WAEC Economics 2012 Theory — Question 6

Model answer

(a)(i) Elasticity of demand refers to the degree of responsiveness of quantity demanded of a commodity to a change in one of the determinants of demand. (ii) Price elasticity of demand is the degree of responsiveness of quantity demanded of a commodity to a change in the price of the commodity. (b) Determinants of price elasticity of demand: (i) Availability of substitutes, (ii) proportion of income spent on the commodity, (iii) necessity/luxury nature of the good, (iv) time period considered. (c) (i) A fairly elastic demand curve is a relatively flat (gently sloping) downward curve on a price-quantity graph. (ii) A perfectly inelastic demand curve is a vertical straight line on a price-quantity graph, showing that quantity demanded does not change regardless of price.