Question 4 [25]
4.1.
What do elasticities for supply and demand describe? As an example, describe in detail
what the price elasticity of demand measures.
(4)
4.2.
Suppose that the daily demand for Pepsi-Cola in South Africa can be represented by
the following equation: $Q_D = 175\,000 - 25\,000P$
Complete the following table by filling in the required values in the shaded spaces.
Round off the values to three (3) decimal places where applicable.
(7)
Price
Price
Price (P) Quantity ($Q_D$)
elasticity
elasticity
using the
using the
midpoint
normal point
formula
method
Total revenue
0
0
0
1
0.167
2
250 000
3
100 000
4
75 000
4.3. Suppose that the income elasticities of demand have been estimated as follows:
\begin{itemize}
\item Television sets: 1.3
\item Corned beef: 0.4
\item Exclusive restaurant dinners: 2.5
\item Retreaded tyres: -0.8
\item Second-hand clothing: -1.5
\end{itemize}
