Gce Model Questions Vol1 2021 Economics Question 3

Practice essay / theory question 3 from the 2021 Gce Model Questions Vol1 Economics examination. This question covers Elasticity .

Gce Model Questions Vol1 2021 Economics Essay / Theory
Topic: Elasticity
Question 3 GCE_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • essay

A small manufacturing firm sells a single product. The table below shows the quantity of the product demanded at two different market prices. | Price (₦) | Quantity Demanded (units) | |-----------|---------------------------| | 200 | 500 | | 250 | 400 | Using this information, answer the following questions.

Question Parts

( a )
Calculate the price elasticity of demand between the two price points using the midpoint (arc) method. State whether demand is elastic, inelastic or unit‑elastic and justify your answer.
( b )
The government imposes a specific tax of ₦50 per unit on this product. Assuming the full amount of the tax is added to the price paid by consumers, predict the effect of the tax on total revenue and explain your reasoning using the elasticity calculated in part (a).
( c )
If consumer income rises by 10 % and the income elasticity of demand for the product is 1.5, estimate the percentage change in quantity demanded and discuss the likely impact on the firm’s sales strategy.

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About This Question

This is Gce Model Questions Vol1 2021 Economics Question 3. It is one of the essay questions from the 2021 Gce Model Questions Vol1 Economics examination.

The question covers Elasticity .

View More Gce Model Questions Vol1 2021 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

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