O-LevelEconomicsThe allocation of resources2281/11 · May/June 2012 · Q81 Mark

A shop sells chocolate birthday cakes. When the price was $15 it sold 40 cakes. It reduced the price to $10 and sold 60 cakes. What can be concluded from this?

AThe firm will make less profit because the price has fallen.

BThe firm will make more profit because sales have increased.

CThe price elasticity is inelastic because demand only increased by 50%.

DThere is unit price elasticity because the firm’s revenue remained the same after the price change.

✓ Correct answer

D: There is unit price elasticity because the firm’s revenue remained the same after the price change.

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Topic: The allocation of resources, O-Level Economics (syllabus 2281). Multiple choice, 1 mark.
Source: O-Level Economics, May/June 2012 Paper 1 Variant 1, question 8.

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