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UI Post-UTME Economics 2025 (Model questions) Question 25

Question 25

Elasticity

The following statements relate to the concept of elasticity:
I. Cross price elasticity of demand is positive for substitute goods
II. The income elasticity of demand for inferior goods is negative.
III. Price elasticity of supply is higher in the long run than in the short run.
IV. Unit elastic demand means a price change causes no change in total revenue

  1. A.I, II and III only
  2. B.I and IV only
  3. C.II, III and IV only
  4. D.All of the above
Show the answer and explanation

Answer: D (All of the above)

Explanation

All four are true: substitutes have positive cross elasticity, inferior goods negative income elasticity, supply is more elastic in the long run, and with unit elasticity total revenue stays the same.