Problem 1:
a. What is price elasticity of demand and how is it measured?
b. Using diagrams explain:
(i) A good with price elastic demand
(ii) A good with price inelastic demand; and
(iii) A good with unit price elastic demand
c. What are the practical implications of this analysis to producers and sellers?
Problem 2:
a. Describe the term ‘opportunity cost' showing the conditions under which it is relevant.
b. Show a diagram to illustrate the concept of opportunity cost.
c. Describe the significance of opportunity cost for a business enterprise.