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QUESTION 3 (25 Marks) 3.1 Critically evaluate ANY THREE (3) categories of price elasticity of demand...

QUESTION 3

3.1 Critically evaluate ANY THREE (3) categories of price elasticity of demand and explain how the elasticity of demand concept can be used in setting prices for goods and services. 3.2 You are the Group Economist of Spoornet. Analysts have determined that the weighted average price elasticity of passenger rail service is 1.4. During peak hours in the morning and evening the price elasticity of demand is 0.8 and during the day it is 2.6. Using the relationship between elasticity and total revenue, fully explain how these affect your pricing strategy.

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