Neco 2017 Economics Question 3

Practice essay / theory question 3 from the 2017 Neco Economics examination. This question covers Elasticity, Revenue .

Neco 2017 Economics Essay / Theory

Topics: Elasticity Revenue

Question 3 NECO • 2017 • ECONOMICS • essay

A local bakery sells loaves of bread. When the price of a loaf increased from \(\text{₦}200\) to \(\text{₦}250\), the quantity demanded fell from 500 loaves per week to 380 loaves per week.

Question Parts

( a )

Calculate the price elasticity of demand (PED) using the midpoint (arc) method. Show all steps.

( b )

Classify the elasticity (elastic, inelastic, or unit‑elastic) and explain what this classification implies for the bakery’s total revenue when price changes.

( c )

If the bakery wishes to increase its total revenue, should it raise or lower the price? Justify your answer using the elasticity result.

( d )

Suppose the bakery can reduce its variable cost per loaf by \(\text{₦}20\) through a new supplier. Discuss how this cost reduction might affect the bakery’s pricing decision in light of the elasticity you have computed.

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About This Question

This is Neco 2017 Economics Question 3. It is one of the essay questions from the 2017 Neco Economics examination.

The question covers Elasticity, Revenue .

View More Neco 2017 Economics Questions More Neco Practice Questions Back to Questions

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