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Topical›Economics 9708›The price system and the microeconomy (AS Level)›Price elasticity, income elasticity and cross elasticity of demand›Paper 1

Price elasticity, income elasticity and cross elasticity of demand — Paper 1 · A Level Economics 9708

2.2· 287 questions · 287 marks · 344 min · 2005–2025· Multiple choice

Every Cambridge A Level Economics Paper 1 question on price elasticity, income elasticity and cross elasticity of demand, laid out as 89 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

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Question 1: The diagram shows the demand curve for commodity X. price D O quantity Which of the following statements is correct? A Demand is less elast…Question 2: Over the last ten years the price elasticity of demand for tea in many countries has risen. What is the most likely cause of this change in…Question 3: The price of Good X rises by 20 %. As a result, the demand for a substitute Good Y rises by 10 %. What is the cross-elasticity of demand fo…1 / 89
Question 4: The diagram shows the demand curve for an agricultural commodity that has unitary elasticity. S1 is the supply curve if there is a bad harv…Question 5: The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantit…2 / 89
Question 6: The diagrams show possible relationships between income and the quantity of a good purchased. Which diagram shows an inferior good? A B 45o…Question 7: Assume the price elasticity of demand for best-quality French wine is zero. What would be the effect in New Zealand if the New Zealand gove…Question 8: From the table below, in which price range is demand for product X inelastic? product X price quantity demanded $ 12 250 11 450 10 500 9 60…3 / 89
Question 9: Product R is an inferior good with no close substitutes. It is also a complement to product S. Which describes product R? cross elasticity …Question 10: A businessman had intended to borrow $5000 at 8 % per year for house purchase. When the interest rate rose to 10 % he decided to borrow onl…Question 11: The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week resp…Question 12: In 2003, some tobacco companies in the US wanted to raise prices but a spokesman said the tobacco industry was no longer in a position wher…4 / 89
Question 13: A fall in the price of cars causes the demand for petrol to rise by 20 %. The cross-elasticity of demand between cars and petrol is –2. Whi…Question 14: The government imposes a sales tax to reduce consumption of good X. With which combination of price elasticity of demand and price elastici…Question 15: A good has unitary price elasticity of demand and at a price of $25 it sells 100 000 units. Which price must the firm charge if it wants to…Question 16: The table shows how an individual’s consumption of cola and nuts varies with income. income ($) cola (cans) nuts (packets) 50 2 0 100 4 1 W…Question 17: A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direc…5 / 89
Question 18: The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is…Question 19: The diagram shows the demand curve for a product. M N price S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle …Question 20: The price of good X rises by 10 %. As a result, the demand for a substitute good Y rises by 20 %. What is the cross-elasticity of demand fo…6 / 89
Question 21: The table shows the demand for tickets for a concert. price of tickets quantity $ demanded 20 6000 30 5000 40 4000 50 3000 The capacity of …Question 22: The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between tota…Question 23: In the UK, attempts to encourage people to change from road to rail travel by the introduction of a system of road pricing were forecast to…7 / 89
Question 24: The table shows changes in a consumer’s expenditure on various goods when his income increases from $20 000 to $24 000. income income $20 0…Question 25: Japan introduces import quotas on consumer durables imported from Malaysia. These goods have a high price elasticity of demand. What effect…Question 26: A country has a large current account deficit. Its government decides to devalue its currency. In which circumstance would such a measure r…8 / 89
Question 27: A government wishes to impose a tax on a good so that the consumer and not the producer pays most of the tax increase. Which type of elasti…Question 28: The table shows the price elasticity of demand for four goods and services. price elasticity motor cycles 1.6 telephone calls 1.0 football …Question 29: Two goods, X and Y, are complementary goods. Column 1 of the table below shows the original market situation at time period 1 and column 2 …9 / 89
Question 30: The table shows the price elasticity of demand for four goods and services. price elasticity motor cycles 1.6 telephone calls 1.0 football …Question 31: Two goods, X and Y, are complementary goods. Column 1 of the table below shows the original market situation at time period 1 and column 2 …10 / 89
Question 32: The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity an…Question 33: The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week resp…11 / 89
Question 34: The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity an…Question 35: The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week resp…12 / 89
Question 36: The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity an…Question 37: The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week resp…Question 38: When is a deficit on the current account of the balance of payments likely to worsen? A when the government adopts a deflationary macroecon…13 / 89
Question 39: The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q0 at price P0…Question 40: The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income…14 / 89
Question 41: The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices …Question 42: What will make it more likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public trans…Question 43: In a country the Marshall-Lerner condition for an improvement in the trade balance is satisfied in the long run, but quantities of imports …15 / 89
Question 44: The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q0 at price P0…Question 45: The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income…16 / 89
Question 46: The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices …Question 47: What will make it more likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public trans…Question 48: The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q0 at price P0…17 / 89
Question 49: The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income…Question 50: The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices …Question 51: What will make it more likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public trans…18 / 89
Question 52: The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A …Question 53: The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to th…19 / 89
Question 54: The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A …Question 55: The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to th…20 / 89
Question 56: The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A …Question 57: The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to th…Question 58: The price of good X rises by 10 %. As a result, the demand for a complementary good Y changes by 20 %. What is the cross elasticity of dema…Question 59: A country’s floating exchange rate falls and its export revenue declines. What could explain this? A Demand for its exports is inelastic. B…21 / 89
Question 60: A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The…Question 61: During a period of falling incomes in Germany in 2009, demand for jewellery declined. There was, however, a rise in demand for frozen foods…Question 62: It was estimated in 2010 that milk had an income elasticity of demand of –0.6. What can be concluded about milk from this information? A It…Question 63: The price of good X rises by 10 %. As a result, the demand for a complementary good Y changes by 20 %. What is the cross elasticity of dema…22 / 89
Question 64: A country’s floating exchange rate falls and its export revenue declines. What could explain this? A Demand for its exports is inelastic. B…Question 65: A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The…Question 66: A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many will the firm sell if it charges …Question 67: The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of pro…23 / 89
Question 68: The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3. 1 2 price 3 O total expenditure Whic…Question 69: The table shows the quantities demanded (Q) of goods X and Y corresponding to different prices (P) of the two goods. PX = $8 PX = $10 QX = …Question 70: What is the definition of a normal good? A one where the demand for the good is both price and income elastic B one where the income elasti…Question 71: A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many will the firm sell if it charges …24 / 89
Question 72: The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of pro…Question 73: The diagrams show possible relationships between income and the quantity of a good purchased. Which diagram shows an inferior good? A B 45°…Question 74: The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantit…Question 75: Consumer spending decreased in the recession of 2009-10. A firm tried to keep revenue high by giving discounts to encourage demand. It meas…25 / 89
Question 76: What can be concluded about a product which has an income elasticity of demand (YED) of +1.5 and a cross elasticity of demand (XED) of +1.2…Question 77: A manufacturer increases the price of his product in an attempt to increase total revenue. The table shows the outcome of the policy. price…Question 78: A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax. Which type of elasticity woul…26 / 89
Question 79: The diagram shows the relationship between the price and the total expenditure on a good. price O total expenditure Which statement is corr…Question 80: The table gives an individual’s demand for four goods at two income levels. Over this range of income, for which good does the individual h…Question 81: The price elasticity of demand for a product is unitary for all price ranges. What will be the effect of an increase in its price? A an equ…27 / 89
Question 82: A fall in the price of cars causes the demand for petrol to rise by 20%. The cross-elasticity of demand between cars and petrol is –2. Whic…Question 83: When the supply of a good decreases, equilibrium price stays the same. What is the price elasticity of demand of the good? A –1 B zero C +1…Question 84: A product is an inferior good with no close substitutes. It is also a complement to good X. Which product matches the above description? cr…28 / 89
Question 85: The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices …Question 86: Why might a product have a high negative income elasticity of demand and a high price elasticity of demand? A It is an inferior good with c…Question 87: The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is…29 / 89
Question 88: The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus fares caused the demand for rail travel…Question 89: The diagram shows the demand for a product for which there are only three buyers, Freeman, Hardy and Willis. D 25 20 price 15 ($) 10 5 D 0 …30 / 89
Question 90: The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between tota…Question 91: The price of good X rises by 20 %. As a result, the demand for a substitute good Y rises by 10 %. What is the cross-elasticity of demand fo…Question 92: Oranges and apples are substitutes. The diagram shows the equilibrium position in the market for oranges at X. Weather conditions reduce th…31 / 89
Question 93: In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola curve. D1 D2 M price D2 N D1 O quantity Which state…Question 94: The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 0…32 / 89
Question 95: The diagram shows the demand for and supply of a product. D price S O quantity What can be deduced about the product? A It has infinite pri…Question 96: If the elasticity of demand for a commodity is unity, an increase in its price will A decrease the quantity purchased. B have no effect on …Question 97: The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income…Question 98: A good has unitary price elasticity of demand and at a price of $25 it sells 100 000 units. Which price must the firm charge if it wants to…33 / 89
Question 99: The diagram shows how a 10% increase in consumer incomes shifts the demand for good X from D to D1. price ($) 10 D1 D 0 80 100 quantity (kg…Question 100: The diagram shows the relationship between a firm’s total revenue and the quantity of goods sold. revenue TR O quantity What is the price e…34 / 89
Question 101: The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q at price P. …Question 102: The diagram shows the demand curve for a product. M N price S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle …35 / 89
Question 103: Which elasticity values indicate that cars are normal goods and that petrol is a complement to car use? cross elasticity demand of income e…Question 104: The market price of a product rose from $8 to $10 and as a result the market demand fell from 20 000 to 8000 a week. Consumer X’s demand de…Question 105: A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax increase. Which level of price…36 / 89
Question 106: The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity an…Question 107: The price of good X rises by 10%. As a result, the demand for a substitute good Y rises by 20%. What is the cross-elasticity of demand for …Question 108: In which case will a given increase in the supply of a good cause the greatest fall in the price of the good? A when the demand for the goo…Question 109: The table shows the price and quantity demanded of a successful film DVD in the first four weeks after its release. price of DVD quantity d…37 / 89
Question 110: The price of good X rises by 20%. As a result, the demand for a substitute good Y changes by 10%. What is the cross elasticity of demand fo…Question 111: The price elasticity of demand for a product is inelastic. How will a decrease in supply affect producer revenue and consumer surplus? prod…Question 112: Two goods, X and Y, are complementary goods. Column 1 of the table below shows the original market situation at time period 1 and column 2 …Question 113: The weighting given to food in the construction of the United Kingdom’s Retail Price Index fell from 16.7% in 1987 to 11.8% in 2011. What w…38 / 89
Question 114: The table shows the price elasticity of demand for four goods and services. price elasticity motorcycles –1.6 telephone calls –1.0 football…Question 115: In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. P1 M1 price M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of de…Question 116: A survey into the market for good X found that it is an inferior good and a close substitute to good Y. Which values for the income elastic…39 / 89
Question 117: The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A …Question 118: An appreciation of country X’s currency leads to an increase in its foreign currency earnings from tourism. What can be concluded from this…Question 119: The table refers to exports of sugar from Jamaica in 1999 and 2000. exports of sugar export earnings (tonnes) from sugar (US$ millions) 199…40 / 89
Question 120: The price elasticity of demand for grapes is –2.0. When the price is $15, quantity demanded is 5000 units. How much will be demanded when t…Question 121: A businessman had intended to borrow $5000 at an interest rate of 8% per year. When the interest rate rose to 10% he decided to borrow only…Question 122: What will make it most likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public trans…Question 123: The diagram shows the demand curve for an agricultural commodity that has unitary elasticity. S1 is the supply curve if there is a bad harv…41 / 89
Question 124: Tourism is seen as a good way of increasing net export earnings. Luxury tourism, such as wildlife safaris and cultural tours, is considered…Question 125: An individual reacts to a 5% increase in the price of good X by increasing the proportion of his income that he spends on good X from 2% to…Question 126: The cross-elasticity of demand for good X with respect to good Y is –0.5. What can be concluded from this? A Goods X and Y are complementar…Question 127: A theatre increases the price of its tickets from $5 to $10. As a result, its total receipts increase from $2500 to $4000. Within what rang…42 / 89
Question 128: The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income ($) biscuits (packs) coffee (cups)…Question 129: In a town, bus fares fall by 50% and this leads to an increase in bus use by 30%. The effect on car use is very low with only a 1% reductio…Question 130: In the diagram the rectangular hyperbola, DD, represents a firm’s demand curve. D price D O quantity What can be deduced from the diagram? …Question 131: A 10% tax is placed on a good. What type of product would be most likely to face the biggest impact on its equilibrium price as a result? A…43 / 89
Question 132: A manufacturer progressively reduces the price of his product in an attempt to increase total revenue. The table shows the outcome of this …Question 133: Public transport has an income elasticity of demand of –0.36. What does this mean about public transport? A It has close substitutes. B It …Question 134: A government pays a subsidy to a country’s onion producers. With which price elasticity of demand (PED) will this action be most effective …44 / 89
Question 135: The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to th…Question 136: It has been estimated that bread has an income elasticity of –0.04. What can be concluded about bread from this information? A It is a norm…Question 137: In which circumstances must the total expenditure by consumers on a good increase when its price increases? A if demand for the good is inc…Question 138: The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantit…Question 139: The cross-elasticity of demand of good S with respect to the price of good P is +1.5. The cross-elasticity of demand of good S with respect…45 / 89
Question 140: A government imposes a tax on a good. The equilibrium price rises by the same amount as the tax. What can be concluded about the price elas…Question 141: What can be concluded about a product which has an income elasticity of demand (YED) of –1.5 and a cross-elasticity of demand (XED) of +1.2…Question 142: In which situation is the demand for a product said to be price elastic? A A fall in price increases expenditure on the product. B A fall i…Question 143: Goods X and Y are complements with a cross-elasticity of demand of – 0.8. When the price of good X was $10, the quantity of good Y demanded…46 / 89
Question 144: The diagram shows an industry’s total revenue when different quantities are demanded. point 2 point 1 point 3 total revenue O quantity dema…Question 145: The diagram shows a demand curve for pineapples. 2 X 1.5 price 1 ($) Y 0.5 0 D 0 3 6 9 12 quantity (000s) What happens to the value of pric…47 / 89
Question 146: A product is an inferior good with no close substitutes. It is also a complement to good X. Which product matches the above description? cr…Question 147: The table shows the quantities demanded (Q) of goods X and Y corresponding to different prices (P) of the two goods. PX = $8 PX = $10 QX = …Question 148: What will cause the payment of a subsidy to firms to result in the greatest increase in sales? A a shift in the demand curve to the right B…Question 149: The price elasticity of demand for a firm’s product is equal to one for all price changes. What would be the result of this? A A percentage…48 / 89
