Questions:
Elasticity
1. (a) Define ‘price elasticity of demand’ and explain how it is measured. (8)
(b) With the use of examples, explain why some products have a low price elasticity while others have a high elasticity. (8)
(c) If you were employed as an economist by a business, explain why a knowledge of the price elasticity of demand of your product would be useful.(9)
(Total 25 marks)
2. (a) What are the various factors that determine the value of (i) price elasticity of demand and (ii) income elasticity of demand? (12)
(b) Assess the importance of price elasticity and income elasticity of demand for business decision-making. (13)
(Total 25 marks)
3. (a) Explain the factors which influence price elasticity of supply. Illustrate your answer
with reference to the market for a commodity or raw material. (13)
(b) Discuss the importance of price elasticity of supply and price elasticity of demand for producers of primary commodities in less developed countries. (12)
