Question 1

Observation

This is one of the data response questions and was quite popular among candidates, most of whom performed slightly above average. The question required the candidates to calculate the total revenue, price elasticity of demand and the relationship between total revenue and the elasticity coefficients calculated in the (a), (b) and (c) parts of the question. Most candidates were able to calculate the total revenue and price elasticity of demand but only few were able to identify the relationship that exists between the two variables in the (c) part of the question.

The candidates were expected to provide the following answers to score higher marks.
(a) Total Revenue = Price x Quantity
TR1 = \$5.00 x 60 = \$300.00
TR2 = \$10.00 x 50 = \$500.00
TR3 = \$15.00 x 40 = \$600.00
TR4 = \$20.00 x 30 = \$600.00
TR5 = \$25.00 x 20 = \$500.00
TR6 = \$30.00 x 10 = \$300.00
(b) (i)  When price changes from \$5.00 to \$10.00
P1 = \$5.00                    Q1 = 60
P2 = \$10.00                  Q2 = 50
Δ P = \$5.00                 ΔQ = -10

(c)        (i)         Demand is inelastic.
(ii)        Demand is elastic.

(d)       If demand is inelastic, as shown in (b)(i), TR increases from\$300.00 to \$500.00 as price

Increases from \$5.00 to \$10.00.OR TR decreases from\$500.00 to \$300.00 as price falls from \$10.00 to \$5.00.
If demand is elastic, as shown in (b)(ii), TR decreases from \$500 to \$300 as price   increases from \$25.00 to \$30.00. OR TR increases from\$300.00 to \$500.00 as price   falls from \$30.00 to \$25.00