Neco 2017 Economics Question 38
Practice objective / multiple choice question 38 from the 2017 Neco Economics examination.
Country X imports a good for which the import price is \( P = 20 \) Naira per unit and the price elasticity of import demand is \( \varepsilon_{M} = -0.5 \). The same country exports a good with an export price of \( P^{*} = 30 \) Naira per unit and the price elasticity of export supply is \( \eta_{X} = 0.8 \). The government imposes a specific tariff of 2 Naira per imported unit. Assuming the country initially has a balanced trade (value of imports equals value of exports) and that the small‑change approximation holds, estimate the percentage change in the terms of trade (TOT = \( P^{*}/P \)).
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About This Question
This is Neco 2017 Economics Question 38. It is one of the objective questions from the 2017 Neco Economics examination.
Difficulty level: Hard .
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