Neco Model Questions Vol1 2021 Economics Question 3

Practice essay / theory question 3 from the 2021 Neco Model Questions Vol1 Economics examination. This question covers Elasticity of demand, Taxation, Consumer welfare .

Neco Model Questions Vol1 2021 Economics Essay / Theory

Topics: Elasticity of demand Taxation Consumer welfare

Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • essay

The government is contemplating an increase in the excise duty on cigarettes from N50 per pack to N70 per pack. A recent market survey shows that when the price of a pack of cigarettes rises from N200 to N240, the quantity demanded falls from 2 million packs per month to 1.6 million packs per month.

Question Parts

( a )

Calculate the price elasticity of demand for cigarettes using the midpoint (arc) method.

( b )

Classify the demand for cigarettes as elastic, inelastic or unitary based on your result and explain what the classification implies for total revenue when price rises.

( c )

Discuss two likely effects of the proposed tax increase on (i) government revenue and (ii) consumer welfare.

( d )

Based on your analysis, advise whether the government should implement the tax increase. Provide two supporting arguments.

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About This Question

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

The question covers Elasticity of demand, Taxation, Consumer welfare .

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

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