ATTEMPT ALL QUESTIONS ON THE CONCEPT OF ELASTICITY ASSIGNMENT

1      Mention any four circumstances where the concept of price elasticity of demand is being applied in your country (4 mks)

2    (a) What is meant by the term price elasticity of demand? (1 mk)

(b) Mention any three factors which determine the elasticity of demand for a commodity (3 mks)

3. The cross elasticity of demand between two commodities x and y is 2. An increase in the price of y to sh.1000 caused an increase in demand for commodity x from 10 kg to 20 kg.

(a) Determine the original price

(b)Identify the relationship between the two commodities x and y (1 mk)

(c)State the degree of elasticity of elasticity of demand in the above question (1 mk)

4. What is the importance of price elasticity of demand to a producer? (4 mks)
5. (a)Explain why the price elasticity of demand is always negative (2 mks)

(b) What is the relevancy of price elasticity of demand to the government? (2 mks)

6. (a) Define the term ‘income elasticity of demand’ (1 mk)

(b) Given that an individual’s income increased from sh.100, 000 to sh.160,000 per month and this led to an increase in the demand for a commodity by 10%. Calculate the income elasticity of demand (3 mks)

7. Given that an individual’s income increased from sh.5,000 to sh.15,000 per month and this resulted into a change in demand for commodity A by -30%. (a)Calculate the income elasticity of demand for commodity A (2 mks)

(b) What type of commodity is A? Give a reason for your answer (2 mks)

8. (a) calculate the cross elasticity of demand if the price of a commodity Y falls from ug sh.200,000 to ug sh.160,000 per unit and the quantity demanded of commodity Z increases from 20,000 to 30,000 units (3 mks)

(b) State the relationship between commodities Y and Z (1mk)

9. (a)If the price of a given commodity increases from sh.20,000 to sh.22,000 and this results into an increase in the quantity supplied of that commodity from 50kg to 60 kg; calculate the price elasticity of supply. (3 mks)

(b) State the degree of elasticity of supply( 1mk)