Most candidates did not attempt this question and the few who did scored very low marks. There is the possibility that most of the candidates were not properly taught the related topics by their teachers. This question required that candidates wrote down the Iullowing details III Score the maximum marks.     

(a) An increase in output would decrease the sales revenue of a producer where demand is price inelastic. The explanation is as follows:
(i) An increase in output, grven demand, will reduce the price and increase the quantity demanded.
(ii) If demand is price inelastic, the increase in the quamitx demanded will be proportionately smaller than the reduction in the price.
(iii) Therefore sales revenue will decrease.

Illustration

A 40% fall in price is matched by a 10(1'0 Increase III quantity demanded i.e demand is price inelastic.

Period	Price	Quantity Demanded	Sales Revenue
	$		$
I	100	500	50.000
2	60	550	33.000

(b)   An increase in output would increase the sales revenue ora producer where the demand for the product is price elastic. The explanation is as follows:
(i)  An increase in output given demand will reduce the prrce and increase tile quantity demanded for the product.
(ii)   If demand is price elastic. the increase in the quantity demanded will hl' proportionately greater than the reduction in price.
(ii i) Therefore sales revenue will increase.

Illustration
A 10% fall in price is matched by a 40% Increase in quantity demanded i.e demand is price clastic.

Period	Price	Quantity Demanded	Sales Revenue
	$		$
1	100	500	50.000
2	90	700	63.000