IGCSE Economics Paper-1: Specimen Questions with Answers 46 - 47 of 64

Question 46

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Question

MCQ▾

At a price of Rs. 300, a fiction novel production house is expected to sell 10,000 copies. If the novel is offered for sale at a price of Rs. 275, then the publisher can expect to sell

Choices

Choice (4)
a.10,000 copies
b.More than 10,000 copies
c.Not possible to predict
d.Less than 10,000 copies

Answer

b.

Explanation

  • At a price of Rs. 300, production house is selling 10,000 copies, when a discount is offered to customers at Rs. 25 less than the market price the sales of the novel will increase because of the inverse relationship between the price of a commodity and demand for the product.
  • The consumers to increase their consumer surplus always want to buy at the lowest price to get the maximum utility. On discount being offered by the seller, production house would ultimately observe an increase the sales of the novel.

Question 47

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Question

MCQ▾

Calculate the elasticity of demand, if 4 % increase in price results in a 12 % decrease in quantity demanded:

Choices

Choice (4)
a.
b.6
c.2
d.3

Answer

a.

Explanation

  • The degree of responsiveness of the quantity demanded of a commodity varies and elasticity is a measure of such responsiveness. Thus, the law of demand describes the relation between price change and quantity change.
  • The elasticity of demand quantifies such changes and gives us an accurate measure of how consumers respond to price change.
  • Elasticity of demand indicates the magnitude of such change
  • The price elasticity of demand is calculated as the percentage change in quantity demanded divided by a percentage change in price. So, the answer will be (12/4)

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