Economics

a. Define elasticity of demand. (2 marks)

O.

Explain five areas in which the concept of elasticity becomes useful to businesses and

governments. (10 marks)

According to a report, MTN's own price elasticity of demand for long distance services is -8.64. If

MTN lowered price by 3 percent, what would happen to the volume of long distance telephone

calls routed through MTN? (4 marks)

d. If the Income elasticity of demand for chocolate is -1.94 and consumer incomes are expected to

rise by 10 percent in the next year, how will this forecast affect the chocolate factories' decision

making process? From your answer, what type of good is the chocolate to the consumers? (4

marks)