Age of marriage – all other things being equal (ceteris paribus), if people marry earlier, they are more likely to give birth to earlier and have more children than when they marry late.

Age distribution of the population – the higher the number of people in the child bearing age, the higher the birth rate.

Attitude towards children born outside marriage – in societies where premarital sex and birth are not seen as a serious issue, the birth rate will be higher than in society where they are seen as serious issues.

The number of fertile women – ceteris paribus, the higher the number of fertile women in a society, the greater the birth rate.

Attitude towards polygamy and large families - the birth rate will be higher in societies were polygamy and large families is common.

Knowledge and acceptance of birth control – the birth rate will be lower in societies were people are aware and make use of birth controls.

Health of the people – the health of the people affects both fertility and virility. Therefore, birth rate will be higher in societies were people are very healthy.

DEATH RATE

This is the number of deaths per thousand of a population in a given year. It is determined by the following factors:

Availability of health and medical facilities – if health and medical facilities are made easily available, the death rate will be reduced.

Standards of personal hygiene and environmental sanitation – where the standards of environmental sanitation and personal hygiene are high, the birth rate will be reduced.

Standard of living – if the standard of living is high (as such that people are adequately provided with their needed goods and services) the death rate will be low.

Incidence of wars, epidemic, famine and natural disasters such as floods, earthquakes and tsunami – is these are on the rise in a society, the death rate will increase.

Age distribution of a society – the tendency for death rate to increase will be possible if they are many elderly people.

MIGRATION

This is the movement of people from one place to another in order to settle there for a given period of time. Migration has two aspects – emigration and immigration. Emigration is the movement of people out of a place or country and the people who move out of a place or country are called emigrants. Immigration is the movement of people into a place or a country, and the people who move into a place or a country are called immigrants. Immigration increases a population while emigration decreases a population.

REASONS FOR POPULATION GROWTH IN WEST AFRICA

Increase in birth rate – all over West Africa, there have been an experienced increase in the population growth. The birth rate is increasing in West Africa because of the following:

Higher levels of income – the income level of workers have generally increased in web Africa.

Higher degree of immorality – people in West Africa are now more open with their lifestyle and sex is common practice within unmarried people nowadays than it was in the olden days.

Importance of polygamy and large families – the West Africa, especially in the Muslim parts of the society, polygamy is a common practice and people are encouraged to have more children.

Limited use of birth control – birth control is not common in this part of the world and there is little desire to prevent unwanted pregnancy.

Early marriage – many people are now getting married earlier in West Africa than it was before.

Government policies – since independents, many West African governments have embarked on policies which encourages birth rate such free education, free medical check-ups etc.

Decrease in birth rate – as a result of advanced meet in technology and adoption of medical practices which encourage healthy life, death rate have been reduced in West African Countries.

Increases in immigrants – the number of people migrating to work and settle down in West Africa have increased in recent year. This increases the population of the societies.

HOW TO CONTROL POPULATION GROWTH IN WEST AFRICA

Birth control or family – creation of awareness for birth control and family planning, as well as making the facilities easily available will reduce birth rate.

Provision of more jobs and educational facilities for all – when people are working and well educated, they will be better positioned to control the rate of children they want to have as they will be more familiar with birth control measures and will not have to be fired from work for having children. This will effectively reduce the birth rate in this part of the continent

Late marriage – promotion of late marriage measures such as creation of awareness and education will have positive impact on birth rate as it has been stated that, if all things being equal, rather marriage will yield lesser children than early marriage.

Migration policies – governments can adopt migration policies such as the number of people to allow into its country per annum and the type of foreign workers allowed to take jobs in their country. This will significantly reduce population size.

Sex education – this will enable youths to understand the risk associated with premarital sex, how to prevent unwanted sex and control pregnancy. As such, it will reduce the birth rate in a country.

CONSEQUENCES OR IMPLICATION OF A RAPIDLY GROWING POPULATION

Increase in market size – since the population size is on the rise, the demand for goods and services will also increase and now companies will emerge to meet these demands. However, it can have negative implications of increase in price of commodities as the customers will have low bargaining power as a result of the high population size.

Increase in investment and production - naturally, large markets have the potential of attracting investors as there customer base is essential for profitability. Therefore, increase in population will result in increase in investment and production capacity.

Dependency ration will increase - working class people will have more dependants in the form of children and workers who need their support to survive.

Standard of living will reduce - as a result of the high number of people sharing government and private facilities, the standard of such facilities will easily wade out and people will experience general fall in standards of living.

Unemployment rate will increase – because of the higher number of people being born, the entry to retirement ration in workforces will increase leading to high unemployment rate as more people will compete for a particular job.

CONSEQUENCES OR IMPLICATIONS OF DECLINING (AGEING) POPULATION

There will be a shift in demand – old people will demand products that satisfy their wants such as healthy eating and medication. This will affect the teenage and children market as less demand will be experienced in these markets.

There will be change in production pattern – since more products for elderly people is demanded, the production will shift focus to satisfying this market segment and it can neglect the needs of other segments which are smaller in size.

Structural unemployment will occur – since few goods and services for children are required, producers of such goods and services will be forced out of jobs as there is little demand for their products.

Dependency ration will increase – the number of people dependent on working class will increase as result of increase in ageing people.

Less mobility of labour - since most of the people in the ageing segment of the population are not capable of working anymore, positions will remain unfilled in the workforce and it can affect productivity.

