Gce Model Questions Vol1 2017 Economics Question 2

Practice essay / theory question 2 from the 2017 Gce Model Questions Vol1 Economics examination. This question covers Demand Curve, Supply Curve, Tax Incidence, Price Elasticity of Demand, Price Elasticity of Supply .

Gce Model Questions Vol1 2017 Economics Essay / Theory
Topics: Demand Curve Supply Curve Tax Incidence Price Elasticity of Demand Price Elasticity of Supply
Question 2 GCE_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • essay

The Nigerian government has introduced a 5 % tax on all mobile data bundles sold by telecom operators. Answer the following questions, using appropriate economic reasoning.

Question Parts

( a )
Explain how the tax will affect the demand curve, the supply curve and the resulting equilibrium price and quantity of data bundles in the short run.
( b )
Given that the price elasticity of demand for data bundles is –0.5 and the price elasticity of supply is 1.2, discuss which group – consumers or producers – bears a greater burden of the tax and why.
( c )
If the tax is removed after one year, predict the short‑run adjustments in price and quantity and discuss any possible lag in the market’s response.

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About This Question

This is Gce Model Questions Vol1 2017 Economics Question 2. It is one of the essay questions from the 2017 Gce Model Questions Vol1 Economics examination.

The question covers Demand Curve, Supply Curve, Tax Incidence, Price Elasticity of Demand, Price Elasticity of Supply .

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