Waec Model Questions Vol1 2018 Economics Question 38

Practice objective / multiple choice question 38 from the 2018 Waec Model Questions Vol1 Economics examination.

Waec Model Questions Vol1 2018 Economics Objective / Multiple Choice Medium Difficulty
Question 38 WAEC_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

The demand for a commodity is Q = 500 - 5P. The current market price is ₦40. The government imposes a tax that raises the price to ₦44. (a) Calculate the price elasticity of demand at the original price. (b) State whether total revenue will increase or decrease after the tax and compute the new total revenue.

Answer Options

Correct Answer A. Elasticity ≈ -0.67 (inelastic); Total revenue rises to 12,320 naira (increase of 320 naira)
B. Elasticity ≈ -1.20 (elastic); Total revenue falls to 11,200 naira (decrease of 1,200 naira)
C. Elasticity ≈ -0.45 (inelastic); Total revenue rises to 12,000 naira (increase of 100 naira)
D. Elasticity ≈ -0.80 (inelastic); Total revenue rises to 12,500 naira (increase of 500 naira)
Correct Answer
A
Correct Option:
Elasticity ≈ -0.67 (inelastic); Total revenue rises to 12,320 naira (increase of 320 naira)

About This Question

This is Waec Model Questions Vol1 2018 Economics Question 38. It is one of the objective questions from the 2018 Waec Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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