Question 150: A country has a large current account deficit. Its government decides to devalue its currency. In which circumstance would such a measure r…Question 151: Which combination is most likely to result in the demand for a product being highly price elastic? number of close % of income substitutes …Question 152: A manufacturer increases the price of his product from $4 in an attempt to increase total revenue. The table shows the outcome of the polic…Question 153: A government imposes a specific indirect tax on a product. When will the tax cause the greatest reduction in consumer surplus for the buyer…49 / 89
Question 154: The table gives a set of price and cross-price elasticities for four commodities, W, X, Y and Z. elasticity of demand with respect for comm…Question 155: The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between tota…Question 156: A local government is deciding whether to increase parking charges and provide more lanes for bus use only. One official said that the incr…50 / 89
Question 157: The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3. 1 2 price 3 O total expenditure Whic…Question 158: The table shows the price of a good and total expenditure on the good during specific periods when the market is in equilibrium. price tota…Question 159: In which situation is the demand for a product said to be price elastic? A The quantity demanded responds to a change in price. B An increa…51 / 89
Question 160: In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola curve. D1 D2 price M D2 N D1 O quantity Which state…Question 161: It was estimated in 2015 that milk had an income elasticity of demand of –0.6. What can be concluded about milk from this information? A It…Question 162: A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The…52 / 89
Question 163: The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is…Question 164: The diagram shows the relationship between the price and the total expenditure on a good. price O total expenditure Which statement is corr…Question 165: Over the last ten years the price elasticity of demand for tea in many countries has risen. What is the most likely cause of this change in…53 / 89
Question 166: The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Consumer expenditure on the product alwa…Question 167: The cross-elasticity of demand between two goods will be higher A the greater the difference in price between the two goods. B the greater …Question 168: A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax. Which type of elasticity woul…Question 169: Which statement about trade protection is correct? A A tariff will result in a greater decrease in demand for an import the lower its price…54 / 89
Question 170: The number of passenger journeys per week by train on a route is shown by the demand curve in the diagram. fare ($) V P T W U D O R S numbe…Question 171: The diagram shows the demand curve for a product. price M N S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle …Question 172: When the supply of a good decreases, equilibrium price stays the same. What is the price elasticity of demand of the good? A –1 B zero C +1…55 / 89
Question 173: What is necessary for consumer surplus to be zero? A Demand is perfectly elastic. B Demand is perfectly inelastic. C Supply is perfectly el…Question 174: In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. price P1 M1 M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of de…Question 175: Which elasticity values indicate that cars are normal goods and that petrol is a complement to car use? cross elasticity of demand income e…Question 176: Country M imposes a tariff on imports of steel. Which price elasticity values will result in the smallest reduction in steel imports into M…56 / 89
Question 177: Two goods X and Y have a positive cross-elasticity of demand and upward-sloping supply curves. What will be the effect of a reduction in th…Question 178: The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 0…Question 179: Goods X and Y are complements and have upward-sloping supply curves. What will be the effect on the equilibrium price and quantity of good …57 / 89
Question 180: A theatre increases the price of its tickets from $10 to $15. As a result, its total receipts decrease from $10 000 to $6000. Within what r…Question 181: The table shows Shanaz’s and Sunil’s price elasticity of demand for restaurant meals and theatre tickets. Shanaz Sunil restaurant meals –0.…Question 182: The diagram shows the demand curve for a normal product. price W X demand Y Z O quantity Which two points indicates a move from a price ine…58 / 89
Question 183: The diagram shows the demand and supply of rice. Supply increases from S1 to S2. S1 S2 50 price of rice per kg (cents) 35 32 30 27 D1 0 0 1…Question 184: What is cross elasticity of demand? A the responsiveness of price of good X due to a change in demand of good Y B the responsiveness of qua…Question 185: Consumers receive an increase in their incomes. Which circumstances will cause the quantity of the product sold to increase the most? price…59 / 89
Question 186: What does the Marshall-Lerner condition state must be present for a depreciation of a currency to cause an improvement in the current accou…Question 187: What follows if the income elasticity of demand for a good has a value of –0.2? A When income rises less of the good is bought. B When inco…Question 188: The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of pro…60 / 89
Question 189: The diagram shows a market for wheat. 100 price of wheat S P2 P1 D 0 0 Q2 Q1 Q3 100 quantity of wheat What is the response of demand for an…Question 190: Doctors are concerned about the negative health effects of sugary drinks. When would a tax on sugary drinks be least effective in improving…Question 191: Two goods, X and Y, have a cross elasticity of demand of +1.8. Good Y has an income elasticity of demand of –0.6. An increase in both the i…61 / 89
Question 192: In which situation is the demand for a product said to be price elastic? A A fall in price increases expenditure on the product. B A fall i…Question 193: A government increased a specific tax on shoes. The resulting increase in the price of shoes was paid mainly by the consumer and not by the…Question 194: Travellers can cross the English Channel either by the Channel Tunnel or by a sea journey. The table gives details of the passengers, in th…62 / 89
Question 195: The diagrams represent the demand curves for three goods X, Y and Z. They are drawn to the same scale and can be used to represent the pric…Question 196: A government decides to put a tax on a good. Which price elasticity conditions would result in most of the tax being paid by the consumer? …Question 197: In which circumstance will the total expenditure by consumers on a good increase when its price increases? A Demand for the good is income …63 / 89
Question 198: Good X is related to good Y. Incomes increase and the price of good Y falls. Which combination would give the greatest increase in demand f…Question 199: The diagram shows a demand curve for pineapples. 2 price ($) X 1.5 1 Y 0.5 0 D 0 3 6 9 12 quantity (000s) What happens to the value of pric…Question 200: The economics department of a university calculates that the price elasticity of demand for the products of a local firm is between –1.1 an…64 / 89
Question 201: A manufacturer progressively reduces the price of his product. The table shows the outcome of this policy. price total revenue ($) 000s ($)…Question 202: Following the introduction of a 10% increase in charges for car parking in a city centre, the demand for bus journeys per day into the city…Question 203: The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to th…Question 204: Which combination is most likely to result in the demand for a product being highly price-elastic? number of close % of income substitutes …65 / 89
Question 205: The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income ($) biscuits (packs) coffee (cups)…Question 206: Agricultural economies have faced a deterioration in their terms of trade. What might have contributed to this? A falling exchange rates of…Question 207: In the UK, attempts to encourage people to change from road to rail travel by the introduction of a system of road pricing were forecast to…66 / 89
Question 208: The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A …Question 209: The market for good X is in equilibrium. The government introduces a subsidy to the producers of good X. Under which conditions will the to…Question 210: Public transport in an economy has an income elasticity of demand of –0.36. What does this mean about public transport? A It has close subs…Question 211: A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many units will the firm sell if it ch…67 / 89
Question 212: A bus journey is considered an inferior good in a relatively rich country such as Singapore but a normal good in a relatively poor country …Question 213: A government regards alcoholic drinks as a demerit good and introduces a minimum price above the equilibrium in an attempt to protect consu…Question 214: What is used to calculate the price elasticity of demand? change in price A change in quantity demanded change in quantity demanded B chang…Question 215: The government redistributes income by raising the top rate of income tax and using the money raised to finance additional benefits to stud…68 / 89
Question 216: The price elasticity of demand for a firm’s product is equal to one for all price changes. What would be the result of this? A A percentage…Question 217: Knowledge of which combination of demand elasticities would be relevant to a firm trying to increase its revenue? price elasticity | cross…Question 218: The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week resp…Question 219: When the supply of a good decreases, equilibrium price stays the same. What is the price elasticity of demand of the good? A –1 B zero C +1…69 / 89
Question 220: What can be measured by cross-elasticity of demand? A a change in real income as a result of a change in the price of consumer goods B a ch…Question 221: The diagram shows how a 10% increase in consumer incomes shifts the demand for good X from D to D1. price ($) 10 D1 D 0 80 100 quantity (kg…Question 222: The table shows the quantity demanded of three goods when the price of good X changes. price of X quantity of X quantity of Y quantity of Z…70 / 89
Question 223: In an attempt to reduce crime, a government introduces a subsidy on the production of burglar alarms, but sales rise very little. Which pos…Question 224: What would be the price elasticity of demand for smartphones if their price fell from US$100 to US$90 and the quantity demanded rose from 2…Question 225: The cross-elasticity of demand of good S with respect to the price of good P is +1.5. The cross-elasticity of demand of good S with respect…Question 226: A government wishes to impose a tax on a good so that the consumer pays most of the tax increase. Which type of elasticity would best achie…Question 227: What is the measure of cross-elasticity of demand for good X in terms of good Y? A the change in the demand for X divided by the change in …71 / 89
Question 228: The producer of a good with a price-elastic demand observes that a rise in its price is accompanied by a rise in total revenue. What might …Question 229: What can be concluded about a good with a positive cross-price elasticity of demand? A Its price will be sensitive to changes in prices of …Question 230: The table shows data from a bus company that was privatised in 2013. passenger journeys revenue year percentage change $000 from previous y…Question 231: What would be the most likely reason for a firm’s decision to calculate the price elasticity of demand for its product? A to provide retail…72 / 89
Question 232: The cross-elasticity of demand of good S with respect to the price of good P is +1.5. The cross-elasticity of demand of good S with respect…Question 233: The table gives different combinations of possible values for a country’s price elasticity of demand for exports and price elasticity of de…Question 234: The diagram shows the demand curve for a normal product. price W X demand Y Z O quantity Which two points indicate a move from a price inel…Question 235: Each day there are hundreds of airline flights. Which combination would make the demand for flights most price-inelastic? distance of purpo…73 / 89
Question 236: The price elasticity of demand for a high-quality smartphone is elastic. The price of the smartphone decreases. Which combination describes…Question 237: When the price of good X rises, total spending on good X rises, but the demand for good Y falls. What can be concluded about good X and goo…Question 238: What will be the result of a subsidy that is given to the producers of a good with an inelastic demand curve? A The equilibrium price of th…Question 239: The currency of country X has a floating exchange rate against other currencies. Under which circumstances will the value of country X’s cu…74 / 89
Question 240: Which products are likely to have a positive cross-elasticity of demand with tea? A biscuits and cakes B coffee and hot chocolate C cups an…Question 241: What does the Marshall–Lerner condition state must be present for a depreciation of a currency to cause an improvement in the current accou…Question 242: An indirect tax is imposed on a product, causing total expenditure by consumers to increase. Which row identifies this situation? price pri…Question 243: The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and cinema tickets. Lee Yim restaurant meals –1.2 –0.8 cine…75 / 89
Question 244: The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3. 1 2 price 3 O total expenditure Whic…Question 245: Which product has the lowest price elasticity of demand? quantity demanded price rises by falls by (%) (%) A 0 10 B 5 5 C 10 5 D 10 0Question 246: The market for good Z is in equilibrium with 1000 units sold at a price of $10. The government pays a subsidy of $2 per unit to producers o…76 / 89
Question 247: A sports stadium has two prices of seats. The cheaper seats are $10 and the more expensive seats are $20. When the prices of all seats are …Question 248: Which row correctly describes the relationship between two goods implied by the value of the cross elasticity of demand? value of the cross…Question 249: In which situation is the demand for a product said to be price elastic? A The quantity demanded responds to a change in price. B An increa…Question 250: The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus fares caused the demand for rail travel…77 / 89
Question 251: A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direc…Question 252: In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. price P1 M1 M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of de…Question 253: The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 0…78 / 89
Question 254: When is the price elasticity of demand for a product most likely to be price elastic? A A large percentage of income is spent on the produc…Question 255: When the price of a firm’s product falls by 5%, its total revenue also falls by 5%. What describes the product’s price elasticity of demand…Question 256: The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income biscuits coffee ($) (packs) (cups)…79 / 89
Question 257: The diagram shows a demand curve for pineapples. 2 price ($) X 1.5 1 Y 0.5 0 D 0 3 6 9 12 quantity (000s) What happens to the value of pric…Question 258: The cross-elasticity of demand between good P and good Q is –0.4. The cross-elasticity of demand between good P and good R is +0.6. Which c…80 / 89
Question 259: The table shows the demand schedule for textbooks. price quantity $ demanded 50 0 40 100 30 200 20 300 10 400 0 500 What can be concluded f…Question 260: After a 10% decrease in a consumer’s income, the consumer’s demand for a good rises from 100 to 105. What is the value of the consumer’s in…Question 261: When the incomes of consumers of good X fall by 5%, under which conditions will the demand curve shift furthest to the right? income elasti…Question 262: The price elasticity of demand for a product is –0.6. The supplier wants to clear all surplus stock of a product and reduces the price of a…81 / 89
Question 263: In a town, bus fares fall by 50% and this leads to an increase in bus use by 30%. The effect on car use is very low with only a 1% reductio…Question 264: The price elasticity of demand for good X is –2.4, its income elasticity of demand is –0.4 and the cross elasticity of demand for good X wi…Question 265: The diagram shows two straight line demand curves, X and Y. price X Y O quantity What is correct about curves X and Y? A Both X and Y are u…Question 266: Which statement is correct? A Demand for an inferior good has a positive relationship to income and a negative relationship to price. B Dem…82 / 89
Question 267: A firm calculates that the income elasticity of demand for its product is –3.0. What can be deduced from this information? A In a period of…Question 268: The tables show the different quantities of a good demanded at different prices and levels of income. price quantity income quantity $ dema…Question 269: A firm is charging a price of $12 for its product and using 80% of its production capacity of 10 000 units per month. Assuming the product …83 / 89
Question 270: The diagram shows the effect of an indirect tax imposed on cigarettes. The market is initially in equilibrium at point X. price S1 Z S P1 W…Question 271: The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and cinema tickets. Lee Yim restaurant meals –1.2 –0.8 cine…Question 272: A product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit. Price elasticity of demand is 1.5 ov…84 / 89
Question 273: A good has the following elasticity values. cross elasticity of demand +1.4 income elasticity of demand –0.8 Which statement is correct? A …Question 274: The diagram shows the impact on equilibrium due to an increase in the costs of production. The original price is $72. The price elasticity …Question 275: A decrease in the quantity demanded of a product results in a proportionate decrease in sales revenues. What is true about its price elasti…85 / 89
Question 276: Cars and petrol (gasoline) are in joint demand. What is the effect of an increase in the price of cars on the demand for petrol? A B price …Question 277: Too much sugar causes an increase in a consumer’s weight. A government has introduced a ‘sugar tax’ on the consumption of soft drinks that …Question 278: A government decides to raise most of its revenues from indirect taxes. What would increase the effectiveness of this policy? A an increasi…86 / 89
Question 279: When can a product be said to have a negative income elasticity of demand? A When it is a luxury good. B When it is a necessity good. C Whe…Question 280: An indirect tax is imposed on good X. Which situation is most likely to result in producers bearing a higher burden of the tax? A price ela…Question 281: What is true for income elasticity of demand but not for price elasticity of demand? A It helps firms differentiate between goods with elas…Question 282: Which statement is true if the income elasticity of demand for a good has a value of –0.2? A When income rises less of the good is bought. …87 / 89
Question 283: The table shows the price of a good and total expenditure on the good during specific periods when the market is in equilibrium. price tota…Question 284: The diagram shows the demand curve for a product. 100 price $ 50 demand 0 0 50 100 quantity What is the price at which the price elasticity…Question 285: Public transport in an economy has an income elasticity of demand of –0.36. What does this mean about public transport? A It is an inferior…88 / 89
Question 286: Good X has an income elasticity of demand (YED) value of −0.8. Its cross elasticity of demand (XED) with respect to good Y is also −0.8. Wh…Question 287: Assuming demand is price elastic, what will rise the most if an indirect tax is removed? A consumer expenditures B price of the product C p…89 / 89

Mark scheme287 answers

Answers below. Sit the paper first if you are practising.