              

OPTIMUM POPULATION

Optimum means best and optimum population means the actual size of a population which given the available resources, technical supports, capital and organization will produce the highest output per head. The standard of living will be high because the population size adequately matches existing resources.

Figure (7) optimum population 

There is no exact figure for optimum population across the world. Optimum population is influenced in different countries by different factors such as advancement in technology and net population. Optimum population is also not fixed and it can change over a given period of time. If the conditions of production increase, optimum population will increase.

OVERPOPULATION

Overpopulation is said to occur when the population of a country is above the optimum figure. This implies that the population is well above the available resources and technical knowledge, making output per person below the maximum. As a result of the increasing population, the available resources will start to experience diminishing returns and standard of living will decrease.

EFFECTS OF OVERPOPULATION

Land congestion and pressure on available resources – as people seek to find shelter, available land will be congested and natural resources will be put through extreme pressure. In the long-run, these resources will start to experience diminishing returns.

There will be fall in per capital income – as a result of increase in labour and pressure on available resources, average output will decrease and wages for labour will decrease as well.

Demand for goods and services will be relatively higher than what is available – this is because more needs must be satisfied, but as a result of scarcity of resources, these demands will be higher than it is possible to be fulfilled.

Increased dependency on importation – since the available resources have been subjected to extreme pressure, once these resources start to depreciate in value, the country will become dependent on importation as a means of survival.

High level of unemployment and under-employment – there number of unemployed people will increase and additionally labour will not be fully utilized.

Producers might adopt a more labour intensive form of production – as a result of high number of people seeking jobs; producers are likely to adopt a more labour intensive form of production instead of mechanizing their production process.

UNDERPOPULATION

This is the figure were the size of a given population is below the optimum figure. Underemployment exists when the number of labour (people) available are not enough to enough to tap available resources, given the existence of technical knowledge. Countries that face under-employment do not enjoy economies of large scale production and there is high pressure on labour to contribute more than its actual capacity.

EFFECTS OF UNDERPOPULATION

Supply of labour is relatively low – since the population size is below the optimum level, labour supply is limited and many vacant positions exists in their workforce.

Market size is relatively small – the size of the market is small and as such demand for goods and services is low. Because of low demand, producers are left at the mercy of customers as availability of numerous options for small amount of people can lead to price war between competing brands.

Level of production will be low – because of the small size of the population, output is relative low as compared with optimum population.

Export will decrease - as a result of the low production capacity; exportation will be low because the available workforce are small and can’t produce enough to power exportation.

IMPORTANCE OF POPULATION SIZE

It determines the number of available workforce – the higher the population, the higher the available workforce and vice versa.

It determine the per capita income and amount of resource available per person - the higher the population, the lower the per capita income and amount of resources available per person.

It determines the size of market for goods and services – the higher the population, the higher the size of markets for goods and services and producers will make more profit in big markets because demand is usually high.

The population size determines the level of government expenditure on social infrastructures -  a high population size calls for increased expenditure on infrastructures such as housing, road, water, electricity etc. from the government to ensure sustainability of livelihood.

It determines the amount of import and export – if a population is large, import and export is usually high as more goods will be produced through it workforce for export and more will be imported to meet existing demands.

ADVANTAGES OF LARGE POPULATION

1.      Supply of labour is high.

2.      A large population provides a large market for goods and services.

3.      Internal economies of large-scale production are common in large populations.

4.      Due to its large market size, large population is more likely to attract foreign direct investments (FDI) and foreign aids.

5.      Large populations are more likely to provide higher skills and diverse talents from its populace (residents).

DISADVANTAGES OF LARGE POPULATION

1.      The per capita income will decrease and as a result the standard of living will be low.

2.      In order to meet the social needs of people, there will be increased government expenditures in provision of social amenities.

3.      In order to meet the demands of people, the value of import may increase and this can lead to 

balance of payment problems are import exceed export.

4.      A large population can lead to urban congestion as more people move from the rural areas to urban areas in search of jobs.

5.      A large population may lead to high unemployment as the workforce is by far higher than the demand for labour.

AGE DISTRIBUTION

This is the way people in a population are spread according to their age group. It is usually represented in a population pyramid. The age distribution can be between 0-17, 18 – 35, 36 – 60 and 60 or above. An example of a population pyramid is illustrated below:

Figure (8): population pyramid

WORKING POPULATION

This is also known as the labour force. It can be defined as the number of people between the age of 18-60 who are allowed by law, customs or other factors to work, and whom make themselves available for employment.

GEOGRAPHICAL DISTRIBUTION OF POPULATION

This refers to the number of people living within a given geographical area. In Nigeria, the areas with high geographical populations can be found across the Igbo land, Hausa land and Yoruba land. Numerous factors influence the geographical distribution of people in a population. These factors include:

PHYSICAL FACTORS

Soil and weather conditions – people tend to concentrate on the areas where soil is fertile and the weather conditions are favourable because they can grow their crops in these areas and take good care of themselves with natural resources available within these geographical areas.

Relief – this is another physical factor that influenced population density. Areas with high and rugged reliefs are usually thinly populated because they road are difficult to access and the soil are not good for farming. This is common in the northern and southern highlands of Nigeria.

ECONOMIC FACTORS

Presence of natural resources – areas with high number of natural resources are usually highly populated because people can adopt these natural resources to manufacture goods and services that will be used to satisfy human wants.

