Gce Model Questions Vol1 2017 Economics Question 3

Practice essay / theory question 3 from the 2017 Gce Model Questions Vol1 Economics examination. This question covers Elasticity .

Gce Model Questions Vol1 2017 Economics Essay / Theory

Topic: Elasticity

Question 3 GCE_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • essay

The market for bottled water in Nigeria is competitive. The price of bottled water increased from ₦150 per litre to ₦180 per litre, and as a result the quantity demanded fell from 12,000 litres per month to 9,600 litres per month. At the same time, the price of a close substitute, sachet drink, fell from ₦100 to ₦85 per litre, leading to an increase in its quantity demanded from 8,000 to 10,000 litres per month.

Question Parts

( a )

Calculate the price elasticity of demand for bottled water using the midpoint (arc) method.

( b )

Calculate the cross‑price elasticity of demand for bottled water with respect to the price of sachet drink, using the midpoint method.

( c )

Based on the elasticities obtained, discuss how a firm producing bottled water should respond in terms of pricing and product strategy.

( d )

Explain two possible reasons why the demand for bottled water might be relatively elastic in this market.

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About This Question

This is Gce Model Questions Vol1 2017 Economics Question 3. It is one of the essay questions from the 2017 Gce Model Questions Vol1 Economics examination.

The question covers Elasticity .

View More Gce Model Questions Vol1 2017 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

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