WAEC Economics 2021 Theory — Question 19

Model answer

(i) Elastic demand: the demand curve is relatively flat. When price falls, the percentage increase in quantity sold is larger than the percentage fall in price, so the revenue gained from extra sales outweighs the revenue lost from the lower price — total revenue increases. (ii) Inelastic demand: the demand curve is relatively steep (close to vertical). When price falls, the percentage increase in quantity sold is smaller than the percentage fall in price, so the revenue lost from the lower price outweighs the revenue gained from extra sales — total revenue falls.