Waec Model Questions Vol1 2023 Economics Question 3

Practice essay / theory question 3 from the 2023 Waec Model Questions Vol1 Economics examination. This question covers Elasticity, Price Elasticity of Demand, Revenue, Pricing Decision .

Waec Model Questions Vol1 2023 Economics Essay / Theory

Topics: Elasticity Price Elasticity of Demand Revenue Pricing Decision

Question 3 WAEC_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • essay

A firm produces a single product whose market demand is represented by the linear demand equation Q = 500 – 5P, where Q is the quantity demanded per month and P is the price in naira per unit.

Question Parts

( a )

Define price elasticity of demand and explain why it is important for a firm’s pricing strategy.

( b )

Using the demand equation, calculate the price elasticity of demand when the price is ₦40. Show all steps of your calculation and state whether demand is elastic, inelastic or unit‑elastic at this price.

( c )

The firm’s marginal cost (MC) is constant at ₦200 per unit. The firm is considering raising its price from ₦40 to ₦45. (i) Estimate the percentage change in quantity demanded using the elasticity calculated in part (b). (ii) Based on your estimate, state the expected change in total revenue and advise whether the firm should raise the price.

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About This Question

This is Waec Model Questions Vol1 2023 Economics Question 3. It is one of the essay questions from the 2023 Waec Model Questions Vol1 Economics examination.

The question covers Elasticity, Price Elasticity of Demand, Revenue, Pricing Decision .

View More Waec Model Questions Vol1 2023 Economics Questions More Waec Model Questions Vol1 Practice Questions Back to Questions

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