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ECS2601 EXAM PACK 2023
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ECS2601EXAM PACK
2023
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This paper consists of questions 1 to 50 which are multiple choice questions (MCQ)
1. Use the diagram below to answer the question that follows;
At equilibrium, the price elasticity of supply is
given by;
[1] 2.
[2] 1.
[3] 2.5.
[4] 3.
Explanations:
Point elasticity is the price elasticity of demand at a specific point on the demand curve instead of
over a range of it.By using the point elasticity formula we can get 2 ; 𝑃𝐸𝑆 = 𝛥𝑄𝑠/𝛥 × p/qs
2. The following table shows the demand elasticities for fish and chips. Use the information in
the table to answer the question below. Remember: CPED is the cross-price elasticity of
demand; YED is the income elasticity of demand, and PED is the price elasticity of demand.
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CPED of chips with respect to fish - 0,8
YED Chips 0.3
YED fish 1.4
PED fish 1.7
PED Chips 0.1
From the table above, we can conclude that:
[1] Chips and fish are complements.
[2] Chips is an inferior good.
[3] The price elasticity of demand for fish is inelastic.
[4] The price elasticity of demand for chips is elastic.
Explanation; A complementary good or service is an item used in conjunction with another good or
service. Usually, the complementary good has little to no value when consumed alone, but when
combined with another good or service, it adds to the overall value of the offering.
3. Which of the following is correct regarding tax incidence?
[1] Sellers pay the full tax incidence when demand is perfectly elastic.
[2] Buyers pay the full tax incidence when demand is perfectly inelastic.
[3] Buyers pay the full tax incidence when supply is perfectly inelastic.
[4] Sellers pay the full tax incidence when supply is relatively elastic,
Explanation
The tax incidence depends on the relative price elasticity of supply and demand. When supply is
more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than
supply, producers bear most of the cost of the tax. Tax revenue is larger the more inelastic the
demand and supply are.
4. The market demand curve is given by = 𝑎 − 𝑏𝑄𝑑 . Which of the followings is correct with
regard to total revenue?
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