Gce Model Questions Vol1 2018 Economics Question 3

Practice essay / theory question 3 from the 2018 Gce Model Questions Vol1 Economics examination. This question covers Elasticity, Price elasticity of demand, Total revenue .

Gce Model Questions Vol1 2018 Economics Essay / Theory
Topics: Elasticity Price elasticity of demand Total revenue
Question 3 GCE_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • essay

A firm sells a single product. The following data show how the quantity demanded of the product varies with its price, assuming all other factors remain constant. | Price (₦ per unit) | Quantity demanded (units) | |--------------------|---------------------------| | 100 | 5,000 | | 150 | 3,500 | The firm is currently charging ₦120 per unit and is contemplating raising the price to ₦140 per unit. Answer the following:

Question Parts

( a )
Calculate the price elasticity of demand between the two price‑quantity points using the midpoint (arc) method. Show all steps.
( b )
Classify the demand as elastic, unit‑elastic or inelastic based on the elasticity calculated in part (a).
( c )
Using the elasticity obtained in part (a) and the linear demand relationship implied by the data, estimate the percentage change in total revenue if the price is increased from ₦120 to ₦140. State whether total revenue is likely to rise or fall and give a short justification.
( d )
Discuss two non‑price factors that could affect the price elasticity of demand for this product. For each factor, explain how a change would likely shift the elasticity towards a more elastic or a more inelastic response.

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About This Question

This is Gce Model Questions Vol1 2018 Economics Question 3. It is one of the essay questions from the 2018 Gce Model Questions Vol1 Economics examination.

The question covers Elasticity, Price elasticity of demand, Total revenue .

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