Economics 9708 · AS & A Level
Price elasticity of demand
100 practice questions on Price elasticity of demand, with worked solutions and instant marking.
A 10% tax is imposed on a good. Which type of product would be most likely to experience the greatest effect on its equilibrium price as a result?
Feb/March 2016
If the price of a good goes up and the quantity demanded also increases, what might account for this?
Feb/March 2016
What would cause the demand curve for an inferior good to shift rightward?
Feb/March 2016
Within a town, bus fares are reduced by 50% and bus usage rises by 30%. Car use is affected only slightly, with a decrease of just 1%. What is the value of the cross-elasticity of demand between car travel and bus travel?
Feb/March 2016
The diagram shows the rectangular hyperbola, DD, as a firm’s demand curve. What can be deduced from it?
Feb/March 2016
Compare the trend in crude oil price from April 2014 to June 2014 with the trend from June 2014 to September 2014.
Feb/March 2016
The diagram illustrates a firm’s total revenue curve. Which statement is correct at the curve’s peak point?
Feb/March 2016
Jam and honey are substitutes. Honey and beeswax are produced in joint supply. Assuming all other factors stay unchanged, what is likely to happen if the price of jam increases? (columns: honey price / beeswax price)
Feb/March 2017
The price elasticity of demand for a firm’s product remains equal to one whatever the price change. What would be the consequence of this?
Feb/March 2017
The diagram illustrates how the quantity demanded for four goods varies as income changes. Which good has an income elasticity of demand that is always +1?
Feb/March 2018
A theatre raises the price of its tickets from $10 to $15. As a result, its total receipts fall from $10 000 to $6000. Within what range does the price elasticity of demand for theatre tickets lie?
Feb/March 2019
The table compares Shanaz’s and Sunil’s price elasticity of demand for restaurant meals and theatre tickets. The price of restaurant meals rises, whereas the price of theatre tickets falls. What can be concluded after these changes in price?
Feb/March 2019
The diagram illustrates the demand curve for a normal product. Which two points indicate a movement from a price inelastic point to a less inelastic point?
Feb/March 2019
Explain how understanding a good’s price elasticity of demand can help a business judge the effect of price changes for that good on total revenue.
Feb/March 2019
The diagram illustrates a demand curve for pineapples. What happens to the value of price elasticity of demand (PED) as there is a movement from point X to point Y, and how is the value at point Y described?
Feb/March 2020
Under which condition will consumers’ total spending on a good rise when its price rises?
Feb/March 2020
Which calculation is applied to find price elasticity of demand?
Feb/March 2021
Explain how you would use the concept of cross-elasticity of demand to measure the effect on the demand for cars when the price of fuel for cars rises and when the price of public transport rises.
Feb/March 2021
The diagram illustrates the demand curve for a firm’s product. Which diagram shows the shape of the firm’s matching total revenue (TR) curve?
Feb/March 2021
An increase in the price of a good is followed by a rise in the quantity demanded. What might account for this?
Feb/March 2022
What makes the demand curve for an inferior good move to the right?
Feb/March 2022
The diagrams illustrate the effect of a change in the market for good X on the market for good Y. Which relationship between the two goods is most likely?
Feb/March 2022
The diagram illustrates the demand and supply curves for cars in India. The market begins at equilibrium at X. What will be the new equilibrium if Indian car manufacturers are given a subsidy and the price of train and bus journeys in India also increases?
Feb/March 2022
How is the cross-elasticity of demand for good X with respect to good Y measured?
Feb/March 2022
Explain what economists mean by indifference curves and budget lines and evaluate whether they can be used together to support rational consumer decision making.
Feb/March 2022
A sports stadium charges for two categories of seats. The lower-priced seats cost $10, while the higher-priced seats cost $20. If every seat price rises by 10%, demand changes by falling 5% for the lower-priced seats and falling 12% for the higher-priced seats. What term describes how demand responds to the price change?
Feb/March 2023
Good X has a price elasticity of demand of –2.4, an income elasticity of demand of –0.4 and a cross elasticity of demand with good Y of +0.8. Which description best fits good X?
Feb/March 2024
The diagram illustrates two straight-line demand curves, X and Y. Which statement about curves X and Y is correct?
Feb/March 2024
Using a formula, explain the meaning of income elasticity of demand and assess the extent to which a rise in income will raise the consumption of all goods and services.
Feb/March 2024
When the quantity demanded of a product falls, sales revenue also falls by the same proportion. Which statement about its price elasticity of demand is correct?
Feb/March 2025
The price of a good increases by 5% and the quantity demanded of it increases by 3%. At the same time, consumer incomes for the good rise by 4%. In this situation, the law of demand seems not to apply. What is the most likely explanation?
Feb/March 2025
The diagram illustrates the effect on equilibrium of a rise in the costs of production. The initial price is $72. The price elasticity of demand is –2.0. What is the revised equilibrium price, P2?