Pastlit

Economics 9708 · Price elasticity, income elasticity and cross elasticity of demand — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

1C1
2C1
3B1
4A1
5B1
6D1
7C1
8D1
9C1
10C1
11C1
12B1
13C1
14A1
15B1
16C1
17C1
18C1
19A1
20A1
21C1
22C1
23D1
24B1
25C1
26D1
27A1
28B1
29C1
30B1
31C1
32A1
33C1
34A1
35C1
36A1
37C1
38C1
39D1
40B1
41C1
42C1
43B1
44D1
45B1
46C1
47C1
48D1
49B1
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Pastlit

Economics 9708 · Price elasticity, income elasticity and cross elasticity of demand — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

50C1
51C1
52C1
53A1
54C1
55A1
56C1
57A1
58D1
59A1
60A1
61C1
62D1
63D1
64A1
65A1
66C1
67A1
68C1
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70B1
71C1
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75A1
76D1
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78A1
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80B1
81A1
82C1
83D1
84D1
85C1
86A1
87C1
88A1
89D1
90C1
91B1
92A1
93B1
94D1
95B1
96A1
97B1
98B1
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Pastlit

Economics 9708 · Price elasticity, income elasticity and cross elasticity of demand — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

99C1
100B1
101—1
102—1
103—1
104B1
105A1
106B1
107A1
108A1
109C1
110C1
111C1
112C1
113C1
114A1
115C1
116B1
117C1
118D1
119C1
120C1
121C1
122C1
123A1
124C1
125D1
126A1
127A1
128A1
129C1
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132D1
133D1
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135A1
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140B1
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142A1
143A1
144B1
145B1
146D1
147C1
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Pastlit

Economics 9708 · Price elasticity, income elasticity and cross elasticity of demand — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

148C1
149D1
150D1
151A1
152B1
153C1
154A1
155C1
156B1
157C1
158D1
159D1
160B1
161D1
162A1
163C1
164C1
165D1
166C1
167D1
168A1
169D1
170D1
171A1
172D1
173A1
174A1
175C1
176A1
177C1
178D1
179D1
180C1
181B1
182D1
183A1
184D1
185C1
186C1
187A1
188A1
189C1
190D1
191C1
192A1
193A1
194A1
195A1
196C1
4 / 6

Pastlit

Economics 9708 · Price elasticity, income elasticity and cross elasticity of demand — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

197B1
198C1
199B1
200D1
201D1
202D1
203C1
204A1
205A1
206A1
207D1
208C1
209D1
210D1
211C1
212B1
213B1
214D1
215C1
216D1
217A1
218C1
219D1
220B1
221C1
222C1
223D1
224C1
225C1
226A1
227C1
228B1
229C1
230B1
231B1
232C1
233A1
234D1
235A1
236B1
237D1
238B1
239D1
240B1
241C1
242D1
243C1
244C1
245D1
5 / 6

Pastlit

Economics 9708 · Price elasticity, income elasticity and cross elasticity of demand — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

246A1
247C1
248C1
249D1
250A1
251C1
252A1
253D1
254A1
255D1
256A1
257B1
258C1
259C1
260B1
261B1
262A1
263C1
264A1
265C1
266B1
267B1
268—1
269A1
270B1
271C1
272B1
273C1
274A1
275B1
276C1
277D1
278D1
279D1
280A1
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Questions as text

Q1 · The diagram shows the demand curve for commodity X 9708/11 Oct/Nov 2005

6 The diagram shows the demand curve for commodity X. price D O quantity Which of the following statements is correct? A Demand is less elastic at higher prices than at lower prices. B Consumer expenditure on the commodity always rises when price falls. C Price elasticity of demand is different at every price. D Price elasticity of demand equals one at every price.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2005

Q2 · Over the last ten years the price elasticity of demand for tea in many countries has risen 9708/11 Oct/Nov 2005

7 Over the last ten years the price elasticity of demand for tea in many countries has risen. What is the most likely cause of this change in price elasticity? A a decrease in the incomes of consumers B a decrease in the number of complements to tea C an increase in the number of substitutes for tea D an increase in the supply of tea

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2005

Q3 · The price of Good X rises by 20 % 9708/11 Oct/Nov 2005

8 The price of Good X rises by 20 %. As a result, the demand for a substitute Good Y rises by 10 %. What is the cross-elasticity of demand for Good Y with respect to Good X? A + 2 B + 0.5 C - 0.5 D - 2

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2005

Q4 · The diagram shows the demand curve for an agricultural commodity that has unitary… 9708/11 Oct/Nov 2005

18 The diagram shows the demand curve for an agricultural commodity that has unitary elasticity. S1 is the supply curve if there is a bad harvest and S2 is the supply curve if there is a good harvest. S1 S2 price P D O Q quantity What should the government do in order to stabilise the incomes of farmers? A allow the price of the commodity to be determined by the market B fix the price paid to farmers at price OP C introduce a quota on production equal to OQ D subsidise farmers in bad years and impose a tax on farmers in good years

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2005

Q5 · The price elasticity of demand for good X is 1 9708/11 May/June 2006

7 The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantity demanded is 20 000 units? A $2.00 B $2.40 C $2.66 D $20.00

1 marks

Answer: B

This question in 9708/11 May/June 2006

Q6 · The diagrams show possible relationships between income and the quantity of a good… 9708/11 May/June 2006

8 The diagrams show possible relationships between income and the quantity of a good purchased. Which diagram shows an inferior good? A B 45o income income O quantity O quantity purchased purchased C D income income O quantity O quantity purchased purchased

1 marks

Answer: D

This question in 9708/11 May/June 2006

Q7 · Assume the price elasticity of demand for best-quality French wine is zero 9708/11 May/June 2006

11 Assume the price elasticity of demand for best-quality French wine is zero. What would be the effect in New Zealand if the New Zealand government imposed a tariff on such wine? A The price of the wine would rise by an amount less than the tariff. B Demand for the wine would fall. C Expenditure on the wine would rise. D Sales of the wine would cease.

1 marks

Answer: C

This question in 9708/11 May/June 2006

Q8 · From the table below, in which price range is demand for product X inelastic? 9708/11 Oct/Nov 2006

7 From the table below, in which price range is demand for product X inelastic? product X price quantity demanded $ 12 250 11 450 10 500 9 600 8 650 A $12-11 B $11-10 C $10-9 D $9-8

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2006

Q9 · Product R is an inferior good with no close substitutes 9708/11 Oct/Nov 2006

8 Product R is an inferior good with no close substitutes. It is also a complement to product S. Which describes product R? cross elasticity of demand income elasticity of demand with respect to product S A negative positive B positive negative C negative negative D positive positive

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2006

Q10 · A businessman had intended to borrow $5000 at 8 % per year for house purchase 9708/11 May/June 2007

7 A businessman had intended to borrow $5000 at 8 % per year for house purchase. When the interest rate rose to 10 % he decided to borrow only $4000. Within what range is his interest elasticity of demand for loans? A 0.0 to –0.3 B –0.4 to –0.7 C –0.8 to –1.2 D –1.3 to –1.7

1 marks

Answer: C

This question in 9708/11 May/June 2007

Q11 · The table gives information about the market for two models of car 9708/11 May/June 2007

9 The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week respect to the price of petrol 1200 cc 10 000 –0.25 2000 cc 5 000 –0.50 If the prices of the cars remain unchanged, but the price of petrol increases by 100 %, what will be the effect on the number of cars sold per week? A increase by 5000 B no change C decrease by 5000 D decrease by 15 000

1 marks

Answer: C

This question in 9708/11 May/June 2007

Q12 · In 2003, some tobacco companies in the US wanted to raise prices but a spokesman said the… 9708/11 May/June 2007

13 In 2003, some tobacco companies in the US wanted to raise prices but a spokesman said the tobacco industry was no longer in a position where it could increase revenue by raising prices. What might be concluded from this statement? A The price elasticity of demand for tobacco is lower than it used to be. B The price elasticity of demand for tobacco is likely to be greater than unity. C The price of tobacco is too low. D The profit of tobacco growers does not depend on the price system.

1 marks

Answer: B

This question in 9708/11 May/June 2007

Q13 · A fall in the price of cars causes the demand for petrol to rise by 20 % 9708/11 Oct/Nov 2007

6 A fall in the price of cars causes the demand for petrol to rise by 20 %. The cross-elasticity of demand between cars and petrol is –2. Which change in car prices has brought this about? from to A $6000 $5000 B $5500 $4500 C $5000 $4500 D $5000 $4000

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2007

Q14 · The government imposes a sales tax to reduce consumption of good X 9708/11 Oct/Nov 2007

9 The government imposes a sales tax to reduce consumption of good X. With which combination of price elasticity of demand and price elasticity of supply will this have the greatest effect? A elastic demand and elastic supply B elastic demand and inelastic supply C inelastic demand and elastic supply D inelastic demand and inelastic supply

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2007

Q15 · A good has unitary price elasticity of demand and at a price of $25 it sells 100 000 units 9708/11 May/June 2008

7 A good has unitary price elasticity of demand and at a price of $25 it sells 100 000 units. Which price must the firm charge if it wants to sell 125 000 units of the good? A $22 B $20 C $18 D $15

1 marks

Answer: B

This question in 9708/11 May/June 2008

Q16 · The table shows how an individual’s consumption of cola and nuts varies with income 9708/11 May/June 2008

8 The table shows how an individual’s consumption of cola and nuts varies with income. income ($) cola (cans) nuts (packets) 50 2 0 100 4 1 Which statement about income elasticity of demand over the range of income shown is true? A For cola it is less than 1. B For cola it is greater than 1. C For nuts it is greater than 1. D For nuts it is zero.

1 marks

Answer: C

This question in 9708/11 May/June 2008

Q17 · A change in the price of a good causes an increase in the quantity of the good demanded 9708/11 Oct/Nov 2008

5 A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direction of price change for this to be certain to happen? nature of good price change A inferior fall B inferior rise C normal fall D normal rise

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2008

Q18 · The diagram shows how the quantity demanded of four goods changes as income changes 9708/11 Oct/Nov 2008

6 The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is always +1? A B C quantity of good D demanded O income

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2008

Q19 · The diagram shows the demand curve for a product 9708/11 Oct/Nov 2008

7 The diagram shows the demand curve for a product. M N price S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle OPQR, which statement is correct? A A rise in price from OR to ON results in the same proportionate fall in quantity demanded. B Consumer surplus falls by RSMN if the price rises from OR to ON. C The price elasticity of demand is unitary for all changes in price. D Total revenue falls by MSQ if the price rises from OR to ON.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2008

Q20 · The price of good X rises by 10 % 9708/11 Oct/Nov 2008

8 The price of good X rises by 10 %. As a result, the demand for a substitute good Y rises by 20 %. What is the cross-elasticity of demand for good Y with respect to good X? A +2 B +0.5 C –0.5 D –2

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2008

Q21 · The table shows the demand for tickets for a concert 9708/11 May/June 2009

6 The table shows the demand for tickets for a concert. price of tickets quantity $ demanded 20 6000 30 5000 40 4000 50 3000 The capacity of the concert hall is 6000. What price should be charged to maximise total revenue? A $20 B $30 C $40 D $50

1 marks

Answer: C

This question in 9708/11 May/June 2009

Q22 · The price elasticity of demand for a product is constant and equal to unity 9708/11 May/June 2009

8 The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between total expenditure on the product and its price? A B total C expenditure D O price

1 marks

Answer: C

This question in 9708/11 May/June 2009

Q23 · In the UK, attempts to encourage people to change from road to rail travel by the… 9708/11 May/June 2009

9 In the UK, attempts to encourage people to change from road to rail travel by the introduction of a system of road pricing were forecast to fail because ‘people like using their cars too much’. How would this forecast be explained? A The price elasticity of demand for cars is high. B The price elasticity of demand for petrol is high. C The price elasticity of demand for rail travel is low. D The price elasticity of demand for car travel is low.

1 marks

Answer: D

This question in 9708/11 May/June 2009

Q24 · The table shows changes in a consumer’s expenditure on various goods when his income… 9708/11 May/June 2009

10 The table shows changes in a consumer’s expenditure on various goods when his income increases from $20 000 to $24 000. income income $20 000: $24 000: good amount spent amount spent on good on good ($) ($) W 100 96 X 100 100 Y 200 224 Z 200 248 Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of demand greater than 1.0? A W only B Z only C W and Z only D W, Y and Z

1 marks

Answer: B

This question in 9708/11 May/June 2009

Q25 · Japan introduces import quotas on consumer durables imported from Malaysia 9708/11 May/June 2009

20 Japan introduces import quotas on consumer durables imported from Malaysia. These goods have a high price elasticity of demand. What effect is this likely to have on the prices paid for these goods by Japanese consumers and on the revenues received by Malaysian producers? change in prices paid change in revenues by Japanese received by Malaysian consumers producers A decrease uncertain B decrease increase C increase decrease D increase uncertain

1 marks

Answer: C

This question in 9708/11 May/June 2009

Q26 · A country has a large current account deficit 9708/11 May/June 2009

30 A country has a large current account deficit. Its government decides to devalue its currency. In which circumstance would such a measure reduce the deficit? price elasticity of price elasticity of demand for exports demand for imports A 0.0 0.0 B 0.0 0.5 C 0.5 0.5 D 0.5 1.0

1 marks

Answer: D

This question in 9708/11 May/June 2009

Q27 · A government wishes to impose a tax on a good so that the consumer and not the producer… 9708/11 Oct/Nov 2009

6 A government wishes to impose a tax on a good so that the consumer and not the producer pays most of the tax increase. Which type of elasticity would best achieve this aim? A high price elasticity of supply B low price elasticity of supply C unitary price elasticity of supply D perfectly inelastic price elasticity of supply

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2009

Q28 · The table shows the price elasticity of demand for four goods and services 9708/11 Oct/Nov 2009

7 The table shows the price elasticity of demand for four goods and services. price elasticity motor cycles 1.6 telephone calls 1.0 football tickets 0.3 light bulbs 0.0 If the price of each item increased by 1 %, for which items would the total expenditure increase? A football tickets only B football tickets and light bulbs C motor cycles and telephone calls D motor cycles only

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2009

Q29 · Two goods, X and Y, are complementary goods 9708/11 Oct/Nov 2009

8 Two goods, X and Y, are complementary goods. Column 1 of the table below shows the original market situation at time period 1 and column 2 shows the situation following an increase in the price of good Y. 1 2 price of good X 10 10 quantity demanded 50 40 price of good Y 20 30 quantity demanded 80 60 The value of cross elasticity of demand for good X with respect to the price of good Y lies between A –1.7 and –2.6. B –0.8 and –1.3. C –0.3 and –0.8. D +0.3 and +0.6.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2009

