This is one of the data response question and it was attempted by most candidates. The question required the candidates to calculate the price elasticity of demand for deep freezers, the change in total revenue of a dealer in deep freezers as price changes and to state some factors influencing price elasticity of demand. Most candidates were able to calculate the price elasticity of demand and change in revenue but only few of them were able to state the factors influencing demand as they mistook it for factors influencing demand. This prevented them from obtaining the maximum mark.
The candidates were expected to provide the following answers to score higher marks.

(ii)        Demand is price elastic because the coefficient is greater than 1.

(b) (i)   Total revenue before   = $450 x 800   = $360,000     
Total revenue after     = $500 x 600   = $300,000     
(ii)   Change in total revenue          = $360,000 - $300,000   = $60,000   
(c)        The firm’s revenue has fallen by $60,000 after the price increase.

(d) Factors influencing price elasticity of demand.
(i)         Availability of substitutes:
Commodities with close substitutes tend to have elastic demand while those without close substitutes have inelastic demand.
(ii)        Degree of necessity:
Necessities tend to have inelastic demand while luxuries tend to have elastic demand.
(iii)       Percentage of income spent on the commodity:
Commodities that take a very small percentage of consumers’ incomes tend to be price inelastic while those that take a very large proportion of one’s income tend to have elastic demand.         
(iv)       Habit or strength of consumer’s taste:
Goods which are habit-forming tend to have inelastic demand and vice versa.
(v)        Income of consumer:
Very high income earners tend to have inelastic demand for many goods while low income earners have elastic demand for many commodities.
(vi)       Time factor: In the short-run, most goods do not have substitutes and so demand is inelastic, but in the long-run when goods have substitutes, demand is elastic.
(vii)      Scope of definition of the good:
The broader the definition e.g. (food) demand is inelastic, but if the definition is narrow e.g. (yam) demand is elastic.
(viii)     Number of uses of the commodity:
If a commodity has several uses, demand is elastic, but if there is only one use demand is inelastic.
(ix)       Degree of durability:
If a commodity is durable, it has inelastic demand and vice versa.