Feb/March 2025
Using Fig. 1.1, calculate the percentage change in the world price of olive oil from May 2022 to January 2023.
Feb/March 2025
A government put in place a tax on soft drinks that contain sugar. It was predicted that this tax would generate £520m each year for the government. In fact, the amount of tax collected was only £240m. What is the most likely explanation for why the tax revenue was below the forecast?
Feb/March 2025
Explain, with examples, what the size of a good’s cross-elasticity of demand shows about its substitutes and complements.
May/June 2006
The demand for a commodity has unitary price elasticity. Which diagram illustrates how total expenditure on the commodity varies with its price?
May/June 2010
The demand for a commodity has unitary price elasticity. Which diagram shows how total expenditure on the commodity changes with its price?
May/June 2010
The table provides data on the market for two car models. If the prices of the cars stay the same, but the price of petrol rises by 100 %, what effect will this have on the number of cars sold each week?
May/June 2010
The demand for a commodity is price elastic with unitary price elasticity. Which diagram illustrates the link between total expenditure on the commodity and its price?
May/June 2010
The table provides information on the market for two car models. If the prices of the cars stay the same, but the price of petrol rises by 100%, what effect will this have on the number of cars sold per week?
May/June 2010
How far does the data in Fig. 1 support the normal demand curve relationship between the price and the quantity demanded of cigarettes?
May/June 2010
The diagram illustrates a firm’s demand curve together with its marginal revenue curve. What is the approximate price elasticity of demand at price OP?
May/June 2010
The diagram illustrates a firm’s demand curve together with its marginal revenue curve. What is the approximate price elasticity of demand at price OP?
May/June 2010
The diagram illustrates a firm’s demand curve together with its marginal revenue curve. What is the approximate price elasticity of demand at price OP?
May/June 2010
The table presents estimates of the price elasticities and cross elasticities of demand for bus and rail travel. What would be the change in the volume of rail travel following a 1 % rise in bus fares?
May/June 2011
The diagram illustrates the demand curve for a product with unitary price elasticity. What happens to this curve?
May/June 2011
The table shows estimated price elasticities and cross elasticities of demand for bus and rail travel. What change would occur in the volume of rail travel if bus fares rose by 1 %?
May/June 2011
The diagram illustrates the demand curve for a product with unitary price elasticity. What would be the effect of such a curve?
May/June 2011
The diagram illustrates the demand curve for a product with unitary price elasticity. What will occur with this curve?
May/June 2011
The table shows estimated price elasticities and cross elasticities of demand for bus and rail travel. What change in the amount of rail travel would result from a 1 % rise in bus fares?
May/June 2011
A firm is practising price discrimination. To maximise profits, what action should the firm take?
May/June 2011
For a product whose supply is infinitely elastic, weekly sales are 1000 units when the price is $1 per unit. Price elasticity of demand is 1.5 across the relevant range. The government introduces a tax of 10%. What will be the government’s weekly tax revenue?
May/June 2011
A product with infinite elasticity of supply sells 1000 units each week when the price is $1 per unit. Price elasticity of demand is 1.5 over the relevant range. The government introduces a tax of 10%. What is the government’s weekly tax revenue?
May/June 2011
A product with infinite elasticity of supply sells 1000 units each week at a price of $1 per unit. Over the relevant range, price elasticity of demand is 1.5. The government introduces a tax of 10%. What is the government’s weekly tax revenue?
May/June 2011
A firm is carrying out price discrimination. To maximise profits, what action should the firm take?
May/June 2011
A product has a unitary price elasticity of demand, and when its price is $20 a firm sells 40 000 units. If the firm sets the price at $5, how many units will it sell?
May/June 2012
The cross elasticity of demand for products X and Y is negative. What would happen immediately if the price of product Y increases?
May/June 2012
The diagram illustrates how total expenditure changes with price for three products, 1, 2 and 3. Which curves show the products with price elastic demand and unitary price elasticity of demand?
May/June 2012
The table gives the quantities demanded (Q) of goods X and Y for various prices (P) of both goods. In which range does the cross elasticity of demand for good Y with respect to the price of good X lie?
May/June 2012
How would you define a normal good?
May/June 2012
A good has a unitary price elasticity of demand. When its price is $20, a firm sells 40 000 units. How many units will the firm sell if it sets a price of $5?
May/June 2012
The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate consequence of an increase in the price of product Y?
May/June 2012
Explain, using elasticity of demand, the possible reasons why in some countries private transport has become more widely used than public transport.
May/June 2012
Explain, using elasticity of demand, why a train company might introduce a policy of increasing fares at busy travel times and reducing fares at less busy travel times.
May/June 2012
Explain how income elasticity of demand and cross elasticity of demand may be used to sort different types of goods.