Q30 · The table shows the price elasticity of demand for four goods and services 9708/12 Oct/Nov 2009

6 The table shows the price elasticity of demand for four goods and services. price elasticity motor cycles 1.6 telephone calls 1.0 football tickets 0.3 light bulbs 0.0 If the price of each item increased by 1 %, for which items would the total expenditure increase? A football tickets only B football tickets and light bulbs C motor cycles and telephone calls D motor cycles only

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2009

Q31 · Two goods, X and Y, are complementary goods 9708/12 Oct/Nov 2009

7 Two goods, X and Y, are complementary goods. Column 1 of the table below shows the original market situation at time period 1 and column 2 shows the situation following an increase in the price of good Y. 1 2 price of good X 10 10 quantity demanded 50 40 price of good Y 20 30 quantity demanded 80 60 The value of cross elasticity of demand for good X with respect to the price of good Y lies between A –1.7 and –2.6. B –0.8 and –1.3. C –0.3 and –0.8. D +0.3 and +0.6.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2009

Q32 · The demand for a commodity has unitary price elasticity 9708/11 May/June 2010

8 The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity and its price? A B total total expenditure expenditure O O price price C D total total expenditure expenditure O O price price

1 marks

Answer: A

This question in 9708/11 May/June 2010

Q33 · The table gives information about the market for two models of car 9708/11 May/June 2010

9 The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week respect to the price of petrol 1200 cc 10 000 –0.25 2000 cc 5 000 –0.50 If the prices of the cars remain unchanged, but the price of petrol increases by 100 %, what will be the effect on the number of cars sold per week? A increase by 5000 B no change C decrease by 5000 D decrease by 15 000

1 marks

Answer: C

This question in 9708/11 May/June 2010

Q34 · The demand for a commodity has unitary price elasticity 9708/12 May/June 2010

7 The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity and its price? A B total total expenditure expenditure O O price price C D total total expenditure expenditure O O price price

1 marks

Answer: A

This question in 9708/12 May/June 2010

Q35 · The table gives information about the market for two models of car 9708/12 May/June 2010

8 The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week respect to the price of petrol 1200 cc 10 000 –0.25 2000 cc 5 000 –0.50 If the prices of the cars remain unchanged, but the price of petrol increases by 100 %, what will be the effect on the number of cars sold per week? A increase by 5000 B no change C decrease by 5000 D decrease by 15 000

1 marks

Answer: C

This question in 9708/12 May/June 2010

Q36 · The demand for a commodity has unitary price elasticity 9708/13 May/June 2010

6 The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity and its price? A B total total expenditure expenditure O O price price C D total total expenditure expenditure O O price price

1 marks

Answer: A

This question in 9708/13 May/June 2010

Q37 · The table gives information about the market for two models of car 9708/13 May/June 2010

7 The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week respect to the price of petrol 1200 cc 10 000 –0.25 2000 cc 5 000 –0.50 If the prices of the cars remain unchanged, but the price of petrol increases by 100 %, what will be the effect on the number of cars sold per week? A increase by 5000 B no change C decrease by 5000 D decrease by 15 000

1 marks

Answer: C

This question in 9708/13 May/June 2010

Q38 · When is a deficit on the current account of the balance of payments likely to worsen? 9708/13 May/June 2010

25 When is a deficit on the current account of the balance of payments likely to worsen? A when the government adopts a deflationary macroeconomic policy B when the government devalues the currency C when the prices of imported products that are demand-inelastic increase significantly D when tariffs are placed on imported products that are demand-elastic

1 marks

Answer: C

This question in 9708/13 May/June 2010

Q39 · The diagram shows a consumer’s short-run and long-run demand curves for coconuts 9708/11 Oct/Nov 2010

6 The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q0 at price P0. V X P0 Y price Z W O Q0 quantity If the price of coconuts increases from P0, the consumer’s short-run response is greater than his long-run response. If the price decreases from P0 his short-run response is smaller than his long- run response. What is the consumer’s short-run demand curve? A VYW B VYZ C XYZ D XYW

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2010

Q40 · The table shows a consumer’s expenditure on a range of goods at different levels of income 9708/11 Oct/Nov 2010

7 The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income elasticity of demand greater than zero, but less than one? consumer’s income ($) 40 50 100 good consumer’s expenditure ($) A 10 18 40 B 10 11 20 C 10 10 10 D 10 8 6

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2010

Q41 · The diagram shows the demand curve for a product 9708/11 Oct/Nov 2010

8 The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices than at lower prices. B Consumer expenditure on the product always rises when price falls. C Price elasticity of demand is different at every price. D Price elasticity of demand equals one at every price.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2010

Q42 · What will make it more likely that road tolls will reduce traffic congestion? 9708/11 Oct/Nov 2010

17 What will make it more likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public transport is zero. B Demand for car use is income-elastic. C Demand for car use is price-elastic. D Supply of public transport is price-inelastic.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2010

Q43 · In a country the Marshall-Lerner condition for an improvement in the trade balance is… 9708/11 Oct/Nov 2010

28 In a country the Marshall-Lerner condition for an improvement in the trade balance is satisfied in the long run, but quantities of imports and exports are slow to respond to price changes. The government devalues its currency to reduce its trade deficit. Which curve indicates the probable behaviour of the trade balance? A B + trade C 0 balance – D time

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2010

Q44 · The diagram shows a consumer’s short-run and long-run demand curves for coconuts 9708/12 Oct/Nov 2010

6 The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q0 at price P0. V X P0 Y price Z W O Q0 quantity If the price of coconuts increases from P0, the consumer’s short-run response is greater than his long-run response. If the price decreases from P0 his short-run response is smaller than his long- run response. What is the consumer’s short-run demand curve? A VYW B VYZ C XYZ D XYW

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2010

Q45 · The table shows a consumer’s expenditure on a range of goods at different levels of income 9708/12 Oct/Nov 2010

7 The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income elasticity of demand greater than zero, but less than one? consumer’s income ($) 40 50 100 good consumer’s expenditure ($) A 10 18 40 B 10 11 20 C 10 10 10 D 10 8 6

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2010

Q46 · The diagram shows the demand curve for a product 9708/12 Oct/Nov 2010

8 The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices than at lower prices. B Consumer expenditure on the product always rises when price falls. C Price elasticity of demand is different at every price. D Price elasticity of demand equals one at every price.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2010

Q47 · What will make it more likely that road tolls will reduce traffic congestion? 9708/12 Oct/Nov 2010

17 What will make it more likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public transport is zero. B Demand for car use is income-elastic. C Demand for car use is price-elastic. D Supply of public transport is price-inelastic.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2010

Q48 · The diagram shows a consumer’s short-run and long-run demand curves for coconuts 9708/13 Oct/Nov 2010

5 The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q0 at price P0. V X P0 Y price Z W O Q0 quantity If the price of coconuts increases from P0, the consumer’s short-run response is greater than his long-run response. If the price decreases from P0 his short-run response is smaller than his long- run response. What is the consumer’s short-run demand curve? A VYW B VYZ C XYZ D XYW

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2010

Q49 · The table shows a consumer’s expenditure on a range of goods at different levels of income 9708/13 Oct/Nov 2010

6 The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income elasticity of demand greater than zero, but less than one? consumer’s income ($) 40 50 100 good consumer’s expenditure ($) A 10 18 40 B 10 11 20 C 10 10 10 D 10 8 6

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2010

Q50 · The diagram shows the demand curve for a product 9708/13 Oct/Nov 2010

7 The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices than at lower prices. B Consumer expenditure on the product always rises when price falls. C Price elasticity of demand is different at every price. D Price elasticity of demand equals one at every price.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2010

Q51 · What will make it more likely that road tolls will reduce traffic congestion? 9708/13 Oct/Nov 2010

16 What will make it more likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public transport is zero. B Demand for car use is income-elastic. C Demand for car use is price-elastic. D Supply of public transport is price-inelastic.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2010

Q52 · The diagram shows the demand curve for a product with unitary price elasticity 9708/11 May/June 2011

8 The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A fall in price will bring about an increase in expenditure on the product. B A fall in price will bring about an increase in sales but a fall in expenditure on the product. C As the price rises, expenditure on the product stays the same. D As the price rises, expenditure on the product rises and then falls.

1 marks

Answer: C

This question in 9708/11 May/June 2011

Q53 · The table gives estimates of the price elasticities and cross elasticities of demand for… 9708/11 May/June 2011

11 The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to the price of: service bus travel rail travel bus travel –0.37 +0.13 rail travel +0.16 –0.43 What would be the change in the volume of rail travel resulting from a 1 % increase in bus fares? A an increase of 0.16 % B an increase of 0.43 % C a reduction of 0.13 % D a reduction of 0.37 %

1 marks

Answer: A

This question in 9708/11 May/June 2011

Q54 · The diagram shows the demand curve for a product with unitary price elasticity 9708/12 May/June 2011

7 The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A fall in price will bring about an increase in expenditure on the product. B A fall in price will bring about an increase in sales but a fall in expenditure on the product. C As the price rises, expenditure on the product stays the same. D As the price rises, expenditure on the product rises and then falls.

1 marks

Answer: C

This question in 9708/12 May/June 2011

Q55 · The table gives estimates of the price elasticities and cross elasticities of demand for… 9708/12 May/June 2011

10 The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to the price of: service bus travel rail travel bus travel –0.37 +0.13 rail travel +0.16 –0.43 What would be the change in the volume of rail travel resulting from a 1 % increase in bus fares? A an increase of 0.16 % B an increase of 0.43 % C a reduction of 0.13 % D a reduction of 0.37 %

1 marks

Answer: A

This question in 9708/12 May/June 2011

Q56 · The diagram shows the demand curve for a product with unitary price elasticity 9708/13 May/June 2011

6 The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A fall in price will bring about an increase in expenditure on the product. B A fall in price will bring about an increase in sales but a fall in expenditure on the product. C As the price rises, expenditure on the product stays the same. D As the price rises, expenditure on the product rises and then falls.

1 marks

Answer: C

This question in 9708/13 May/June 2011

Q57 · The table gives estimates of the price elasticities and cross elasticities of demand for… 9708/13 May/June 2011

9 The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to the price of: service bus travel rail travel bus travel –0.37 +0.13 rail travel +0.16 –0.43 What would be the change in the volume of rail travel resulting from a 1 % increase in bus fares? A an increase of 0.16 % B an increase of 0.43 % C a reduction of 0.13 % D a reduction of 0.37 %

1 marks

Answer: A

This question in 9708/13 May/June 2011

Q58 · The price of good X rises by 10 % 9708/11 Oct/Nov 2011

8 The price of good X rises by 10 %. As a result, the demand for a complementary good Y changes by 20 %. What is the cross elasticity of demand for good Y with respect to good X? A +2 B +0.5 C –0.5 D –2

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2011

Q59 · A country’s floating exchange rate falls and its export revenue declines 9708/11 Oct/Nov 2011

27 A country’s floating exchange rate falls and its export revenue declines. What could explain this? A Demand for its exports is inelastic. B Supply of its exports is elastic. C The exchange rate is in disequilibrium. D The price of exports, in terms of foreign currency, rises.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2011

Q60 · A country at the beginning of a given period seeks to improve the current account of its… 9708/11 Oct/Nov 2011

30 A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The effect of this policy in the following two years is shown in the diagram. current account surplus current +_ 0 balance 6 12 18 24 deficit months Which statement is likely to explain this performance? A In the short run, the price elasticity of demand for exports and imports was very low. B The domestic inflation rate fell after 12 months before having the desired result. C The elasticity of demand for imports diminished after 12 months. D The policy was ineffective and other factors must have led to an improvement in the current account.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2011

Q61 · During a period of falling incomes in Germany in 2009, demand for jewellery declined 9708/12 Oct/Nov 2011

5 During a period of falling incomes in Germany in 2009, demand for jewellery declined. There was, however, a rise in demand for frozen foods. How would the effect on the demand for the two products be illustrated? jewellery frozen food A a movement downwards a movement upwards along the demand curve along the demand curve B a movement upwards a shift to the right of along the demand curve the demand curve C a shift to the left of a shift to the right of the demand curve the demand curve D a shift to the right of a movement upwards the demand curve along the demand curve

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2011

Q62 · It was estimated in 2010 that milk had an income elasticity of demand of –0.6 9708/12 Oct/Nov 2011

6 It was estimated in 2010 that milk had an income elasticity of demand of –0.6. What can be concluded about milk from this information? A It accounts for only a small proportion of household expenditure. B It has very few substitutes. C Household expenditure on milk will decrease if the price of milk increases. D It is an inferior good.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2011

Q63 · The price of good X rises by 10 % 9708/13 Oct/Nov 2011

6 The price of good X rises by 10 %. As a result, the demand for a complementary good Y changes by 20 %. What is the cross elasticity of demand for good Y with respect to good X? A +2 B +0.5 C –0.5 D –2

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2011

Q64 · A country’s floating exchange rate falls and its export revenue declines 9708/13 Oct/Nov 2011

25 A country’s floating exchange rate falls and its export revenue declines. What could explain this? A Demand for its exports is inelastic. B Supply of its exports is elastic. C The exchange rate is in disequilibrium. D The price of exports, in terms of foreign currency, rises.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2011

Q65 · A country at the beginning of a given period seeks to improve the current account of its… 9708/13 Oct/Nov 2011

28 A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The effect of this policy in the following two years is shown in the diagram. current account surplus current +_ 0 balance 6 12 18 24 deficit months Which statement is likely to explain this performance? A In the short run, the price elasticity of demand for exports and imports was very low. B The domestic inflation rate fell after 12 months before having the desired result. C The elasticity of demand for imports diminished after 12 months. D The policy was ineffective and other factors must have led to an improvement in the current account.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2011

Q66 · A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000… 9708/11 May/June 2012

6 A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many will the firm sell if it charges a price of $5? A 10 000 B 100 000 C 160 000 D 200 000

1 marks

Answer: C

This question in 9708/11 May/June 2012

Q67 · The cross elasticity of demand between two products, X and Y, is negative 9708/11 May/June 2012

7 The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of product Y? A Quantity demanded of product X will fall. B Supply of product X will rise. C The cross elasticity of demand will rise. D The price of product X would rise.