Commercial and industrial activities – as a result of their high availability of natural resources, commercial and industrial activities are common because investors prefer to establish their businesses its transportation costs is reduced. Thus, there is also high demand for labour in these areas.

HISTORICAL FACTORS

Sometimes people are concentrated in a given geographical areas as a result of historically associated factors. For instance, their great grandparents might have been residing in these areas for long, and the children have grown up within the same areas and expanded their own families in the same place. Therefore, in the long-run, the area will be fully populated as a result of expanding population.

GOVERNMENT POLICIES

Certain government policies influence population size within a given area. For instance, participation in international treaties that allow freedom of movement for people in a country into another country can increase the population of that particular country. A good example is Nigeria’s ECOWAS membership which allows people from ECOWAS countries to move freely into Nigeria.

LABOUR AND THE LABOUR MARKET

The concept of labour have already been discussed in the precious chapter where it was referred to as “working population.” The labour force or working population is made up of those between the ages of 18 and 60 who are legally permitted by law, customs, religion and other factors to work and are willing to make themselves available for such work. 

EFFICIENCY OF LABOUR

This is used to describe to the quality of labour available for production. It is the degree to which labour can be combined with other factors of production in the most productive way to yield best output. It is measured by the quality of output obtainable from a specific amount of labour inputted into the production. Therefore, labour can be said to be efficient if it capable of achieving a greater amount of output in a given time without resulting in the reduction of quality of work or product. This means increased productivity per worker and possible increase in the quality of goods and services produced.

DETERMINANTS OF LABOUR EFFICIENT

Education and training – in order for the worker to be equipped with the necessary skill for undertaking his duties, he will need to obtain such skills through training. As such, increase in the level of education and training increases labour efficiency as the worker will be equipped with the right skills to undertake his duties more efficiently. For instance, a typist who uses typewriter can increase his level of education and training with a computer system and it will improve his output as computer systems are much faster, convenient and efficient than typewriters.

General working conditions – the workforce also influences productivity as it has a direct influence on the level of an employee’s motivation to work. As such, if the working condition is designed in a way that all negative factors that influences productivity are either curbed or reduced, the employee will be more motivated as he will view the environment as accommodating and influential. Therefore, his level of motivation will be increased and this will lead to a subsequent increase in production (labour effecieny0.

Health - the workers level of health has a direct influence on labour efficiency. Healthy workers are more capable of undertaking their tasks and adding extra tasks during their free time. Thus, the healthier a worker is, the more efficient such worker is expected to be if all things are left equal.

The amount of incentives or remuneration – the reward for labour is salary (per month) or wages (per hour). The amount of salary or wage received for undertaking a specific task increases employee’s efficiency. The higher the salary or wage, the higher the output as the employee will be motivated input more effort in order to increase the reward obtainable from undertaking that particular task.

Efficiency of other factors of production – the higher the efficiency of other factors of production (land, capital and entrepreneur), the higher the efficiency of labour. For instance, the adoption of advanced machineries in production can improve the output significantly as machines are more precise and accurate in production process.

DIVISION OF LABOUR AND SPECIALIZATION

Division of labour is the breaking down of the production process into different functions, with each of these functions being a worker or group of workers. On the other hand, specialization is the concentration of the production capability of an individual, firm, or community into a specific area of economic activity or on a specific line of production. For instance, the production of computers can be broken down into different sections (division of labour) as screen producers, mouse producers, keyboard producers, mother board producers, and camera producer; with each group of producer specializing on specific areas of production.

TYPES OF DIVISION OF LABOUR AND SPECIALIZATION

Specialization by sex – by law, tradition or custom, there are certain occupations which are specifically either males or females. For instance, females are not allowed by custom and tradition to be palm wine tappers or miners, but they feature more than men in modelling and they are traditionally expected to handle cooking in the house.

Specialization by product – this involves individuals or companies specializing their production capability on specific products. For instance, a farmer can specialize on only cocoa production while a company can specialize on production of Cola Drinks (e.g. Coca Cola and PepsiCo).

Specialization by process – this involves dividing production into different processes and workers concentrating on specific process of the production. For instance in biscuit industry, some people specialize on baking while other undertake packaging and labelling specialty.

Geographical specialization - this form of specialization is as a result of endowment by nature. For instance, some places are more endowed with fertile land (for agricultural production) while other are more endowed with minerals (e.g. petroleum, diamonds, gold etc.). Thus, specific geographical areas produce more of what they are naturally endowed with.

ADVANTAGES OF DIVISION OF LABOUR AND SPECIALIZATION

Increased productivity – since different tasks are undertaken by different people, the production process is improved and the output is subsequently improved as well. Thus, division of labour brings about increase in productivity as more people turnout more outputs from different segment than is possible in a combined process.

Reduction of cost per unit of output and increase in profitability – since the task is divided into different sections, the output is in bulk and larger amount as compared with combined process. This reduction in per unit of output increase profitability as more can be sold at than is possible with combined production process.

Enhances skills of workers – specialization allows workers to focus on specific areas of the production process and this will increase their skill in that areas as they frequent engage in such particular tasks.

It saves time - the time that would have been wasted from moving from one operation or machinery is saved with division of labour. For instance, in the production of cars, different parts are producer individually and fixed together. However, if there was no division of labour, the production unit will not occupy these machines and it will make producers to move from one section to another in order to couple the parts together to form a car.

