From your answers in 1(c), is the demand for the commodity elastic or inelastic? Explain your answer. Figure 2 below represents the budget estimates for Country X in the year 2018. Use the chart to answer the questions that follow.

The sum of angles in a circle is $360^\circ$. The given angles are for Road Construction ($130^\circ$), Maintenance of Public Infrastructure ($80^\circ$), Servicing of Loans ($35^\circ$), and Payment of Wages and Salaries ($60^\circ$).

The government spent \110$million on "Maintenance of Public Infrastructure", which corresponds to an angle of$80^\circ$. Let the total budgetary expenditure be$E. $$ \frac{80^\circ}{360^\circ} = \frac{\110 \text{ million}}{E} $$ E = \frac{360^\circ}{80^\circ} \times $110 \text{ million} $$ E = 4.5 \times $110 \text{ million} $$ E = \boxed{\mathbf{$495 \text{ million}}} $$

Capital expenditure includes "Road Construction" ($130^\circ$) and "Extension of Railway Lines" ($55^\circ$).
Total angle for capital expenditure $= 130^\circ + 55^\circ = 185^\circ$. $\text{Capital Expenditure} = \frac{185^\circ}{360^\circ} \times \$495 \text{ million}$ $= \frac{185}{360} \times \$495 \text{ million}$ $= \boxed{\mathbf{\$254.375 \text{ million}}}$

Recurrent expenditure includes "Maintenance of Public Infrastructure" ($80^\circ$), "Servicing of Loans" ($35^\circ$), and "Payment of Wages and Salaries" ($60^\circ$).
Total angle for recurrent expenditure $= 80^\circ + 35^\circ + 60^\circ = 175^\circ$. $\text{Recurrent Expenditure} = \frac{175^\circ}{360^\circ} \times \$495 \text{ million}$ $= \frac{175}{360} \times \$495 \text{ million}$ $= \boxed{\mathbf{\$240.625 \text{ million}}}$

First, calculate the expenditure on "Payment of Wages and Salaries". $\text{Wages and Salaries Expenditure} = \frac{60^\circ}{360^\circ} \times \$495 \text{ million}$ $= \frac{1}{6} \times \$495 \text{ million}$ $= \$82.5 \text{ million}$ The total expected revenue is $525\%$ of this expenditure. $\text{Total Expected Revenue} = 5.25 \times \$82.5 \text{ million}$ $= \boxed{\mathbf{\$433.125 \text{ million}}}$

Total expected revenue = \433.125$million. Total budgetary expenditure =$$495 million. Since the total expected revenue is less than the total budgetary expenditure, the budget was in a **deficit**. $$ \text{Deficit} = \495 \text{ million} - $433.125 \text{ million} = $61.875 \text{ million} $$ The budget was a Deficit.

The government operated a deficit budget. Two likely reasons are:

• High government spending: The government might have undertaken significant capital projects (like road construction and railway extension) or increased recurrent spending (like wages and salaries, or loan servicing) without sufficient revenue generation.
• Insufficient revenue collection: The government's tax collection or other revenue sources might have been lower than anticipated, possibly due to an economic slowdown or inefficient tax administration, leading to a shortfall compared to its expenditures.