June 2022 Section A and B Feedback

Question 1

Increase in customers of a service will lead to, ceteris paribus

Answer 1

• Increase in revenue

Question 2

What will an increase of consumer demand show on a Supply and demand diagram

Answer 2

• Increase in demand

Question 3

Price elasticity of demand for sweetened drinks –1.37

Cross price elasticity of demand for bottled water
in response to a price change in sweetened drinks +0.63

A )The price of sweetened drinks increases by 5%. Ceteris paribus, calculate the
percentage change in the quantity demanded for sweetened drinks. You are
advised to show your working.

B) ) The price of sweetened drinks increases by 5%. Ceteris paribus, calculate the
percentage change in the quantity demanded for bottled water. You are advised
to show your working.

Answer 3

• Easy marks

Times the 5% by the elasticity figures
e.g For A, all you would do is 5 x 1.37 = 6.85
For B all you would do is 5 x 0.63

Question 4

(c) Using the data on page 4, which one of the following is most likely?

A decrease in the price of
sweetened drinks will have the
following effect on revenue:
Sweetened drinks and
bottled water are:

A ) Decrease Complements
B) Decrease Substitutes
C) Increase Complements
D) Increase Substitutes

Answer 4

D

Question 5

Externaltities diagram for production

Answer 5

• PRODUCTION IS SUPPLY CURVE
• MSC is greater than MPC