Reduces fatigue – since workers are assigned to specific tasks, division of labour reduced the level of stress experienced if such workers are assigned to different task at a time. In that case, it increase their efficiency as focusing in one task will allow them the opportunity or relaxing when such task is finished and reduce the mental energy injected into understanding providing troubleshooting for different tasks.

DISADVANTAGES OF DIVISION OF LABOUR

Work becomes monotonous – the division of labour will make a worker to perform a specific type of work every day and it can reduce the worker’s level of interest in the work as he might develop the “I know it all already” mentality.

It reduces craftsmanship and artistry – with the introduction of machine as a result of division of labour, people are now reluctant to use their hands craft out designs and artistic works are was practices before. This is because, machines are deemed to be more effective and as such craftsmanship and artistry is reduced.

Increases the risk of unemployment – division of labour tends to turn workers into specialist who can hardly do other types of jobs. This increases their risk of unemployment if they lose their job as it will be much harder to find a new job when compared with people with multiple task orientation.

Increases the risk of interdependence – since workers are grouped to undertake a particular process in production, division of labour increases their interdependence on one another and a fault from one process can put the whole production in standstill. For instance, in the production of cars, if the painting department is affected, the cars can’t be sold and the whole production process will wait for the painting department to kick-start in order to paint the produce cars and car accessories.

LIMITATION OF DIVISION OF LABOUR

Market size - it was proposed by Adam smith that division of labour is influenced by the size of the market. This implies that higher demand for a commodity will increase the need for division of labour in order to fasten the production process. However, if the products are not in high demand, division of labour is not encouraged because it will result in production of goods and services that might not be sold later, and this can increase waste.

Management efficiency – the management competency enhances the division of labour. If a management is efficient, it can effectively enhance the division of labour by drafting the production process and activities involved in each process. However, if the management is not efficient, division of labour will be faulted as some people might be undertaking different tasks and it reduces the level of specialization.

Nature of product – this is another factor that limits the advantages of division of labour. There are many products and services whose production process cannot be broken down into different sections.  For example, the barbing and hair dressing process cannot be broken down into different sections. These types of products and services limit the advantages of division of labour.

Extent of standardization – division of labour can be limited to the extent of standardization involved in a production process. Where the production is standardized to a great extent, division of labour is encouraged in order to meet the product standards.

Extent of commercialization of the market – the extent of which the commercial sector (especially the distribution channel) is developed will determine the level of division of labour. If produced goods are successfully distributed, division of labour will be encouraged, however if produced goods are not successfully distributed, division of labour will be discouraged as it can lead to waste of resources.

DIVISION OF LABOUR AND EXCHANGE

It has been stated that division of labour increased the need for exchange. This is because when individuals, companies, families or communities specialize in the production of a particular commodity, they will have to exchange that commodity with other producers in order to obtain commodities which they don’t produce. For instance, a farmer needs the clothes of a tailor, while the tailor also needs the farm produce of the farmer. Thus, division of labour increases the level of exchange.

Division of labour also results in the production of commodities in large quantities and this yield excess product. The excess products will need to be exchanged in order to avoid wastage. If not for division of labour, people will be self-sufficient; that is producing whatever they want. In any case, this seems to be less possible because different people are endowed with different resources by nature, so there is the need for exchange in order for man to have all the resources necessary for satisfying his wants.

SPECIALIZATION AND ECONOMIC DEVELOPMENT

Specialization results in numerous economic gains with reference to economic development. Such are:

It increases the total production of goods and services – when concentrate in specialization of production process, total output is increased as they produce more goods and services to meet the demands of the market.

Specialization contributes to a higher standard of living – since the total output is increased, people are more capable of having their demands meet and they can consume more goods or services. This increase in consumption rate will increase the standard of living.

Specialization promote trade on both national and international level – since different people specialize in production of different good or services, there is an increased need for trade and exchange in order for people to have the goods and/or services they don’t produce.

It increase the skill and proficiency of labour – since workers specialize in particular production process, their skill and proficiency is increased in that process (field) as it is a daily part of their practical life.

Specialization contributes to more efficient allocation of resources and stimulates development of technology – in specialization, resources are allocated to those areas where they will yield maximum output, and the allocation of resources is done in relation to demand for such resources. Thus, there is a more efficient allocation of resources. On the other hand, it stimulates the need for technological development that will be used to further enhance the production process.

MOBILITY OF FACTORS OF PRODUCTION

The word mobility is used to demonstrate “a state of motion” or movement of something. As such, mobility of factors of production refers to the degree of movement experienced by these factors.

Labour is the most mobile factor of production especially if we consider it in a geographical sense. Human beings (labourers) can move from or to any part of the country or the world in search of employment. Capital is also mobile but certain types of capital such as buildings, dams and fixed machineries cannot be moved from one place to another. Land is the most immobile factor of production as land is fixed within a geographical area. However, they can be moved during trade (e.g. crude oil, diamond, gold etc.) from one place to another. Entrepreneurs are also mobile but their level of mobility depends of their choice of market to invest in.

MOBILITY OF LABOUR

The mobility of labour refers to the ease with which workers can move from one location or occupation to another. Labour is deemed mobile is workers find it easy to move from one geographical area or work to another, and it is considered immobile if people experienced difficulty in switching jobs or moving to different geographical areas.

