Gce Model Questions Vol1 2017 Economics Question 22

Practice objective / multiple choice question 22 from the 2017 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2017 Economics Objective / Multiple Choice Medium Difficulty
Question 22 GCE_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

When the price of a product rises from £30 to £36, quantity demanded falls from 500 units to 400 units. (a) Calculate the price elasticity of demand between these two points using the midpoint formula. (b) Indicate whether total revenue increases, decreases or remains unchanged as price rises. (c) Advise the firm on how to change price to increase total revenue.

Answer Options

A. Elasticity ≈ -0.85; total revenue falls; firm should lower price
B. Elasticity ≈ -2.00; total revenue falls; firm should keep price unchanged
C. Elasticity ≈ -1.22; total revenue rises; firm should raise price
Correct Answer D. Elasticity ≈ -1.22; total revenue falls; firm should lower price
Correct Answer
D
Correct Option:
Elasticity ≈ -1.22; total revenue falls; firm should lower price

About This Question

This is Gce Model Questions Vol1 2017 Economics Question 22. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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