Gce Model Questions Vol1 2019 Economics Question 3

Practice essay / theory question 3 from the 2019 Gce Model Questions Vol1 Economics examination. This question covers Elasticity, Price elasticity of demand, Income elasticity, Cross‑price elasticity, Interpretation of elasticity .

Gce Model Questions Vol1 2019 Economics Essay / Theory
Topics: Elasticity Price elasticity of demand Income elasticity Cross‑price elasticity Interpretation of elasticity
Question 3 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • essay

The table below shows the quantity demanded of a locally produced mobile phone (in thousands of units) at three different price levels, together with the corresponding consumer income (in thousands of Naira).

Question Parts

( a )
Using the midpoint method, calculate the price elasticity of demand between the price of ₦20 000 and ₦25 000.
( b )
Assuming consumer income rises from ₦50 000 to ₦70 000 while the price of the phone remains at ₦25 000, calculate the income elasticity of demand for the phone. Interpret the result in terms of the phone’s nature as a normal or inferior good.
( c )
The government is considering a 10 % increase in the tax on imported components used to manufacture the phone, which is expected to raise the phone’s price by about 5 %. Discuss how the price elasticity you calculated in part (a) should influence the government’s decision, considering both revenue implications and consumer welfare.

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About This Question

This is Gce Model Questions Vol1 2019 Economics Question 3. It is one of the essay questions from the 2019 Gce Model Questions Vol1 Economics examination.

The question covers Elasticity, Price elasticity of demand, Income elasticity, Cross‑price elasticity, Interpretation of elasticity .

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