TYPES OF LABOUR MOBILITY

Industrial labour mobility – this is the ease at which workers can move from on position to another in a given industry or across industry. it is of two types – vertical and horizontal labour mobility. Vertical labour mobility is a situation whereby an employee is promoted from his position but still functions in the same industry. For instance, an assistant lecturer in University of Nigeria Nsukka (UNN) can be promoted to a senior lecturer in the same university. Under this form of industrial mobility, task undertaken is changed and wages/salary usually increases. Horizontal mobility on the is the form of industrial mobility where an employee changes from one company to another but still retains the same position and undertakes the same task. For example, an economics teach in Danny-T model high school can switch to Govisco secondary school and still be teaching economics.

Occupational labour mobility – this is the ease at which employees can switch from one job to another. It is most common amongst unskilled labourers. For instance, a cleaner in an officer can switch to a nanny in nursing homes.

Geographical labour mobility - this is the ease at which people can move from one geographical area to another in search of job. It can take place on a national level – e.g. from one state in Nigeria to another, or on an international level – e.g. from Nigeria to France in search of jobs.

IMPORTANCE OF LABOUR MOBILITY

It reduces scarcity or unemployment of labour - with labour mobility, people can move from areas where labour is in low demand to areas where they are in high demand and command higher wages. As such, scarcity of labour and unemployment is reduced.

It helps to increase production – labour which has moved to an area of labour scarcity helps to improve the level of production in that area. Additionally, vertical mobility of labour enhances production as people are motivated when they are being promoted.

LIMITATIONS OF LABOUR MOBILITY

Availability of economic and social infrastructures – the extent of availability of infrastructures such as transportation, communication, housing, electricity etc. influences the mobility of labour. If these infrastructures are steadily available, people can easily move from one geographical area to another, but if not, mobility of labour will be rare.

Immigration requirement and government policy – the ease at which people are allowed to move from one place in a country to another or from one country to another county will also influence the mobility of labour. For instance, if an open policy which allows freedom of movement is employed, labour will be more mobile. Additionally, government policies such as payment of unemployment benefits and issuance of licence for entering into a particular trade also influence labour mobility. If these policies are applicable, labour will be less mobile because people who receive unemployment benefits will be reluctant to seek for job and operation licence can limit the level of entrance into a particular trade.

Sociological factors - sometimes, people are so attached to their families, cultures, religion and activities in a given area. If the level of attachment to these factors are high, labour mobility will be reduces as they will find it difficult to take the new challenge of going to other areas where these factors are not easily available.

Condition of service in one’s place of work – if employees are comfortable with their current jobs, salaries, colleagues or employers, labour mobility will be reduce as they are less likely to leave their current job in search of new ones. However, if they are less comfortable with these factors, labour mobility if enhanced as they will be keen to seek new opportunities that will better these factors.

Length and cost of training – skilled occupations that require high level of training such as Doctors and Engineers usually experienced little level of mobility. This is because they have spent a lot of resources and time to obtain their current training and mobility might require extra training in the new field. On the other hand, unskilled labour and those that require little time and capital for training such as carpenter, officer cleaner, office secretary etc. are easily mobile.

HOW THE GOVERNMENT CAN IMPROVE / ENCOURAGE LABOUR MOBILITY

Production of adequate social and economic infrastructures – the provision of social amenities such as good road, transportation medium, communication, good housing, electricity etc. will enhance the mobility of labour as it will make it easier for people to move from one area to another in search of jobs.

Provision of adequate incentives - if the wage or salary bill of workers in certain industries are increased, labour will be horizontally mobile in that industry. Thus, government can increase the incentives of workers in certain industry as a way of increase the level of labour mobility within or into the industry.

Provision of adequate system that disseminate information of labour availability – sometimes labour is immobile because people are not aware of their availability. Thus, provision of adequate system such as (website, newspapers etc.) that communicate the level of labour availability across industry and it will increase labour mobility.

Establishment of vocational and technical institutions – the establishment of such institution will help educate more people and equip them with necessary skilled required across industries and this will also increase the level of labour mobility as more people will be available to fill open positions in different industries or switch across industries with their newly acquired skills.

Establishment of policies that makes entry into certain positions less difficult – another way government can make labour more mobile is to establish new policies that makes entry into certain areas of business and trade less strict. This will increase the mobility of people into these areas.

DISTRIBUTIVE TRADE

PROCESS OF DISTRIBUTION

Goods usually move from the hand of manufacturers or producers to different middlemen before they finally reach consumers. A normal chain of distribution can thus be illustrated below.

Figure (9): distribution chain

The movement of produced goods through the middlemen is still considered part of the production process. This is because the production process is not considered complete until the goods reach the final consumers.

The manufacturer / producer – they are the people who combine the factors of production to produce goods and services which satisfy the wants of consumers. Without them, no production will take place, and consumers’ wants will not be satisfied. They are the people who create utility.

The wholesaler – they are the middle men between the producers and consumers. The number of middlemen depend on the type of goods produces.

ELIMINATION OF THE WHOLESALER

Wholesalers are sometimes regarded as unnecessary feature of the economic organization. Certain arguments have been raised as the reason why wholesalers should be removed. Such arguments include:

High price of goods (inflation) – wholesalers add to the cost of goods without directly adding to the value provided by such goods. For example, when a wholesaler buys a bag of rice from a producer, the wholesaler will add his profit while selling the same rice to the retailer or consumer. Thus, the actual price is increased but the value obtainable from such consumption is not increased.

Creating an artificial scarcity of goods - sometimes wholesalers stock their goods in order to create scarcity for such goods as an increased demand will lead to increase in price of such commodities.