1 marks

Answer: A

This question in 9708/11 May/June 2012

Q68 · The diagram shows the relationship between total expenditure and price for three… 9708/12 May/June 2012

7 The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3. 1 2 price 3 O total expenditure Which curves represent the products with price elastic and unitary price elasticity of demand? elastic unitary A 1 2 B 2 3 C 3 1 D 3 2

1 marks

Answer: C

This question in 9708/12 May/June 2012

Q69 · The table shows the quantities demanded (Q) of goods X and Y corresponding to different… 9708/12 May/June 2012

8 The table shows the quantities demanded (Q) of goods X and Y corresponding to different prices (P) of the two goods. PX = $8 PX = $10 QX = 16 QX = 12 PY = $3 QY = 20 QY = 30 QX = 20 QX = 16 PY = $4 QY = 16 QY = 24 Within which range is the value of the cross elasticity of demand for good Y with respect to the price of good X? A 0.75 to 1.5 B 1.50 to 2.4 C 1.66 to 2.0 D 1.75 to 2.5

1 marks

Answer: C

This question in 9708/12 May/June 2012

Q70 · What is the definition of a normal good? 9708/13 May/June 2012

5 What is the definition of a normal good? A one where the demand for the good is both price and income elastic B one where the income elasticity of demand for the good is greater than zero C one where the proportion of income a consumer spends on the good increases with a rise in income D one where the quantity demanded increases when the price of the good falls

1 marks

Answer: B

This question in 9708/13 May/June 2012

Q71 · A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000… 9708/13 May/June 2012

6 A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many will the firm sell if it charges a price of $5? A 10 000 B 100 000 C 160 000 D 200 000

1 marks

Answer: C

This question in 9708/13 May/June 2012

Q72 · The cross elasticity of demand between two products, X and Y, is negative 9708/13 May/June 2012

7 The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of product Y? A Quantity demanded of product X will fall. B Supply of product X will rise. C The cross elasticity of demand will rise. D The price of product X would rise.

1 marks

Answer: A

This question in 9708/13 May/June 2012

Q73 · The diagrams show possible relationships between income and the quantity of a good… 9708/11 Oct/Nov 2012

7 The diagrams show possible relationships between income and the quantity of a good purchased. Which diagram shows an inferior good? A B 45° income income O quantity O quantity purchased purchased C D income income O quantity O quantity purchased purchased

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2012

Q74 · The price elasticity of demand for good X is 1 9708/11 Oct/Nov 2012

8 The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantity demanded is 20 000 units? A $2.00 B $2.40 C $12.00 D $20.00

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2012

Q75 · Consumer spending decreased in the recession of 2009-10 9708/11 Oct/Nov 2012

9 Consumer spending decreased in the recession of 2009-10. A firm tried to keep revenue high by giving discounts to encourage demand. It measured the price elasticity of demand (PED) for its own product and the cross elasticity of demand (XED) with its competitors’ products. When might such promotions achieve the result the company hoped? A when PED is greater than one and XED is positive B when PED is less than one and XED is negative C when PED is less than one and XED is positive D when PED is unity and XED is negative

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2012

Q76 · What can be concluded about a product which has an income elasticity of demand (YED) of… 9708/12 Oct/Nov 2012

6 What can be concluded about a product which has an income elasticity of demand (YED) of +1.5 and a cross elasticity of demand (XED) of +1.2? YED figure XED figure A the product is an inferior good the product has a close complement B the product is an inferior good the product has a close substitute C the product is a normal good the product has a close complement D the product is a normal good the product has a close substitute

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2012

Q77 · A manufacturer increases the price of his product in an attempt to increase total revenue 9708/12 Oct/Nov 2012

7 A manufacturer increases the price of his product in an attempt to increase total revenue. The table shows the outcome of the policy. price total revenue ($) 000’s ($) 4 400 5 500 6 600 What is the price elasticity of demand for the product? A perfectly elastic B perfectly inelastic C relatively elastic D relatively inelastic

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2012

Q78 · A government wishes to impose a tax on a good so that the producer and not the consumer… 9708/13 Oct/Nov 2012

7 A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax. Which type of elasticity would it be best for the good to have to achieve this aim? A high price elasticity of demand B low price elasticity of demand C totally inelastic price elasticity of demand D unitary price elasticity of demand

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2012

Q79 · The diagram shows the relationship between the price and the total expenditure on a good 9708/13 Oct/Nov 2012

8 The diagram shows the relationship between the price and the total expenditure on a good. price O total expenditure Which statement is correct? A The income elasticity of demand for the commodity is unity. B The income elasticity of demand for the commodity is zero. C The price elasticity of demand for the commodity is unity. D The price elasticity of demand for the commodity is zero.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2012

Q80 · The table gives an individual’s demand for four goods at two income levels 9708/13 Oct/Nov 2012

9 The table gives an individual’s demand for four goods at two income levels. Over this range of income, for which good does the individual have an income elasticity of demand = 1? income level good $1000 $1100 A 50 50 B 50 55 C 50 60 D 50 100

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2012

Q81 · The price elasticity of demand for a product is unitary for all price ranges 9708/11 May/June 2013

6 The price elasticity of demand for a product is unitary for all price ranges. What will be the effect of an increase in its price? A an equal proportionate decrease in the amount demanded B an equal proportionate decrease in expenditure on the product C an increase in the product’s percentage of total consumer expenditure D no change in the amount of the product demanded

1 marks

Answer: A

This question in 9708/11 May/June 2013

Q82 · A fall in the price of cars causes the demand for petrol to rise by 20% 9708/11 May/June 2013

7 A fall in the price of cars causes the demand for petrol to rise by 20%. The cross-elasticity of demand between cars and petrol is –2. Which change in car prices has brought this about? from to A $6000 $5000 B $5500 $4500 C $5000 $4500 D $5000 $4000

1 marks

Answer: C

This question in 9708/11 May/June 2013

Q83 · When the supply of a good decreases, equilibrium price stays the same 9708/12 May/June 2013

7 When the supply of a good decreases, equilibrium price stays the same. What is the price elasticity of demand of the good? A –1 B zero C +1 D infinite

1 marks

Answer: D

This question in 9708/12 May/June 2013

Q84 · A product is an inferior good with no close substitutes 9708/12 May/June 2013

8 A product is an inferior good with no close substitutes. It is also a complement to good X. Which product matches the above description? cross elasticity of price elasticity income elasticity product demand with respect of demand of demand to the price of X A –2 +2 +1 B –2 +2 –1 C –0.5 –2 +1 D –0.5 –2 –1

1 marks

Answer: D

This question in 9708/12 May/June 2013

Q85 · The diagram shows the demand curve for a product 9708/13 May/June 2013

6 The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Demand is less elastic at higher prices than at lower prices. B Consumer expenditure on the product always rises when price falls. C Price elasticity of demand is different at every price. D Price elasticity of demand equals one at every price.

1 marks

Answer: C

This question in 9708/13 May/June 2013

Q86 · Why might a product have a high negative income elasticity of demand and a high price… 9708/13 May/June 2013

7 Why might a product have a high negative income elasticity of demand and a high price elasticity of demand? A It is an inferior good with close substitutes. B It is an inferior good with weak complements. C It is a normal good with close substitutes. D It is a normal good with weak complements.

1 marks

Answer: A

This question in 9708/13 May/June 2013

Q87 · The diagram shows how the quantity demanded of four goods changes as income changes 9708/11 Oct/Nov 2013

8 The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is always +1? A B C quantity of good D demanded O income

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2013

Q88 · The cross elasticity of demand between bus travel and rail travel is +2 9708/11 Oct/Nov 2013

9 The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus fares caused the demand for rail travel to rise by 10%. Which change in bus fares has brought this about? from to (cents) (cents) A 20 21 B 30 33 C 40 45 D 50 60

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2013

Q89 · The diagram shows the demand for a product for which there are only three buyers… 9708/12 Oct/Nov 2013

8 The diagram shows the demand for a product for which there are only three buyers, Freeman, Hardy and Willis. D 25 20 price 15 ($) 10 5 D 0 0 10 20 30 40 50 quantity The table shows the demand from two of the three buyers. price ($) Freeman’s demand Hardy’s demand 10 24 6 15 15 5 20 6 4 Which statement about the demand for the product from Willis is correct? A It has unitary price elasticity of demand. B It is a downward sloping straight line demand curve. C It is a perfectly elastic demand curve. D It is a perfectly inelastic demand curve.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2013

Q90 · The price elasticity of demand for a product is constant and equal to unity 9708/13 Oct/Nov 2013

7 The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between total expenditure on the product and its price? A B total C expenditure D O price

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2013

Q91 · The price of good X rises by 20 % 9708/13 Oct/Nov 2013

8 The price of good X rises by 20 %. As a result, the demand for a substitute good Y rises by 10 %. What is the cross-elasticity of demand for good Y with respect to good X? A +2 B +0.5 C –0.5 D –2

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2013

Q92 · Oranges and apples are substitutes 9708/13 Oct/Nov 2013

11 Oranges and apples are substitutes. The diagram shows the equilibrium position in the market for oranges at X. Weather conditions reduce the number of oranges grown but increase the number of apples grown. Which point is likely to indicate the new equilibrium for oranges? S2 S1 S3 B A X C price of oranges D D2 D1 D3 O quantity of oranges

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2013

Q93 · In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola… 9708/11 May/June 2014

7 In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola curve. D1 D2 M price D2 N D1 O quantity Which statement is correct? A D2D2 is more elastic than D1D1 at point M. B D2D2 is more elastic than D1D1 at point N. C The elasticity of demand increases on moving down both curves. D The elasticity of demand is inelastic at point M on both curves.

1 marks

Answer: B

This question in 9708/11 May/June 2014

Q94 · The table shows changes in a consumer’s expenditure on various goods when her income… 9708/11 May/June 2014

8 The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 000: $24 000: good amount spent amount spent on good on good ($) ($) W 100 96 X 100 100 Y 200 224 Z 200 248 Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of demand greater than 1.0? A W, Y and Z B W and Z only C W only D Z only

1 marks

Answer: D

This question in 9708/11 May/June 2014

Q95 · The diagram shows the demand for and supply of a product 9708/11 May/June 2014

9 The diagram shows the demand for and supply of a product. D price S O quantity What can be deduced about the product? A It has infinite price elasticity of demand. B It has no substitutes. C It is an inferior good. D It takes a large proportion of consumer income.

1 marks

Answer: B

This question in 9708/11 May/June 2014

Q96 · If the elasticity of demand for a commodity is unity, an increase in its price will A… 9708/12 May/June 2014

7 If the elasticity of demand for a commodity is unity, an increase in its price will A decrease the quantity purchased. B have no effect on consumer surplus. C increase total expenditure on the commodity. D leave the quantity purchased unchanged.

1 marks

Answer: A

This question in 9708/12 May/June 2014

Q97 · The table shows a consumer’s expenditure on a range of goods at different levels of income 9708/12 May/June 2014

8 The table shows a consumer’s expenditure on a range of goods at different levels of income. For which good does the consumer have an income elasticity of demand greater than zero, but less than one? consumer’s income ($) 40 50 100 good consumer’s expenditure ($) A 10 18 40 B 10 11 20 C 10 10 10 D 10 8 6

1 marks

Answer: B

This question in 9708/12 May/June 2014

Q98 · A good has unitary price elasticity of demand and at a price of $25 it sells 100 000 units 9708/13 May/June 2014

6 A good has unitary price elasticity of demand and at a price of $25 it sells 100 000 units. Which price must the firm charge if it wants to sell 125 000 units of the good? A $24 B $20 C $16 D $12

1 marks

Answer: B

This question in 9708/13 May/June 2014

Q99 · The diagram shows how a 10% increase in consumer incomes shifts the demand for good X… 9708/13 May/June 2014

7 The diagram shows how a 10% increase in consumer incomes shifts the demand for good X from D to D1. price ($) 10 D1 D 0 80 100 quantity (kg) Which statement about good X is correct? A It is a normal good with income elastic demand. B It is a normal good with income inelastic demand. C It is an inferior good with income elastic demand. D It is an inferior good with income inelastic demand.

1 marks

Answer: C

This question in 9708/13 May/June 2014

Q100 · The diagram shows the relationship between a firm’s total revenue and the quantity of… 9708/13 May/June 2014

8 The diagram shows the relationship between a firm’s total revenue and the quantity of goods sold. revenue TR O quantity What is the price elasticity of demand for the good? A zero B between zero and one C one D between one and infinity

1 marks

Answer: B

This question in 9708/13 May/June 2014

Q101 · The diagram shows a consumer’s short-run and long-run demand curves for coconuts 9708/11 Oct/Nov 2014

6 The diagram shows a consumer’s short-run and long-run demand curves for coconuts. Initially, the consumer purchases quantity Q at price P. V X P Y price Z W O Q quantity If the price of coconuts increases from P, the consumer’s short-run response is greater than his long-run response. If the price decreases from P his short-run response is smaller than his long- run response. What is the consumer’s short-run demand curve? A VYW B VYZ C XYW D XYZ

1 marks

This question in 9708/11 Oct/Nov 2014

Q102 · The diagram shows the demand curve for a product 9708/11 Oct/Nov 2014

7 The diagram shows the demand curve for a product. M N price S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle OPQR, which statement is correct? A A rise in price from OR to ON results in the same proportionate fall in quantity demanded. B Consumer surplus falls by RSMN if the price rises from OR to ON. C The price elasticity of demand is unitary for all changes in price. D Total revenue falls by MSQ if the price rises from OR to ON.

1 marks

This question in 9708/11 Oct/Nov 2014

Q103 · Which elasticity values indicate that cars are normal goods and that petrol is a… 9708/11 Oct/Nov 2014

8 Which elasticity values indicate that cars are normal goods and that petrol is a complement to car use? cross elasticity demand of income elasticity of (XED) for petrol relative to demand (YED) for cars changes in car prices A YED is negative XED is negative B YED is negative XED is positive C YED is positive XED is negative D YED is positive XED is positive

1 marks

This question in 9708/11 Oct/Nov 2014

Q104 · The market price of a product rose from $8 to $10 and as a result the market demand fell… 9708/12 Oct/Nov 2014

5 The market price of a product rose from $8 to $10 and as a result the market demand fell from 20 000 to 8000 a week. Consumer X’s demand declined from 30 to 24 and consumer Y’s demand fell from 100 to 60 a week. What can be concluded from this information? A Consumer X’s demand for the product was more elastic than the market demand. B Consumer X’s percentage share of the market increased. C Producer’s total profit fell. D Producer’s total revenue rose.

