TUTORIAL QUESTIONS

TOPIC ELASTICITY

QUESTION 1

Refer to the table below and answer the following questions.

Price of Quantity demanded for Quantity demanded for Income per

Good A Good B Good C month
(RM) (RM)
2 1500 1000 5000
4 1200 800 3500
6 1000 600 2000
8 900 500 1400
10 800 400 1300
12 600 200 1000

a) Calculate the cross elasticity of demand for Good B when the price of Good A  
            increases from RM4 to RM10.

b) State the relationship between Good A and Good B.

c) Calculate the income elasticity of demand for Good C when income increases
from RM1400 to RM3500 per month.

d) Based on question (c), Good C then must be a/an _________ good.

QUESTION 2

The schedule below shows the relationship between the price of good X and the quantity
demanded for goods X and Y.

a) Calculate the price elasticity of demand for Good X if the price of X increases from
RM2.50 to RM3.00 per kg. State whether it is elastic or inelastic.

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b) Calculate the cross elasticity of demand for good Y when price of X decreases from
RM4.50 to RM4.00. What is the relationship between good X and Y?

c) Give any two (2) determinants of price elasticity of demand.

QUESTION 3

Price of Good X Quantity Demanded (units) Consumers’ Income/ Month

(RM/unit) (RM)

Good Good Good

X Y Z

1 100 1000 10 800

2 50 500 20 700

3 25 250 40 600

4 20 200 80 500

5 18 180 180 400

a) Suppose the price of Good X increases from RM2 per unit to RM4 per unit, calculate:

i) Price elasticity of demand for Good X. State whether demand is elastic or inelastic.

  (2.5 marks)

ii) Cross elasticity of demand for Good Y with respect to Good X.

  (2.5 marks)

iii) Cross elasticity of demand for Good Z with respect to Good X.

  (2.5 marks)

b) Calculate the income elasticity of demand for Good Z when the consumers’ income
increases from RM500 to RM700.

 (2.5 marks)

QUESTION 4

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Table below shows the weekly market demand and supply schedule of tomatoes in a free
market.

Price Quantity demanded Quantity supplied

(RM/kg) (,000 kg) (,000 kg)
4.00 30 80
3.50 35 68
3.00 40 62
2.50 45 55
2.00 50 50
1.50 55 45
1.00 60 38

a) Calculate the elasticity of supply when price of tomatoes increases from RM2.50 to
RM3.50 per kg.

b) The consumers’ incomes have increases from RM3000 to RM4000 per month and
quantity demanded of tomatoes increases from 45,000 kg to 55,000 kg. Calculate the
income elasticity of demand.