Tax evasion – despite the fact that wholesalers earn profits, most of them don’t pay taxes.

Payment of lower producer price to farmers – in most part of Africa, wholesaler pay low production prices to farmers for their agricultural products but later sale these products at an increased price.

Disguised unemployment – the presence of wholesalers raises the level of disguised unemployment as they are considered to be under-employed.

Despite these disadvantages which people have argued for the elimination of wholesaler, they are still considered vital in many trades and should therefore not be eliminated. Such include their undying assistance in the distribution of goods and services in the remote areas of the country where producers cannot reach consumers directly.

BY-PASSING OF THE WHOLESALERS AND/OR RETAILERS

Some producers bypass the wholesale and sale directly to the retailers, and sometimes both the wholesaler and the retailer are bypassed. The reasons for such are:

1.      Producers can increase their profit a little and at the same time reduce the price for their commodities through the elimination of wholesalers and retailers profits.

2.      Some producers want to have greater control of their retail outlets as it will help them in determining the exact amount of more goods and services to be produced for the customers.

3.      Some large producers can afford to have their own departmental stores or warehouses where consumers can buy directly from them.

4.      In some cases, both wholesalers and retailers have been bypassed because of an increased in mail-order and door-to-door sales.

5.      Development of the means of transportation can also mean that producers can reach consumers directly and as such bypass the middlemen.

ECONOMIC FUNCTIONS OF THE WHOLESALER

Buys in bulk from producers – most producers want to dispose their goods in large quantities in order to concentrate more on the production process and wholesalers assist them in such way.

Sales in smaller quantities to retailers - most retailers cannot afford to buy goods in high quantities from producers and the wholesaler helps to resolve this issue by selling the goods in smaller quantities to retailers.

Finances producers – producers want to be paid instantly in order to continue with their production process and wholesalers provide the much needed finance through their bulk purchases.

Finances retailers through credit facilities - some retailers want to order bulk goods but don’t have enough financial dispositions and the wholesaler helps them by selling in credits to them, while they pay back after selling the whole goods.

Provides warehousing or storage facilities – since wholesalers buy in bulk, they provide storage facilities for storing producers commodities and retailers stocks. As such, the producer will have enough room in the production unit, while the retailer will have readily available goods whenever they want to make new order.

The retailer – retailing can be defined as the different arrangements made by trades for selling directly to consumers. The retailers can buy either directly from manufacturers or through the wholesalers. They are the last link between the wholesaler and final consumers in the chain of distribution.

ECONOMIC FUNCTIONS OF THE RETAILER

Serves as the link between wholesaler and consumers – he makes the goods readily available to the final consumers by buying from the wholesaler and selling directly to the consumers. As such, he helps to reduce the stocks of the wholesaler and satisfy consumer’s wants.

Sells to the consumers at convenient places and time – the retailers normally have their shops close to consumers’ houses and as such sales to the consumers at their own convenience. This helps to maintain the production process 24/7.

Enables consumers to have wider range of choice – retailers usually buy different goods from the wholesalers and it allows the consumers to have different choices to satisfy their wants.

Offers credit facility to customers – retailers also sometimes offer credit facilities to their reliable consumers who will pay them back at the agreed time. Such act of benevolence helps consumers who have no money to satisfy their wants.

Providers wholesalers and producers with information about consumer needs – since the retailer deals directly with the consumers, he is more positioned to know what they want. As such, he provides the wholesaler and producers with information about what consumers want.

TYPES OF RETAIL OUTLETS

SMALL-SCALE RETAILERS

This type of retailers carry business on small scale and have low overhead. Good examples include hawkers, street vendors, pedlars, market and pavement stall-holders and small shops. Some of them move about with their goods (e.g. hawkers, street vendors and pedlars).

ADVANTAGES OF SMALL-SCALE RETAILERS

Situated very close to the consumers – they move around with their goods and services and sometimes offer door-to-door sales to consumers. Those that are in fixed shops are also located very close to the consumers.

Sells in small unit – there goods are offered in small units and it allows the consumer the convenience of buying exactly as he can afford or as he requires afford the present consumption.

Offers credit facilities to consumers – since he is located very close to the consumers, those who don’t have money to satisfy their wants are sometimes offered goods in credits.

Usually provides after-sales services – their business with consumers doesn’t end during the transaction stage as they also offer repairs for damaged goods and services and provide consumers with guidelines to further enhance the efficiency of their goods.

Small amount of capital is needed to operate this business - since he sells in small units to the consumer, small amount of capital is needed to start up the business and the products can be of any type.

LARGE-SCALE RETAILERS

They carry on their business on large scale and sometimes buying in bulk from the producer. Examples of large-scale retailers include:

Departmental stores – this comprises of different shops or departments in the same building. Different shops offer different goods and services but the whole shops are owned by the same person. Examples include Olivant, Leventis, U.A.C and G.B. Each department is headed by a departmental manager.

Multiple shops or chain stores – it is a large unit of shops under the same ownership which are set up in different part of the town or city.  Each shop is headed by a manger, and an area manager that controls all the shops in a given area. They are of two types, those that specialize in one type of goods (e.g. Bata shoe shop) and those that sell different kinds of goods (e.g. U.A.C). Those that sell different kinds of good are called variety chain store.

