The is a masterpiece of microeconomic testing. It forces students to integrate algebra, geometry, and policy analysis. Mastery of this single question equips you to handle price controls, elasticity, and welfare economics in any exam. Practice drawing the graph step by step, label all surpluses, and always double-check which quantity determines actual market outcome. For HKDSE candidates, this question remains highly recommended revision material.
The first part of Q2 typically asked: “If a transport company reduces its fares but finds its total revenue falls, what can be concluded about the price elasticity of demand for its service?” hkcee 2010 econ paper 2 q2
As per part (a), if MTR demand is inelastic, reducing its fare alone would lower MTR’s total revenue. The is a masterpiece of microeconomic testing
Even if a firm provides a "free" sample, they use resources (labor, materials) that could have been used elsewhere. Therefore, it is an economic good. Why Students Struggled Practice drawing the graph step by step, label
This is defined as the value of the next best alternative foregone when a choice is made.