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JAMB Economics 1986 Question 18

Question 18

Elasticity

Use the table below to answer this question.
Market Demand Schedule for Commodity X.
Price (₦) | Quantity (million units)
60 | 100
50 | 140
40 | 220
30 | 260
20 | 300
10 | 340
The revenue accruing to the seller of commodity X as a result of a fall in price will

  1. A.increase
  2. B.fall
  3. C.first fall but will increase later
  4. D.remain unchanged.
Show the answer and explanation

Answer: B (fall)

Explanation

At ₦40 revenue is 40 × 220 = ₦8,800 million; at ₦30 it is 30 × 260 = ₦7,800 million. Demand is inelastic here, so revenue falls.