Neco Model Questions Vol1 2024 Economics Question 3

Practice essay / theory question 3 from the 2024 Neco Model Questions Vol1 Economics examination. This question covers Elasticity .

Neco Model Questions Vol1 2024 Economics Essay / Theory
Topic: Elasticity
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • essay

The table below shows the quantity demanded of a good at two different prices. | Price (₦ per unit) | Quantity Demanded (units) | |--------------------|---------------------------| | 40 | 500 | | 50 | 380 | In addition, a survey revealed that when consumers' average monthly income rose from ₦20,000 to ₦25,000, the quantity demanded of the same good increased from 380 units to 440 units. Using this information, answer the following:

Question Parts

( a )
Calculate the price elasticity of demand between the two price points using the midpoint (arc) method.
( b )
Interpret the sign and magnitude of the elasticity obtained in part (a). State whether demand is elastic, inelastic or unit‑elastic.
( c )
If the price of the good is increased by 10 % from the initial price of ₦40, estimate the percentage change in total revenue using the elasticity calculated in part (a). State whether total revenue will rise or fall.
( d )
Using the income data provided, compute the income elasticity of demand and classify the good as a normal or inferior good, and as a necessity or luxury.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Neco Model Questions Vol1 2024 Economics Question 3. It is one of the essay questions from the 2024 Neco Model Questions Vol1 Economics examination.

The question covers Elasticity .

View More Neco Model Questions Vol1 2024 Economics Questions More Neco Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support