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2014

Q105 · A government wishes to impose a tax on a good so that the producer and not the consumer… 9708/12 Oct/Nov 2014

6 A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax increase. Which level of price elasticity of demand would it be best for the good to have to achieve this aim? A price elasticity of demand is elastic B price elasticity of demand is inelastic C price elasticity of demand is perfectly inelastic D price elasticity of demand is unitary

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

Q106 · The demand for a commodity has unitary price elasticity 9708/12 Oct/Nov 2014

7 The demand for a commodity has unitary price elasticity. Which diagram shows the relationship between total expenditure on the commodity and its price? A B total total expenditure expenditure O O price price C D total total expenditure expenditure O O price price

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2014

Q107 · The price of good X rises by 10% 9708/12 Oct/Nov 2014

8 The price of good X rises by 10%. As a result, the demand for a substitute good Y rises by 20%. What is the cross-elasticity of demand for good Y with respect to the price of good X? A +2 B +0.5 C –0.5 D –2

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

Q108 · In which case will a given increase in the supply of a good cause the greatest fall in… 9708/12 Oct/Nov 2014

11 In which case will a given increase in the supply of a good cause the greatest fall in the price of the good? A when the demand for the good is perfectly inelastic B when the demand for the good is infinite C when the good is an inferior good D when the good’s price elasticity of demand is positive

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

Q109 · The table shows the price and quantity demanded of a successful film DVD in the first… 9708/13 Oct/Nov 2014

5 The table shows the price and quantity demanded of a successful film DVD in the first four weeks after its release. price of DVD quantity demanded week ($) per week 1 16 3000 2 14 5000 3 12 6500 4 10 7800 What can be concluded from the table? A Sales do not reflect price changes. B Sales increase less than proportionally to changes in price. C Sales increase more than proportionally to changes in price. D Sales reflect proportionately the changes in price.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q110 · The price of good X rises by 20% 9708/13 Oct/Nov 2014

6 The price of good X rises by 20%. As a result, the demand for a substitute good Y changes by 10%. What is the cross elasticity of demand for good Y with respect to the price of good X? A –2 B –0.5 C +0.5 D +2

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q111 · The price elasticity of demand for a product is inelastic 9708/13 Oct/Nov 2014

7 The price elasticity of demand for a product is inelastic. How will a decrease in supply affect producer revenue and consumer surplus? producer revenue consumer surplus A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q112 · Two goods, X and Y, are complementary goods 9708/13 Oct/Nov 2014

8 Two goods, X and Y, are complementary goods. Column 1 of the table below shows the original market situation at time period 1 and column 2 shows the situation following an increase in the price of good Y. 1 2 price of good X 10 10 quantity demanded 50 40 price of good Y 20 30 quantity demanded 80 60 The value of cross elasticity of demand for good X with respect to the price of good Y lies between A –1.7 and –2.6. B –0.8 and –1.3. C –0.3 and –0.8. D +0.3 and +0.6.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q113 · The weighting given to food in the construction of the United Kingdom’s Retail Price… 9708/13 Oct/Nov 2014

23 The weighting given to food in the construction of the United Kingdom’s Retail Price Index fell from 16.7% in 1987 to 11.8% in 2011. What would help to explain this? A The average price of food decreased by 4.9% points between 1987 and 2011. B The demand for food is price inelastic. C The income elasticity of the demand for food is less than one. D There was an increase in the relative price of food over the period.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q114 · The table shows the price elasticity of demand for four goods and services 9708/11 May/June 2015

6 The table shows the price elasticity of demand for four goods and services. price elasticity motorcycles –1.6 telephone calls –1.0 football tickets –0.3 light bulbs 0.0 If the price of each item increased by 1%, for which items would the total expenditure increase? A football tickets and light bulbs B football tickets only C motorcycles and telephone calls D motorcycles only

1 marks

Answer: A

This question in 9708/11 May/June 2015

Q115 · In the diagram, area OP1M1Q1 is equal to area OP2M2Q2 9708/11 May/June 2015

7 In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. P1 M1 price M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of demand if the price is halved from P1 to P2? A zero B –0.5 C –1 D infinity

1 marks

Answer: C

This question in 9708/11 May/June 2015

Q116 · A survey into the market for good X found that it is an inferior good and a close… 9708/12 May/June 2015

7 A survey into the market for good X found that it is an inferior good and a close substitute to good Y. Which values for the income elasticity of demand for good X and its cross elasticity of demand with respect to the price of good Y would support this? cross elasticity of demand income elasticity of for good X with respect to demand for good X the price of good Y A –1.2 –0.9 B –1.2 +0.9 C +1.2 –0.9 D +1.2 +0.9

1 marks

Answer: B

This question in 9708/12 May/June 2015

Q117 · The diagram shows the demand curve for a product with unitary price elasticity 9708/12 May/June 2015

8 The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A fall in price will bring about an increase in total expenditure on the product. B A fall in price will bring about an increase in sales but a fall in total expenditure on the product. C As the price rises, total expenditure on the product stays the same. D As the price rises, total expenditure on the product rises and then falls.

1 marks

Answer: C

This question in 9708/12 May/June 2015

Q118 · An appreciation of country X’s currency leads to an increase in its foreign currency… 9708/12 May/June 2015

28 An appreciation of country X’s currency leads to an increase in its foreign currency earnings from tourism. What can be concluded from this about the demand by foreigners for holidays in country X? A It is income elastic. B It is price elastic. C It is income inelastic. D It is price inelastic.

1 marks

Answer: D

This question in 9708/12 May/June 2015

Q119 · The table refers to exports of sugar from Jamaica in 1999 and 2000 9708/13 May/June 2015

6 The table refers to exports of sugar from Jamaica in 1999 and 2000. exports of sugar export earnings (tonnes) from sugar (US$ millions) 1999 177 522 95.79 2000 180 481 83.8 What can be concluded from the data? A The demand for sugar was price elastic. B The income elasticity of demand for sugar was negative. C The price of sugar in US$ fell between 1999 and 2000. D The supply of sugar was price elastic.

1 marks

Answer: C

This question in 9708/13 May/June 2015

Q120 · The price elasticity of demand for grapes is –2.0 9708/13 May/June 2015

7 The price elasticity of demand for grapes is –2.0. When the price is $15, quantity demanded is 5000 units. How much will be demanded when the price falls to $12? A 3000 units B 5500 units C 7000 units D 7500 units

1 marks

Answer: C

This question in 9708/13 May/June 2015

Q121 · A businessman had intended to borrow $5000 at an interest rate of 8% per year 9708/11 Oct/Nov 2015

7 A businessman had intended to borrow $5000 at an interest rate of 8% per year. When the interest rate rose to 10% he decided to borrow only $4000. Within what range is his interest elasticity of demand for loans? A 0.0 to –0.3 B –0.4 to –0.7 C –0.8 to –1.2 D –1.3 to –1.7

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2015

Q122 · What will make it most likely that road tolls will reduce traffic congestion? 9708/11 Oct/Nov 2015

17 What will make it most likely that road tolls will reduce traffic congestion? A Cross-elasticity of demand between private and public transport is zero. B Demand for car use is income-elastic. C Demand for car use is price-elastic. D Supply of public transport is price-inelastic.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2015

Q123 · The diagram shows the demand curve for an agricultural commodity that has unitary… 9708/11 Oct/Nov 2015

18 The diagram shows the demand curve for an agricultural commodity that has unitary elasticity. S1 is the supply curve if there is a bad harvest and S2 is the supply curve if there is a good harvest. S1 S2 price P D (unitary) O Q quantity What should the government do to keep the total revenue of farmers the same? A allow the price of the commodity to be determined by the market B fix the price paid to farmers at price OP C introduce a quota on production equal to OQ D provide subsidies in bad years and impose indirect taxes in good years

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2015

Q124 · Tourism is seen as a good way of increasing net export earnings 9708/11 Oct/Nov 2015

30 Tourism is seen as a good way of increasing net export earnings. Luxury tourism, such as wildlife safaris and cultural tours, is considered by an economy to have a very price-inelastic demand. If this is correct, which is most likely to increase export revenue earned by this economy from luxury tourism? A a depreciation of the economy’s currency B a reduction in the taxes levied on hotels C an appreciation of the economy’s currency D cheap government loans to increase the construction of hotels

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2015

Q125 · An individual reacts to a 5% increase in the price of good X by increasing the proportion… 9708/12 Oct/Nov 2015

7 An individual reacts to a 5% increase in the price of good X by increasing the proportion of his income that he spends on good X from 2% to 3%. If there are no other changes, what can be concluded from this about the individual’s demand for good X? A It is income-elastic. B It is income-inelastic. C It is price-elastic. D It is price-inelastic.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2015

Q126 · The cross-elasticity of demand for good X with respect to good Y is –0.5 9708/12 Oct/Nov 2015

8 The cross-elasticity of demand for good X with respect to good Y is –0.5. What can be concluded from this? A Goods X and Y are complementary goods. B Goods X and Y are substitute goods. C Good X is an inferior good. D Good Y is an inferior good.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2015

Q127 · A theatre increases the price of its tickets from $5 to $10 9708/13 Oct/Nov 2015

7 A theatre increases the price of its tickets from $5 to $10. As a result, its total receipts increase from $2500 to $4000. Within what range does the price elasticity of demand for theatre tickets lie? A 0.2 to 0.5 B 0.6 to 0.75 C 0.8 to 1.0 D 1.2 to 2.5

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2015

Q128 · The table shows how an individual’s weekly consumption of biscuits and coffee varies with… 9708/13 Oct/Nov 2015

8 The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income ($) biscuits (packs) coffee (cups) 100 0 5 150 5 10 Which statement about the income elasticity of demand over the range of income shown is true? A For biscuits it is greater than 1. B For biscuits it is zero. C For coffee it is less than 1. D For coffee it is unitary.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2015

Q129 · In a town, bus fares fall by 50% and this leads to an increase in bus use by 30% 9708/12 Feb/March 2016

7 In a town, bus fares fall by 50% and this leads to an increase in bus use by 30%. The effect on car use is very low with only a 1% reduction. What is the value of the cross-elasticity of demand between car travel and bus travel? A –0.60 B –0.02 C +0.02 D +0.60

1 marks

Answer: C

This question in 9708/12 Feb/March 2016

Q130 · In the diagram the rectangular hyperbola, DD, represents a firm’s demand curve 9708/12 Feb/March 2016

8 In the diagram the rectangular hyperbola, DD, represents a firm’s demand curve. D price D O quantity What can be deduced from the diagram? A An increase in the quantity supplied causes a fall in total revenue. B The price elasticity of demand decreases as we move down the demand curve. C The sale of an extra unit gains no extra revenue. D Total expenditure on the commodity decreases as the price falls.

1 marks

Answer: C

This question in 9708/12 Feb/March 2016

Q131 · A 10% tax is placed on a good 9708/12 Feb/March 2016

15 A 10% tax is placed on a good. What type of product would be most likely to face the biggest impact on its equilibrium price as a result? A one with elastic demand B one with inelastic demand C one with infinite elasticity of demand D one with unitary elasticity of demand

1 marks

Answer: B

This question in 9708/12 Feb/March 2016

Q132 · A manufacturer progressively reduces the price of his product in an attempt to increase… 9708/11 May/June 2016

7 A manufacturer progressively reduces the price of his product in an attempt to increase total revenue. The table shows the outcome of this policy. price total revenue ($) 000s ($) 10 750 9 750 8 750 What is the price elasticity of demand for the product? A perfectly inelastic B relatively inelastic C perfectly elastic D unitary

1 marks

Answer: D

This question in 9708/11 May/June 2016

Q133 · Public transport has an income elasticity of demand of –0.36 9708/11 May/June 2016

8 Public transport has an income elasticity of demand of –0.36. What does this mean about public transport? A It has close substitutes. B It is a necessity. C It is a normal good. D It is an inferior good.

1 marks

Answer: D

This question in 9708/11 May/June 2016

Q134 · A government pays a subsidy to a country’s onion producers 9708/11 May/June 2016

16 A government pays a subsidy to a country’s onion producers. With which price elasticity of demand (PED) will this action be most effective in reducing the price of onions? A PED equals 0. B PED is greater than 0 but less than 1. C PED equals 1. D PED is greater than 1 but less than infinity.

1 marks

Answer: A

This question in 9708/11 May/June 2016

Q135 · The table gives estimates of the price elasticities and cross elasticities of demand for… 9708/12 May/June 2016

7 The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to the price of service bus travel rail travel bus travel –0.37 +0.13 rail travel +0.16 –0.43 What would be the change in the volume of rail travel resulting from a 1% increase in bus fares? A an increase of 0.16% B an increase of 0.43% C a reduction of 0.13% D a reduction of 0.37%

1 marks

Answer: A

This question in 9708/12 May/June 2016

Q136 · It has been estimated that bread has an income elasticity of –0.04 9708/12 May/June 2016

8 It has been estimated that bread has an income elasticity of –0.04. What can be concluded about bread from this information? A It is a normal good. B It is an inferior good. C It has many complements. D It has many substitutes.

1 marks

Answer: B

This question in 9708/12 May/June 2016

Q137 · In which circumstances must the total expenditure by consumers on a good increase when… 9708/13 May/June 2016

7 In which circumstances must the total expenditure by consumers on a good increase when its price increases? A if demand for the good is income-elastic B if demand for the good is price-inelastic C if the price of a complementary good also increases D if the price of substitute goods also increases

1 marks

Answer: B

This question in 9708/13 May/June 2016

Q138 · The price elasticity of demand for good X is 1 9708/13 May/June 2016

8 The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantity demanded is 20 000 units? A $2.00 B $2.40 C $12.00 D $20.00

1 marks

Answer: B

This question in 9708/13 May/June 2016

Q139 · The cross-elasticity of demand of good S with respect to the price of good P is +1.5 9708/13 May/June 2016

9 The cross-elasticity of demand of good S with respect to the price of good P is +1.5. The cross-elasticity of demand of good S with respect to the price of good R is –1.5. The cross-elasticity of demand of good P with respect to the price of good R is –1.5. What can be concluded about goods P, R and S? A S and P are complements; P and R are substitutes. B S and P are complements; R is an inferior good. C S and P are substitutes; P and R are complements. D S and P are substitutes; R is an inferior good.

1 marks

Answer: C

This question in 9708/13 May/June 2016

Q140 · A government imposes a tax on a good 9708/11 Oct/Nov 2016

7 A government imposes a tax on a good. The equilibrium price rises by the same amount as the tax. What can be concluded about the price elasticity of demand for the good? A It is perfectly elastic. B It is perfectly inelastic. C It is unitary. D Nothing can be determined about price elasticity of demand.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2016

Q141 · What can be concluded about a product which has an income elasticity of demand (YED) of… 9708/11 Oct/Nov 2016

8 What can be concluded about a product which has an income elasticity of demand (YED) of –1.5 and a cross-elasticity of demand (XED) of +1.2 with another product? YED figure XED figure A The product is an inferior good. The other product is a complement. B The product is an inferior good. The other product is a substitute. C The product is a normal good. The other product is a complement. D The product is a normal good. The other product is a substitute.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2016

Q142 · In which situation is the demand for a product said to be price elastic? 9708/12 Oct/Nov 2016

7 In which situation is the demand for a product said to be price elastic? A A fall in price increases expenditure on the product. B A fall in price increases quantity demanded. C A rise in price increases expenditure on the product. D A rise in price reduces quantity demanded.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2016

Q143 · Goods X and Y are complements with a cross-elasticity of demand of – 0.8 9708/12 Oct/Nov 2016

8 Goods X and Y are complements with a cross-elasticity of demand of – 0.8. When the price of good X was $10, the quantity of good Y demanded was 2000 units per week. After a change in the price of good X, the demand for good Y increases to 2800 units per week. What is the new price of good X? A $5.00 B $6.80 C $13.20 D $15.00

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2016

Q144 · The diagram shows an industry’s total revenue when different quantities are demanded 9708/12 Oct/Nov 2016

9 The diagram shows an industry’s total revenue when different quantities are demanded. point 2 point 1 point 3 total revenue O quantity demanded Which values should be inserted at points 1, 2 and 3 to identify the price elasticity of demand (PED) at that position? point 1 point 2 point 3 A PED>1 PED=0 PED<1 B PED>1 PED=1 PED<1 C PED<1 PED=0 PED>1 D PED<1 PED=1 PED>1

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2016

Q145 · The diagram shows a demand curve for pineapples 9708/13 Oct/Nov 2016

7 The diagram shows a demand curve for pineapples. 2 X 1.5 price 1 ($) Y 0.5 0 D 0 3 6 9 12 quantity (000s) What happens to the value of price elasticity of demand (PED) when there is a movement from point X to point Y and what describes the value at point Y? effect on value of value of PED PED at Y A fall elastic B fall inelastic C rise elastic D unchanged unitary

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2016

Q146 · A product is an inferior good with no close substitutes 9708/13 Oct/Nov 2016

8 A product is an inferior good with no close substitutes. It is also a complement to good X. Which product matches the above description? cross-elasticity of price elasticity income elasticity demand with respect of demand of demand to the price of X A –2 +2 +1 B –2 +2 –1 C –0.5 –2 +1 D –0.5 –2 –1

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2016

Q147 · The table shows the quantities demanded (Q) of goods X and Y corresponding to different… 9708/13 Oct/Nov 2016

9 The table shows the quantities demanded (Q) of goods X and Y corresponding to different prices (P) of the two goods. PX = $8 PX = $10 QX = 16 QX = 12 PY = $3 QY = 20 QY = 30 QX = 20 QX = 16 PY = $4 QY = 16 QY = 24 What is the range of the value of the cross-elasticity of demand for good Y with respect to the price of good X? A 0.75 to 1.5 B 1.50 to 2.4 C 1.66 to 2.0 D 1.75 to 2.5

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2016

Q148 · What will cause the payment of a subsidy to firms to result in the greatest increase in… 9708/13 Oct/Nov 2016

16 What will cause the payment of a subsidy to firms to result in the greatest increase in sales? A a shift in the demand curve to the right B a shift in the supply curve to the left C an elastic price elasticity of demand for the product D an inelastic price elasticity of supply for the product

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2016

Q149 · The price elasticity of demand for a firm’s product is equal to one for all price changes 9708/12 Feb/March 2017

7 The price elasticity of demand for a firm’s product is equal to one for all price changes. What would be the result of this? A A percentage increase in price will cause demand to fall by a larger percentage. B A percentage increase in price will cause demand to increase by the same percentage. C Quantity demanded will always be the same whatever the price. D The firm’s revenue will always be the same whatever the price.

