The question (15 marks)
Define elasticity of demand and explain its kinds and degrees. How is price elasticity measured, and of what use is the concept to a Government framing tax policy and to a firm setting prices? (15 marks)
Standing MU question on Module 1 head 2. Built from chapter 02 and worked examples 1 and 2.
Plan your answer on paper before you look at the authorities — issue first, then the rule, then apply it to these facts.
It tests Unit 1 · Foundation of Economics of Economics.
Authorities you will need
- Price elasticity of demand = percentage change in quantity demanded ÷ percentage change in price
- Competition Act 2002, ss. 2 and 4, on the relevant product market and abuse of dominance
How an answer is marked
A full-marks answer names the issue in one line, states the rule with its section, cites the authority, applies it to these facts and concludes — in that order. The app's model answer for this question is written in exactly that shape, with a checklist to mark your own attempt against.