(a).Using diagrams explain why firms do not immediately go out of business if total

revenue fails to cover total costs of production.[8 marks]

(b).The price and income elasticity of demand is an important concept for any

businessmen and every government in their decision making.

You have been appointed as the Manager of a small and medium

enterprise.

Explain how the knowledge of price elasticity and income

elasticity of demand can be of use to you. Use illustrative examples to

support your answer.[12 marks]