Neco Model Questions Vol1 2019 Economics Question 3

Practice essay / theory question 3 from the 2019 Neco Model Questions Vol1 Economics examination. This question covers Elasticity, Price elasticity of demand, Revenue, Tax incidence, Cross‑price elasticity .

Neco Model Questions Vol1 2019 Economics Essay / Theory
Topics: Elasticity Price elasticity of demand Revenue Tax incidence Cross‑price elasticity
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • essay

The table below shows the quantity demanded of a certain good at three different prices in a competitive market. | Price (₦) | Quantity demanded (units) | |-----------|---------------------------| | 100 | 500 | | 120 | 400 | | 150 | 300 | Using the information above, answer the following:

Question Parts

( a )
Calculate the price elasticity of demand between the first two price points using the midpoint method.
( b )
Suppose the government imposes a specific tax of ₦20 per unit on this good. Assuming the price elasticity you calculated remains constant, estimate the percentage change in quantity demanded and discuss the likely impact on tax revenue.
( c )
If the good has a positive cross‑price elasticity of 0.5 with respect to another good, interpret this relationship and explain how a 10 % increase in the price of the other good would affect demand for the original good.

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About This Question

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

The question covers Elasticity, Price elasticity of demand, Revenue, Tax incidence, Cross‑price elasticity .

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