Question $1(30$ Marks$)$

$1\mathrm{.}1$ Explain the concept of price elasticity of demand, including the formula used to calculate it$,$ and provide an explanation as to why the calculated value is always negative. $(6$ marks$)$

$1\mathrm{.}2$ Read the extract below and answer the question that follows:

Extract: Mr Miyagi, the owner of Yayoo pharmacy is contemplating on a pricing strategy for two products identified in table $1\mathrm{.}1$ to increase sales for the products. He has been presented with the following data relating to price elasticity of demand of the two products.

Table $1\mathrm{.}1$: Price Elasticity

$\backslash$table$[[$Product:$,$ABC Painkillers,Atorvastatin$],[\backslash$table$[[$Price elasticity of demand$],[$Coefficient$]],1\mathrm{.}8,0\mathrm{.}3],[$Description$,$Generic Painkiller,A prescription drug$]]$

Describe the categories of price elasticity of demand for each product mentioned above and, using a diagram, recommend the appropriate price adjustment strategy for Mr$.$ Miyagi to increase revenue for each product. $(14$ marks$)$

$1\mathrm{.}3$ Examine with the aid of a diagram, the three major flows in the economy. $(10$ marks$)$