waecE-LEARNING
Economics Paper 2, May/June 2010  
Questions: 1 2 3 4 5 6 7 8 9 10 11 12 Main
General Comments
Weakness/Remedies
Strength



































Question 3

With an appropriate illustration, explain the circumstance in which an increase ill output of a producer would
(a) decrease his sales revenue;
(b) increase his sales revenue.

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Observation

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

    

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