Supermarkets – they are self-service shops. This is because customers enter the shop and chose whatever they want from the shop and pay at the counter. Goods are speciously and neatly arranged on shelves, and they are marked with their respective prices. Trolleys or baskets are also provided for customer to collect the goods they want to buy. Example is Shoprite, The Game and Albertino stores

Co-operative shops – they are owned by co-operative societies who buy goods in bulk and sell in retail to the member of the society. Their main aim is to carter for the interest of the members of the society. They usually sale different kinds of goods, and offer credit facility to their members.

ADVANTAGES OF LARGE-SCALE RETAILERS

Offer wider range of goods than small-scale retailers - consumers are provided with wider choices from their vast network of goods as large-scale retailers stock a variety of goods ranging from foodstuffs to hardware.

Offer lower prices than small-scale producers – since they buy in bulk, their retail prices are usually lower than small scale-retailers.

Usually have wider market – because of its wide businesses and goods offered, large-scale retailers tend to have wider number of market (higher customers).

Enjoy economies of large scale production – there are for example economies in advertisement and distribution. He can afford to advertise on large scale or distribute goods to different people at the same time, thus increase his sales and profit.

Offer opportunity for window shopping – as a result of the neat, spacious and price tag arrangement of their goods in shelves, consumers can come around and window shop (look at goods and their prices) without actually buying them. This allows them to compare prices with other shops before making their purchase.

CONSUMERS

The consumers provide the market for goods and services. They are the ultimate buyer of the commodities produced by a manufacturer. Without, the production process would be complete as producers and retailers will not be able to sale their produced goods and services.

ROLE OF GOVERNMENT AGENCIES IN PRODUCT DISTRIBUTION IN NIGERIA

THE N.N.S.C

The Nigerian National Supply Company Limited was set up in 1872 to help private effort in product distribution, thereby helping to reduce the rate of inflation brought about by the scarcity of essential commodities in the country.

As a means of reducing price, the organization sometimes embarks on large-scale importation to reduce the scarcity of important goods. It supplies those important commodities such as rice, milk, sugar, salt, tomatoes etc. the commodities handled by the N.N.S.C  are distributed through the following networks:

1.      Co-operative associations and ministries of co-operatives.

2.      Federal government munities, state ministries, government companies, and other establishments.

3.      Private firms with high number of employees (e.g. Dangote group).

4.      Appointed distributors.

5.      Direct sales to members of the public.

PROBLEMS OF DISTRIBUTION AND MARKETING OF COMMODITIES IN WEST AFRICA

Poor transportation – some of the West African communities are not accessible due to bad road networks and this limits the possibility of reaching out to them in order to satisfy their needs and advertise commodities.

Imperfect nature of market due to inadequate information – as a result of poor means of communication and high illiteracy, producers find it difficult to contact the consumers and sometimes when they are contacted, they can’t vividly decode the advertisement message. Thus, this limits the level of distribution and marketing of commodities.

Numerous middlemen – the high number of middle men increase the price of commodities as since most of the West African families are low income earners, an increase in the price of commodity brought about by middlemen reduces their purchase intention as they can’t easily afford these goods.

Inadequate credit facilities – many West African retailers lack the capital to carry out large-scale retailing and they are not provided with credit facilities to make such possible. This reduces the extent of distribution and market of commodities which would have been possible if they were provided with such credit facilities.

Inadequate storage or warehousing facilities – most of the retailers in the rural areas don’t have enough warehouses for stocking goods. Thus, they must finish selling their current goods before making order for new ones. This limits the level of distribution and marketing of commodities in these areas.

MONEY

Money can be used to describe nay commodity which is generally acceptable in a community as payment for goods and services or for settlement of debts.

HISTORICAL DEVELOPMENT OF MONEY

TRADE BY BARTER

This is the form of exchange used before the introduction of money. In this type of exchange, goods and services are exchanged for equivalent goods and services. For instance, a farmer can exchange Yam for Maize with another farmer.

PROBLEMS OF TRADE BY BARTER

The problem of double coincidence of want – this is a big issue with trade by barter and it means that in order for exchange to take place, there must be two people who have what each other needs. For instance, in order for a farmer to exchange yam for maize, he must look for another person who has maize and is willing to exchange it for yam.

Problem of rate of exchange – since the exchange process involves exchanging goods and services for each other, there is a problem of standard rate of exchange. In this case, one person is always at the advantage of benefiting more while the other is on the disadvantage of losing more.

Problem of indivisibility of some goods to be exchange – in the case where a bulky good is to be exchange for a smaller one, problem of indivisibility exist. For instance, if a farmer who has cow needs pepper, the cow cannot be broken into smaller parts to find the right value for exchanging it with pepper.

Problem of storage or saving – goods and services were hard to store because the value can depreciate over time. For instance, if a farmer exchanged his yams for some parts of a cow, he cannot store the meat for a long time and as such is impossible to use the meat to exchange for another good within a long period of time.

Problem of moving bulky goods – since the means of transportation which we have today was not available during that period, people faced the problem of transporting bulky goods from one place to another for exchange. For instance, is a cocoa farmer in Cross River wanted to exchange his cocoa for yams with another farmer in Enugu, the lack of transportation makes this difficult.

TYPES OR FORMS OF MONEY

As a result of the problems of trade by barter discussed above, money was introduced to make exchange easer.

OLD FORM OF MONEY

The first form of money introduced in West African countries include beads, cowries, slaves, elephant trunks, cows, salts, shells, manilas and bars of metal. Although this form of money can be considered better than trade by barter, there was a case of valuation issues as cows can be of different sizes, slaves can perform different functions and salts are easily available in some parts of the world.

