Neco Model Questions Vol1 2017 Economics Question 50

Practice objective / multiple choice question 50 from the 2017 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2017 Economics Objective / Multiple Choice Medium Difficulty
Question 50 NECO_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

The price of Good X is ₦150 and its quantity demanded is 800 units. When the price of Good Y rises from ₦100 to ₦130, the quantity demanded of Good X increases to 880 units. (a) Compute the cross‑price elasticity of demand of Good X with respect to the price of Good Y. (b) If a specific tax of ₦20 per unit is imposed on Good X and the own‑price elasticity of demand for Good X is -1.5, estimate the percentage change in quantity demanded of Good X resulting from the tax, using the approximation \(\Delta Q/Q \approx \varepsilon \;\Delta P/P\).

Answer Options

A. Cross‑price elasticity ≈ -0.33 (complements); quantity demanded falls ≈ 20 %
Correct Answer B. Cross‑price elasticity ≈ 0.33 (substitutes); quantity demanded falls ≈ 20 %
C. Cross‑price elasticity ≈ 0.50 (substitutes); quantity demanded falls ≈ 20 %
D. Cross‑price elasticity ≈ 0.33 (substitutes); quantity demanded falls ≈ 10 %
Correct Answer
B
Correct Option:
Cross‑price elasticity ≈ 0.33 (substitutes); quantity demanded falls ≈ 20 %

About This Question

This is Neco Model Questions Vol1 2017 Economics Question 50. It is one of the objective questions from the 2017 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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