May/June 2012
The price elasticity of demand for a firm’s product is zero. If the firm cuts its price by 5%, what effect will this have on its revenue?
May/June 2012
The price elasticity of demand for a firm’s product is zero. What effect will a 5% fall in its price have on the firm’s revenue?
May/June 2012
The price elasticity of demand for a product is unitary across all price ranges. What effect will a rise in its price have?
May/June 2013
When the price of cars falls, demand for petrol increases by 20%. The cross-elasticity of demand between cars and petrol is –2. What change in car prices has led to this result?
May/June 2013
If the supply of a good falls, the equilibrium price remains unchanged. What is the price elasticity of demand of the good?
May/June 2013
What could cause a product to have a high negative income elasticity of demand and a high price elasticity of demand?
May/June 2013
Explain, using economic analysis, how economists determine whether goods are substitutes or complementary goods.
May/June 2013
The demand for a firm’s product is perfectly elastic. What would happen to the firm’s revenue if it raised its price by 5%?
May/June 2013
The demand for a firm’s product is perfectly inelastic. What effect will there be on the firm’s revenue if it raises its price by 5%?
May/June 2013
A firm’s product faces perfectly elastic demand. What effect would there be on the firm’s revenue if it raises its price by 5%?
May/June 2013
Use the information to explain the ways in which macroeconomic changes can be connected to microeconomic decisions.
May/June 2013
Use the information to explain the links between macroeconomic changes and microeconomic decisions.
May/June 2013
In the diagram, D1D1 is a demand curve in the form of a straight line, while D2D2 is a rectangular hyperbola curve. Which statement is correct?
May/June 2014
The table illustrates how a consumer’s spending on different goods changes as her income rises from $20 000 to $24 000. Assuming everything else stays the same, for which goods is the consumer’s income elasticity of demand above 1.0?
May/June 2014
Where the price elasticity of demand for a commodity is unity, a rise in its price will
May/June 2014
The table presents a consumer’s spending on a variety of goods at different income levels. For which good does the consumer have an income elasticity of demand greater than zero, but less than one?
May/June 2014
A good has unitary price elasticity of demand and, when the price is $25, 100 000 units are sold. What price must the firm set if it wants sales to rise to 125 000 units of the good?
May/June 2014
The diagram illustrates the effect of a 10% rise in consumer incomes on the demand for good X, moving it from D to D1. Which statement about good X is correct?
May/June 2014
The diagram illustrates how a firm’s total revenue is related to the number of goods sold. What is the price elasticity of demand for the good?
May/June 2014
Distinguish between income elasticity of demand and cross elasticity of demand, then explain how each one is used to identify different categories of product.
May/June 2014
Explain the factors that might cause the price elasticity of demand for a good to be highly inelastic.
May/June 2014
The diagram illustrates a firm’s demand curve and marginal revenue curve. At price P, what is the approximate price elasticity of demand?
May/June 2014
A government lowers the specific tax on packets of cigarettes. What might explain why this results in higher tax revenue from cigarette sales?
May/June 2014
The diagram presents a firm's demand curve together with its marginal revenue curve. At price P, what is the approximate price elasticity of demand?
May/June 2014
The table presents the price elasticity of demand for four goods and services. If the price of each item rose by 1%, which items would see total expenditure rise?
May/June 2015
On the diagram, the area OP1M1Q1 is the same as the area OP2M2Q2. What is the value of the price elasticity of demand if the price falls by half from P1 to P2?
May/June 2015
A market investigation of good X showed that it is an inferior good and a near substitute for good Y. Which figures for the income elasticity of demand for good X and its cross elasticity of demand in relation to the price of good Y would fit this?
May/June 2015
The diagram illustrates the demand curve for a product with unitary price elasticity. What happens with a curve of this type?
May/June 2015
The price elasticity of demand for grapes is –2.0. At a price of $15, quantity demanded is 5000 units. What quantity will be demanded if the price decreases to $12?
May/June 2015
Explain how economists measure the extent to which demand for a good changes as income changes and, using a diagram, show why certain goods are described as ‘inferior goods’.
May/June 2015
With diagrams, explain how economists use income elasticity of demand to distinguish inferior goods from necessity goods.
May/June 2015
The diagram illustrates the demand curve for a firm’s product. Which diagram shows the shape of the firm’s matching total revenue (TR) curve?
May/June 2015
A poor harvest of an agricultural crop leads to a rise in the total revenue earned by farmers altogether. If the demand schedule stays unchanged, what conclusion can be drawn from this?
May/June 2015
What does ‘price discrimination’ mean?
May/June 2015
A product whose supply is infinitely elastic sells 1000 units each week at a price of $1 for each unit. Price elasticity of demand is 1.5 over the relevant range. The government introduces a tax of 10%. What will be the weekly tax revenue collected by the government?
May/June 2016