1 marks

Answer: D

This question in 9708/12 Feb/March 2017

Q150 · A country has a large current account deficit 9708/12 Feb/March 2017

29 A country has a large current account deficit. Its government decides to devalue its currency. In which circumstance would such a measure reduce the deficit? price elasticity of price elasticity of demand for exports demand for imports A 0.0 0.0 B 0.0 0.5 C 0.5 0.5 D 0.5 1.0

1 marks

Answer: D

This question in 9708/12 Feb/March 2017

Q151 · Which combination is most likely to result in the demand for a product being highly price… 9708/11 May/June 2017

7 Which combination is most likely to result in the demand for a product being highly price elastic? number of close % of income substitutes spent on product A large large B large small C small large D small small

1 marks

Answer: A

This question in 9708/11 May/June 2017

Q152 · A manufacturer increases the price of his product from $4 in an attempt to increase total… 9708/11 May/June 2017

8 A manufacturer increases the price of his product from $4 in an attempt to increase total revenue. The table shows the outcome of the policy. price total revenue ($) 000’s ($) 4 400 5 500 6 600 What is the price elasticity of demand for the product? A perfectly elastic B perfectly inelastic C relatively elastic D relatively inelastic

1 marks

Answer: B

This question in 9708/11 May/June 2017

Q153 · A government imposes a specific indirect tax on a product 9708/11 May/June 2017

12 A government imposes a specific indirect tax on a product. When will the tax cause the greatest reduction in consumer surplus for the buyers of the product? A The product has price elastic demand and price elastic supply. B The product has price elastic demand and price inelastic supply. C The product has price inelastic demand and price elastic supply. D The product has price inelastic demand and price inelastic supply.

1 marks

Answer: C

This question in 9708/11 May/June 2017

Q154 · The table gives a set of price and cross-price elasticities for four commodities, W, X, Y… 9708/12 May/June 2017

7 The table gives a set of price and cross-price elasticities for four commodities, W, X, Y and Z. elasticity of demand with respect for commodity to price of W X Y Z W –0.3 –0.5 +0.7 –1.3 X –0.7 –1.2 +0.8 +1.6 Y +1.3 +1.7 –3.6 +0.8 Z –2.7 +2.6 +1.7 –0.7 Which pairs of commodities are complements? A W and X; W and Z B W and Y; X and Y C W and Z; X and Z D X and Y; X and Z

1 marks

Answer: A

This question in 9708/12 May/June 2017

Q155 · The price elasticity of demand for a product is constant and equal to unity 9708/12 May/June 2017

8 The price elasticity of demand for a product is constant and equal to unity. Which curve in the diagram shows the relationship between total expenditure on the product and its price? A total B expenditure C D O price

1 marks

Answer: C

This question in 9708/12 May/June 2017

Q156 · A local government is deciding whether to increase parking charges and provide more lanes… 9708/12 May/June 2017

11 A local government is deciding whether to increase parking charges and provide more lanes for bus use only. One official said that the increase in parking charges should cause more bus travel. A second official said that an increase in the frequency of bus services will not cause demand for bus travel to rise. Are these official statements correct or incorrect? first statement second statement A correct correct B correct incorrect C incorrect correct D incorrect incorrect

1 marks

Answer: B

This question in 9708/12 May/June 2017

Q157 · The diagram shows the relationship between total expenditure and price for three… 9708/13 May/June 2017

7 The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3. 1 2 price 3 O total expenditure Which curves represent the products with price elastic and unitary price elastic demand? elastic unitary A 1 2 B 2 3 C 3 1 D 3 2

1 marks

Answer: C

This question in 9708/13 May/June 2017

Q158 · The table shows the price of a good and total expenditure on the good during specific… 9708/11 Oct/Nov 2017

8 The table shows the price of a good and total expenditure on the good during specific periods when the market is in equilibrium. price total expenditure period ($) ($) 1 12 96 000 2 5 40 000 3 8 64 000 4 10 80 000 5 4 32 000 What can be deduced from this data? A The good has constant opportunity cost. B The good is an inferior good. C The price elasticity of demand is equal to one. D The price elasticity of supply is equal to zero.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2017

Q159 · In which situation is the demand for a product said to be price elastic? 9708/12 Oct/Nov 2017

6 In which situation is the demand for a product said to be price elastic? A The quantity demanded responds to a change in price. B An increase in price brings about a decrease in the quantity demanded. C An increase in price induces consumers to spend more on the product. D A decrease in price brings about an increase in revenue.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2017

Q160 · In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola… 9708/12 Oct/Nov 2017

7 In the diagram D1D1 is a straight line demand curve and D2D2 is a rectangular hyperbola curve. D1 D2 price M D2 N D1 O quantity Which statement is correct? A D2D2 is more elastic than D1D1 at point M. B D2D2 is more elastic than D1D1 at point N. C The elasticity of demand increases on moving down both curves. D The elasticity of demand is inelastic at point M on both curves.

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2017

Q161 · It was estimated in 2015 that milk had an income elasticity of demand of –0.6 9708/13 Oct/Nov 2017

6 It was estimated in 2015 that milk had an income elasticity of demand of –0.6. What can be concluded about milk from this information? A It accounts for only a small proportion of household expenditure. B It has very few substitutes. C Household expenditure on milk will decrease if the price of milk increases. D It is an inferior good.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2017

Q162 · A country at the beginning of a given period seeks to improve the current account of its… 9708/13 Oct/Nov 2017

29 A country at the beginning of a given period seeks to improve the current account of its balance of payments by devaluing its currency. The effect of this policy in the following two years is shown in the diagram. current account surplus current + 0 balance – 6 12 18 24 deficit months Which statement is likely to explain this performance? A In the short run, the price elasticity of demand for exports and imports was very low. B The domestic inflation rate fell after 12 months before having the desired result. C The elasticity of demand for imports diminished after 12 months. D The policy was ineffective and other factors must have led to an improvement in the current account.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2017

Q163 · The diagram shows how the quantity demanded of four goods changes as income changes 9708/12 Feb/March 2018

6 The diagram shows how the quantity demanded of four goods changes as income changes. Which good has an income elasticity of demand which is always +1? A B C quantity of good demanded D O income

1 marks

Answer: C

This question in 9708/12 Feb/March 2018

Q164 · The diagram shows the relationship between the price and the total expenditure on a good 9708/11 May/June 2018

6 The diagram shows the relationship between the price and the total expenditure on a good. price O total expenditure Which statement is correct? A The income elasticity of demand for the commodity is unity. B The income elasticity of demand for the commodity is zero. C The price elasticity of demand for the commodity is unity. D The price elasticity of demand for the commodity is zero.

1 marks

Answer: C

This question in 9708/11 May/June 2018

Q165 · Over the last ten years the price elasticity of demand for tea in many countries has risen 9708/11 May/June 2018

7 Over the last ten years the price elasticity of demand for tea in many countries has risen. What is the most likely cause of this change in price elasticity? A a decrease in the incomes of consumers B a decrease in the number of complements to tea C an increase in the amount of tea supplied D an increase in the number of substitutes for tea

1 marks

Answer: D

This question in 9708/11 May/June 2018

Q166 · The diagram shows the demand curve for a product 9708/12 May/June 2018

6 The diagram shows the demand curve for a product. price D O quantity Which statement is correct? A Consumer expenditure on the product always rises when price falls. B Demand is less elastic at higher prices than at lower prices. C Price elasticity of demand differs at every price. D Price elasticity of demand equals one at every price.

1 marks

Answer: C

This question in 9708/12 May/June 2018

Q167 · The cross-elasticity of demand between two goods will be higher A the greater the… 9708/12 May/June 2018

7 The cross-elasticity of demand between two goods will be higher A the greater the difference in price between the two goods. B the greater the income elasticities of demand for the two goods. C the greater the price elasticities of demand for the two goods. D the more they are regarded as similar by consumers.

1 marks

Answer: D

This question in 9708/12 May/June 2018

Q168 · A government wishes to impose a tax on a good so that the producer and not the consumer… 9708/12 May/June 2018

14 A government wishes to impose a tax on a good so that the producer and not the consumer pays most of the tax. Which type of elasticity would it be best for the good to have to achieve this aim? A high price elasticity of demand B low price elasticity of demand C totally inelastic price elasticity of demand D unitary price elasticity of demand

1 marks

Answer: A

This question in 9708/12 May/June 2018

Q169 · Which statement about trade protection is correct? 9708/12 May/June 2018

27 Which statement about trade protection is correct? A A tariff will result in a greater decrease in demand for an import the lower its price elasticity of demand is. B Embargoes are only an effective trade barrier against imports in price-elastic demand. C Export subsidies to domestic firms will prevent the dumping of foreign products in the domestic market. D Quotas are less effective than tariffs for raising government revenue.

1 marks

Answer: D

This question in 9708/12 May/June 2018

Q170 · The number of passenger journeys per week by train on a route is shown by the demand… 9708/13 May/June 2018

6 The number of passenger journeys per week by train on a route is shown by the demand curve in the diagram. fare ($) V P T W U D O R S number of journeys per week Initially the fare is OP, but it is then reduced by PW. Which area measures the amount spent on the extra journeys resulting from the lower fare? A VUT B PWTV C VRST D URST

1 marks

Answer: D

This question in 9708/13 May/June 2018

Q171 · The diagram shows the demand curve for a product 9708/13 May/June 2018

7 The diagram shows the demand curve for a product. price M N S Q R D O L P quantity If the rectangle OLMN is equal in area to the rectangle OPQR, which statement is correct? A A rise in price from OR to ON results in the same proportionate fall in quantity demanded. B Consumer surplus falls by RSMN if the price rises from OR to ON. C The price elasticity of demand is unitary for all changes in price. D Total revenue falls by MSQ if the price rises from OR to ON.

1 marks

Answer: A

This question in 9708/13 May/June 2018

Q172 · When the supply of a good decreases, equilibrium price stays the same 9708/13 May/June 2018

8 When the supply of a good decreases, equilibrium price stays the same. What is the price elasticity of demand of the good? A –1 B zero C +1 D infinite

1 marks

Answer: D

This question in 9708/13 May/June 2018

Q173 · What is necessary for consumer surplus to be zero? 9708/13 May/June 2018

12 What is necessary for consumer surplus to be zero? A Demand is perfectly elastic. B Demand is perfectly inelastic. C Supply is perfectly elastic. D Supply is perfectly inelastic.

1 marks

Answer: A

This question in 9708/13 May/June 2018

Q174 · In the diagram, area OP1M1Q1 is equal to area OP2M2Q2 9708/11 Oct/Nov 2018

6 In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. price P1 M1 M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of demand if the price is halved from P1 to P2? A –1 B –0.5 C zero D infinity

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2018

Q175 · Which elasticity values indicate that cars are normal goods and that petrol is a… 9708/11 Oct/Nov 2018

7 Which elasticity values indicate that cars are normal goods and that petrol is a complement to car use? cross elasticity of demand income elasticity of (XED) for petrol relative to demand (YED) for cars changes in car prices A YED is negative XED is negative B YED is negative XED is positive C YED is positive XED is negative D YED is positive XED is positive

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2018

Q176 · Country M imposes a tariff on imports of steel 9708/11 Oct/Nov 2018

27 Country M imposes a tariff on imports of steel. Which price elasticity values will result in the smallest reduction in steel imports into M? price elasticity of price elasticity of supply of domestic demand for steel in steel producers in country M country M A 0.2 0.4 B 1.0 0.8 C 1.5 1.0 D 2.0 1.2

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2018

Q177 · Two goods X and Y have a positive cross-elasticity of demand and upward-sloping supply… 9708/12 Oct/Nov 2018

7 Two goods X and Y have a positive cross-elasticity of demand and upward-sloping supply curves. What will be the effect of a reduction in the price of good Y? A The demand for good X will increase. B The demand for good Y will decrease. C The price of good X will decrease. D The quantity of good X supplied will increase.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2018

Q178 · The table shows changes in a consumer’s expenditure on various goods when her income… 9708/12 Oct/Nov 2018

9 The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 000: $24 000: good amount spent amount spent on good on good ($) ($) W 100 96 X 100 100 Y 200 224 Z 200 248 Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of demand greater than 1.0? A W, Y and Z B W and Z only C W only D Z only

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2018

Q179 · Goods X and Y are complements and have upward-sloping supply curves 9708/12 Oct/Nov 2018

11 Goods X and Y are complements and have upward-sloping supply curves. What will be the effect on the equilibrium price and quantity of good X of an increase in the supply of good Y? quantity of X price of X A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2018

Q180 · A theatre increases the price of its tickets from $10 to $15 9708/12 Feb/March 2019

6 A theatre increases the price of its tickets from $10 to $15. As a result, its total receipts decrease from $10 000 to $6000. Within what range does the price elasticity of demand for theatre tickets lie? A 0.2 to 0.5 B 0.6 to 1.0 C 1.1 to 1.4 D 1.5 to 2.0

1 marks

Answer: C

This question in 9708/12 Feb/March 2019

Q181 · The table shows Shanaz’s and Sunil’s price elasticity of demand for restaurant meals and… 9708/12 Feb/March 2019

8 The table shows Shanaz’s and Sunil’s price elasticity of demand for restaurant meals and theatre tickets. Shanaz Sunil restaurant meals –0.8 –1.2 theatre tickets –1.3 –0.7 There is a rise in the price of restaurant meals and a fall in the price of theatre tickets. What can be concluded after these price changes? A Restaurant owners will receive more income. B Shanaz will spend more money on both theatre tickets and restaurant meals. C Sunil will spend more money on both theatre tickets and restaurant meals. D Theatre owners will receive less income.