NEW FORM OF MONEY

COINS

This form of money is produced with metals such as zinc, gold, diamond, silver and copper. Coin is of two types: standard coins and token coins. A standard coin is the type that has actual value of the coin written on it, while a token coin doesn’t have the actual value of the coin written on it.

BANK NOTES

Coins had the issue of bulkiness and heavy to transport when they are in huge value and bank notes where introduced to help solve this issue. Banks notes are paper money that are issued by the central bank and contains the actual value written on the note. Bank notes can sometimes be backed by gold. A process whereby a bank note is backed by gold is known as fiduciary issue, and a country that has all its bank notes backed by gold id said to be living on gold standard.

BANK DEPOSIT

This is a form of money contained in a savings account of the owner and deposited in the bank. It can earn value for the owner depending on the duration in which the money is deposited without being used.

QUASI-MONEY OR NEAR FORM

These include bills of exchange, promissory notes, money order, postal orders and cheques. They are not real money, but can sometimes be used to represent a value of exchange. However, people are not compelled by law to accept this as a means of exchange because they are not legal tender. A legal tender is any commodity which people are compelled by law to accept as a means of exchange.

 QUALITIES OF GOOD MEANS OF EXCHANGE

Acceptability – the commodity to be used as a means of exchange must be acceptable in the place where it is used as a form of payment or settlement of debt. Everybody in the place where it is used must be confident that it will be acceptable as a means of exchange.

Homogeneity or standard unit – the commodity must be made from unique materials with similar shapes, colour, size and weight, and should have a standard for which it will be used for exchange.

Divisibility – the commodity must be easily divisible in order to be used for payment of good with smaller value. This was the problem of trade by barter as divisibility is not possible. For instance, the Nigerian currency is divided into Naira and Kobo and each of them can be used for payment of any form of goods or services.

Relative scarcity – the commodity to be used for exchange must be relatively scarce or people will use bulky amount of it to exchange small valued goods. However, it should not be too scarce or it will be hard to be used for exchange of small valued goods.

Portability – the commodity must be easily transmissible and transportable from one location to another.  This is to ensure that the owners are capable of using it to exchange for goods or services in any part of the communities where it is acceptable.

Stability of value – the commodity must have a stable value that doesn’t fluctuate over a long period of time. This will make savings easier as people will know that the commodity maintains the same value for a long period. This was the problem of diamond and gold as their values tend to change over time.

Durability and cheap maintenance – the commodity must be capable of being kept for a long time without spoiling or damaging. It must be capable of withstanding rough-handling for sometimes. This will ensure that the value does not change and loses does not occur.

Recognisability – the commodity must be easily recognizable in the communities where it is being used and should not be similar to any other commodity in order to remove the possibility of mistaking it with that commodity.

FUNCTIONS OF MONEY

It serves as a medium of exchange - because of its standard value, money is used to exchange goods and services. It is accepted as a means of payment for goods and services in any part of the community where it is used.

It serves as a unit of account – since money is used for exchange and payment, it can represent the unit of goods and services in the form of receipt and invoice. As such, the actual value of a commodity can be determined by invoicing it.

It serves as a measure of value – money can be used to measure the value of a commodity over others. For instance, if two shoes cost $20 and $30 each, it can easily be believed that the shoe which costs $30 has higher value. The reason is because money has standard value.

Money can be used as a store of value – the goods and services that cannot be fully consumed at present can be sold and stored in monetary value in savings account with banks. The value can also increase over time if the money if stored in fixed deposit accounts.

It can be used for deferred payment – money acts as a standard for deferred payment because people are compelled by law to accept it. As such, it can be used to settle debts owed to people.

DIFFERENCES AND SIMILARITIES BETWEEN MONEY AND OTHER COMMODITIES

SIMILARITIES

1.      Money is needed like order commodities for satisfying human wants.

2.      Both money and other commodities are assets and can be stored for future use.

3.      Both of them have price and value that if influenced by the factors of demand and supply.

4.      Both of them have recognizable markets where it can be bought or sold.

DIFFERENCES

1.      Money is used as a medium of exchange while other commodities don’t perform this function.

2.      Money can be used as a unit of account and measure of value while other commodities cannot be used for such.

3.      Money can be used effectively used as a standard for deferred payment while other commodities cannot be used for such.

4.      Since money is durable, it can be used as a store for value but other commodities cannot be used for such.

5.      Money doesn’t have any intrinsic value and as such is not required for it sake but other commodities can be required for it sake.

DIFFERENCE BETWEEN CHEQUES AND BANK NOTE

Bank notes have already been defined as money issued by commercial banks which people are compelled by law to accept as a means of exchange. Cheques on the order hand are written order made by a current account owner (drawer) to the bank (payer), demanding the payment of specified amount of money to the bearer or person whose name is written on the cheque (payee), from drawer’s current account deposit.

DIFFERENCES

1.      Cheques are issued by commercial banks while bank notes are issued by central banks.

2.      Cheques are not legal tender and as such people are not compelled by law to accept it as a medium of payment while bank notes are legal tenders.

3.      Cheques are not easily acceptable as means of payment while bank notes are widely acceptable.

4.      Cheques are an easier means of carrying about large value of money and they are not easily stolen.

5.      Cheques doesn’t guarantee payment because the money to be paid depends on the amount in the owner’s account, while bank notes guarantee payment.

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