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.

Step 1: Calculate the angle for "Extension of Railway Lines". 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 ($60^\circ$). $Angle for Extension of Railway Lines = 360^\circ - (130^\circ + 80^\circ + 35^\circ + 60^\circ)$ $= 360^\circ - 305^\circ$ $= 55^\circ$

Step 2: Solve part (a) - Determine the total budgetary expenditure. 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. $$ \frac{80^\circ}{360^\circ} = \frac{\110 million}{E} $$ E = \frac{360^\circ}{80^\circ} \times $110 million $$ E = 4.5 \times $110 million $$ E = \mathbf{$495 \text{ million}} $$

Step 3: Solve part (b)(i) - Calculate capital expenditure. Capital expenditure includes "Road Construction" ($130^\circ$) and "Extension of Railway Lines" ($55^\circ$). Total angle for capital expenditure $= 130^\circ + 55^\circ = 185^\circ$. $Capital Expenditure = \frac{185^\circ}{360^\circ} \times \$495 million$ $= \frac{185}{360} \times \$495 million$ $= \mathbf{\$254.375 \text{ million}}$

Step 4: Solve part (b)(ii) - Calculate recurrent expenditure. 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 $= 80^\circ + 35^\circ + 60^\circ = 175^\circ$. $Recurrent Expenditure = \frac{175^\circ}{360^\circ} \times \$495 million$ $= \frac{175}{360} \times \$495 million$ $= \mathbf{\$240.625 \text{ million}}$

Step 5: Solve part (c)(i) - Calculate total expected revenue. First, calculate the expenditure on "Payment of Wages and Salaries". $Wages and Salaries Expenditure = \frac{60^\circ}{360^\circ} \times \$495 million$ $= \frac{1}{6} \times \$495 million$ $= \$82.5 million$ The total expected revenue is $525\%$ of this expenditure. $Total Expected Revenue = 5.25 \times \$82.5 million$ $= \mathbf{\$433.125 \text{ million}}$

Step 6: Solve part (c)(ii) - Determine whether the budget was in surplus or deficit. Total expected revenue = \433.125$million. Total budgetary expenditure =$$495 million. Since the total expected revenue is less than the total budgetary expenditure, the budget was in a *deficit*. $$ Deficit = \495 million - $433.125 million = $61.875 million $$ The budget was a \mathbf{Deficit}.

Step 7: Solve part (d) - State any two likely reasons for the budget type. 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.

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