Q: What mistakes do candidates make on this ACCA question?

Selecting 'Price elastic' assuming any drop in demand means it is elastic.

Question 1

Section A

"AquaPure" operates a municipal desalination plant providing essential drinking water to a desert region. The local government recently allowed AquaPure to increase its prices by 15%, which resulted in only a 2% drop in water consumption.

Which of the following economic terms best describes the demand for AquaPure's water?

Accepted Answer

Compare the % change in price (15%) to the % change in demand (2%). Since 2% < 15%, demand is inelastic.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Selecting 'Price elastic' assuming any drop in demand means it is elastic.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA BT — Business & Technology Practice Exam 3

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