Observation

This question was attempted by few candidates. The candidates were required to define elasticity of demand and explain price, cross and income elasticities of demand in the (a) and (b) parts of the question respectively. Candidates were also required to use appropriate diagrams only to explain unitary elastic, perfectly inelastic and infinitely elastic supply in the (c) part of the question. Most of the candidates were able to define elasticity of demand correctly in the (a) part of the question; they were however unable to correctly explain price, cross and income elasticities of demand in the (b) part of the question. Most of the candidates were unable to use appropriate diagrams to illustrate unitary elastic, perfectly inelastic and infinitely elastic supply in the (c) part of the question. Candidates’ performance was poor in this question.

Candidates were expected to provide the following answer to score maximum marks in this question.

(a)        Elasticity of demand is the degree of responsiveness of quantity demanded to a change in             any of the variables that affect demand such as the price of a commodity, income and so
on.

(b)        (i) Price elasticity of demand measures the degree of responsiveness of quantity
demanded of a commodity to a change in the price of that commodity.

(ii) Cross elasticity of demand measures the degree of responsiveness of quantity
demanded of a commodity to a change in the price of related commodities.

            (iii) Income elasticity of demand measures the degree of responsiveness of quantity    
demanded of a commodity to a change in the income of consumers.     

(c)(i)                                                         

(ii)

(iii)