This is the alternative data response question to question 1 and it was attempted by few candidates, majority of whom scored below average marks. The question required candidates to calculate the income elasticity of demand in the (a) part, determine with a reason if demand is elastic or inelastic in the (b) part, identify the kind of good beef is to Mr. Koffi and give a reason for the answer in the (c) part and highlight any three factors that influence price elasticity of demand in the (d) part of the question. Few of the candidates were able to calculate the income elasticity of demand in the (a) part, majority were unable to determine if demand is elastic or inelastic and identify the kind of good beef is to Mr. Koffi in the (b) and (c) parts respectively. Most of the candidates stated the factors that influence demand instead of price elasticity of demand, the few who were able to give the factors that influence price elasticity of demand did not explain further in the (d) part.
The candidates were expected to provide the following answers to obtain the maximum    mark

(a)

(b)       Demand is inelastic because the coefficient of elasticity of demand is less than 1.

(c)        Beef is a normal good/necessity to Mr. Smith because as his income increases, his demand for beef also increases.

(d)       Factors that affect price elasticity of demand
(i)    Habit: When one forms a habit of consuming a commodity, a change in the price of that commodity will most likely not affect the demand for such commodity. The demand tends to   be inelastic. When no habit has been formed, demand is elastic.

(ii)   Close substitutes of a commodity: A slight increase in the price of a commodity with close substitutes will make people switch over to the substitutes hence the demand will be elastic. If a commodity has no substitutes, demand is inelastic.
(iii)  The degree of necessity of the commodity: The demand for a commodity that people cannot  do without is inelastic. If the commodity is not a necessity, its demand is elastic.

(iv)  The number of uses a commodity has: This affects elasticity of demand in the sense that a commodity with several uses has elastic demand, but a commodity with only one use has inelastic demand.
(v) Proportion of income spent on the commodity/Size of consumers’ incomes: If the  proportion is small, the demand is inelastic and if the proportion is large, the demand for the good tends to be elastic.

(vi)  Nature of the product: If a product is highly durable, its demand is inelastic. Non-durable goods have elastic demand.

(vii)Time period: Demand is inelastic in the short-run, but elastic in the long-run.