1 marks

Answer: B

This question in 9708/12 Feb/March 2019

Q182 · The diagram shows the demand curve for a normal product 9708/12 Feb/March 2019

9 The diagram shows the demand curve for a normal product. price W X demand Y Z O quantity Which two points indicates a move from a price inelastic point to a less inelastic point? A W to X B X to W C Y to Z D Z to Y

1 marks

Answer: D

This question in 9708/12 Feb/March 2019

Q183 · The diagram shows the demand and supply of rice 9708/12 Feb/March 2019

15 The diagram shows the demand and supply of rice. Supply increases from S1 to S2. S1 S2 50 price of rice per kg (cents) 35 32 30 27 D1 0 0 18 20 100 kgs rice What is the change in sales revenue received by the rice farmer? A 24 cents B 60 cents C 600 cents D 700 cents

1 marks

Answer: A

This question in 9708/12 Feb/March 2019

Q184 · What is cross elasticity of demand? 9708/11 May/June 2019

10 What is cross elasticity of demand? A the responsiveness of price of good X due to a change in demand of good Y B the responsiveness of quantity demanded of a good due to a change in its price C the responsiveness of quantity demanded of good X due to a change in quantity of good Y D the responsiveness of quantity demanded of good X due to a change in the price of good Y

1 marks

Answer: D

This question in 9708/11 May/June 2019

Q185 · Consumers receive an increase in their incomes 9708/11 May/June 2019

11 Consumers receive an increase in their incomes. Which circumstances will cause the quantity of the product sold to increase the most? price elasticity of nature of the product supply of the product A inferior good price elastic B inferior good price inelastic C normal good price elastic D normal good price inelastic

1 marks

Answer: C

This question in 9708/11 May/June 2019

Q186 · What does the Marshall-Lerner condition state must be present for a depreciation of a… 9708/11 May/June 2019

27 What does the Marshall-Lerner condition state must be present for a depreciation of a currency to cause an improvement in the current account balance? A The price elasticity of demand for exports and the price elasticity of demand for imports are both greater than one. B The price elasticity of demand for exports and the price elasticity of demand for imports are both less than one. C The sum of the price elasticity of demand for exports and the price elasticity of demand for imports is greater than one. D The sum of the price elasticity of demand for exports and the price elasticity of demand for imports is less than one.

1 marks

Answer: C

This question in 9708/11 May/June 2019

Q187 · What follows if the income elasticity of demand for a good has a value of –0.2? 9708/12 May/June 2019

9 What follows if the income elasticity of demand for a good has a value of –0.2? A When income rises less of the good is bought. B When income rises more of the good is bought. C When price falls more of the good is bought. D When price rises less of the good is bought.

1 marks

Answer: A

This question in 9708/12 May/June 2019

Q188 · The cross elasticity of demand between two products, X and Y, is negative 9708/12 May/June 2019

12 The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of product Y? A Quantity demanded of product X will fall. B Supply of product X will rise. C The cross elasticity of demand will rise. D The price of product X will rise.

1 marks

Answer: A

This question in 9708/12 May/June 2019

Q189 · The diagram shows a market for wheat 9708/13 May/June 2019

9 The diagram shows a market for wheat. 100 price of wheat S P2 P1 D 0 0 Q2 Q1 Q3 100 quantity of wheat What is the response of demand for and supply of wheat when the price of wheat falls from P2 to P1? demand supply A elastic elastic B elastic inelastic C inelastic elastic D inelastic inelastic

1 marks

Answer: C

This question in 9708/13 May/June 2019

Q190 · Doctors are concerned about the negative health effects of sugary drinks 9708/13 May/June 2019

17 Doctors are concerned about the negative health effects of sugary drinks. When would a tax on sugary drinks be least effective in improving health? A when the demand for sugary drinks is income elastic B when the demand for sugary drinks is income inelastic C when the demand for sugary drinks is price elastic D when the demand for sugary drinks is price inelastic

1 marks

Answer: D

This question in 9708/13 May/June 2019

Q191 · Two goods, X and Y, have a cross elasticity of demand of +1.8 9708/11 Oct/Nov 2019

10 Two goods, X and Y, have a cross elasticity of demand of +1.8. Good Y has an income elasticity of demand of –0.6. An increase in both the incomes of consumers and the price of good Y will have which combination of effects? quantity quantity demanded of X demanded of Y A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2019

Q192 · In which situation is the demand for a product said to be price elastic? 9708/11 Oct/Nov 2019

13 In which situation is the demand for a product said to be price elastic? A A fall in price increases expenditure on the product. B A fall in price increases quantity demanded. C A rise in price increases expenditure on the product. D A rise in price reduces quantity demanded.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2019

Q193 · A government increased a specific tax on shoes 9708/12 Oct/Nov 2019

10 A government increased a specific tax on shoes. The resulting increase in the price of shoes was paid mainly by the consumer and not by the producer. What must be true for this to happen? A The price elasticity of demand was less than the price elasticity of supply. B The price elasticity of demand was unitary. C The price elasticity of supply was less than one. D The price elasticity of supply was inelastic while the price elasticity of demand was elastic.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2019

Q194 · Travellers can cross the English Channel either by the Channel Tunnel or by a sea journey 9708/13 Oct/Nov 2019

7 Travellers can cross the English Channel either by the Channel Tunnel or by a sea journey. The table gives details of the passengers, in thousands, using these services between 2005 and 2015. Between 2005 and 2015 the price of the Channel Tunnel fell and the price of sea journeys rose. Channel Tunnel sea journey year passengers passengers 2005 17 005 23 693 2010 18 303 21 883 2015 20 864 21 000 What does the data suggest? A The cross elasticity of demand between the two services is positive. B The market for crossing the English Channel grew continuously over the period. C The rate of decline in sea journeys accelerated over the period. D The two services for crossing the English Channel are complementary.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2019

Q195 · The diagrams represent the demand curves for three goods X, Y and Z 9708/13 Oct/Nov 2019

8 The diagrams represent the demand curves for three goods X, Y and Z. They are drawn to the same scale and can be used to represent the price elasticity of each good. The three goods are lamb only, all meat and all food. price price price O quantity O quantity O quantity good X good Y good Z Which combination of goods is likely to represent lamb only, all meat and all food? good X good Y good Z A food meat lamb B lamb meat food C lamb food meat D meat lamb food

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2019

Q196 · A government decides to put a tax on a good 9708/13 Oct/Nov 2019

11 A government decides to put a tax on a good. Which price elasticity conditions would result in most of the tax being paid by the consumer? demand supply elasticity elasticity A elastic elastic B elastic inelastic C inelastic elastic D inelastic inelastic

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2019

Q197 · In which circumstance will the total expenditure by consumers on a good increase when its… 9708/12 Feb/March 2020

5 In which circumstance will the total expenditure by consumers on a good increase when its price increases? A Demand for the good is income elastic. B Demand for the good is price inelastic. C The price of a complementary good also increases. D The price of substitute goods also increases.

1 marks

Answer: B

This question in 9708/12 Feb/March 2020

Q198 · Good X is related to good Y 9708/12 Feb/March 2020

8 Good X is related to good Y. Incomes increase and the price of good Y falls. Which combination would give the greatest increase in demand for good X? relationship between nature of good X good X and good Y A inferior good complements B inferior good substitutes C normal good complements D normal good substitutes

1 marks

Answer: C

This question in 9708/12 Feb/March 2020

Q199 · The diagram shows a demand curve for pineapples 9708/12 Feb/March 2020

12 The diagram shows a demand curve for pineapples. 2 price ($) X 1.5 1 Y 0.5 0 D 0 3 6 9 12 quantity (000s) What happens to the value of price elasticity of demand (PED) when there is a movement from point X to point Y and what describes the value at point Y? effect on value of value of PED PED at Y A fall elastic B fall inelastic C rise elastic D unchanged unitary

1 marks

Answer: B

This question in 9708/12 Feb/March 2020

Q200 · The economics department of a university calculates that the price elasticity of demand… 9708/11 May/June 2020

13 The economics department of a university calculates that the price elasticity of demand for the products of a local firm is between –1.1 and –1.3. Which decision could be justified by the research? A Increase prices to increase profit. B Invest in more capital to increase output. C Reduce advertising to reduce costs. D Reduce prices to increase revenue.

1 marks

Answer: D

This question in 9708/11 May/June 2020

Q201 · A manufacturer progressively reduces the price of his product 9708/12 May/June 2020

6 A manufacturer progressively reduces the price of his product. The table shows the outcome of this policy. price total revenue ($) 000s ($) 10 750 9 750 8 750 What is the price elasticity of demand for the product? A perfectly inelastic B relatively inelastic C perfectly elastic D unitary

1 marks

Answer: D

This question in 9708/12 May/June 2020

Q202 · Following the introduction of a 10% increase in charges for car parking in a city centre… 9708/12 May/June 2020

8 Following the introduction of a 10% increase in charges for car parking in a city centre, the demand for bus journeys per day into the city rose from 800 to 1000. What was the cross elasticity of demand for bus journeys with respect to car parking charges? A –0.4 B +0.4 C +2.0 D +2.5

1 marks

Answer: D

This question in 9708/12 May/June 2020

Q203 · The table gives estimates of the price elasticities and cross elasticities of demand for… 9708/13 May/June 2020

12 The table gives estimates of the price elasticities and cross elasticities of demand for bus and rail travel. elasticity with respect to the price of service bus travel rail travel bus travel –0.37 +0.13 rail travel +0.16 –0.43 What would be the change in the volume of rail travel resulting from a 1% increase in bus fares? A a decrease of 0.13% B a decrease of 0.37% C an increase of 0.16% D an increase of 0.43%

1 marks

Answer: C

This question in 9708/13 May/June 2020

Q204 · Which combination is most likely to result in the demand for a product being highly… 9708/13 May/June 2020

13 Which combination is most likely to result in the demand for a product being highly price-elastic? number of close % of income substitutes spent on product A large large B large small C small large D small small

1 marks

Answer: A

This question in 9708/13 May/June 2020

Q205 · The table shows how an individual’s weekly consumption of biscuits and coffee varies with… 9708/11 Oct/Nov 2020

6 The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income ($) biscuits (packs) coffee (cups) 100 0 5 150 5 10 Which statement about the income elasticity of demand over the range of income shown is true? A For biscuits it is greater than 1. B For biscuits it is zero. C For coffee it is less than 1. D For coffee it is unitary.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2020

Q206 · Agricultural economies have faced a deterioration in their terms of trade 9708/11 Oct/Nov 2020

19 Agricultural economies have faced a deterioration in their terms of trade. What might have contributed to this? A falling exchange rates of agricultural economies B falling productivity in agricultural production C increasing productivity in manufacturing economies D the high income elasticity of demand for foodstuffs

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2020

Q207 · In the UK, attempts to encourage people to change from road to rail travel by the… 9708/12 Oct/Nov 2020

5 In the UK, attempts to encourage people to change from road to rail travel by the introduction of a system of road pricing were forecast to have little effect because ‘people like using their cars too much’. How would this forecast be explained? A The price elasticity of demand for cars is high. B The price elasticity of demand for petrol is high. C The price elasticity of demand for rail travel is low. D The price elasticity of demand for car travel is low.

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2020

Q208 · The diagram shows the demand curve for a product with unitary price elasticity 9708/12 Oct/Nov 2020

6 The diagram shows the demand curve for a product with unitary price elasticity. price D O quantity What will happen with such a curve? A A fall in price will bring about an increase in total expenditure on the product. B A fall in price will bring about an increase in sales but a fall in total expenditure on the product. C As the price rises, total expenditure on the product will stay the same. D As the price rises, total expenditure on the product will rise and then fall.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2020

Q209 · The market for good X is in equilibrium 9708/12 Oct/Nov 2020

18 The market for good X is in equilibrium. The government introduces a subsidy to the producers of good X. Under which conditions will the total expenditure by the government on the subsidy be the greatest? price elasticity of price elasticity of demand for good X supply for good X A <1 <1 B <1 >1 C >1 <1 D >1 >1

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2020

Q210 · Public transport in an economy has an income elasticity of demand of –0.36 9708/13 Oct/Nov 2020

6 Public transport in an economy has an income elasticity of demand of –0.36. What does this mean about public transport? A It has close substitutes. B It is a necessity. C It is a normal good. D It is an inferior good.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2020

Q211 · A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000… 9708/13 Oct/Nov 2020

9 A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many units will the firm sell if it charges a price of $5? A 10 000 B 100 000 C 160 000 D 200 000

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2020

Q212 · A bus journey is considered an inferior good in a relatively rich country such as… 9708/13 Oct/Nov 2020

10 A bus journey is considered an inferior good in a relatively rich country such as Singapore but a normal good in a relatively poor country such as Tanzania. In which direction would an increase in incomes in both countries cause the demand curve for bus journeys in Singapore and Tanzania to shift? Singapore Tanzania A left left B left right C right left D right right

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2020

Q213 · A government regards alcoholic drinks as a demerit good and introduces a minimum price… 9708/13 Oct/Nov 2020

14 A government regards alcoholic drinks as a demerit good and introduces a minimum price above the equilibrium in an attempt to protect consumers. Demand for alcoholic drinks is price inelastic. What is the most likely outcome? A a fall in the revenue of alcoholic drink producers B a fall in the quantity of alcoholic drink sales C a long-run shortage of alcoholic drinks D an increase in specific tax revenue from the sale of alcoholic drinks

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2020

Q214 · What is used to calculate the price elasticity of demand? 9708/12 Feb/March 2021

13 What is used to calculate the price elasticity of demand? change in price A change in quantity demanded change in quantity demanded B change in price percentage change in price C percentage change in quantity demanded percentage change in quantity demanded D percentage change in price

1 marks

Answer: D

This question in 9708/12 Feb/March 2021

Q215 · The government redistributes income by raising the top rate of income tax and using the… 9708/12 Feb/March 2021

16 The government redistributes income by raising the top rate of income tax and using the money raised to finance additional benefits to students and the unemployed. Under which conditions will total spending in the economy increase the most? income elasticity income elasticity of demand of top of demand of rate income students and the taxpayers unemployed A > 1 > 1 B > 1 < 1 C < 1 > 1 D < 1 < 1

1 marks

Answer: C

This question in 9708/12 Feb/March 2021

Q216 · The price elasticity of demand for a firm’s product is equal to one for all price changes 9708/12 May/June 2021

6 The price elasticity of demand for a firm’s product is equal to one for all price changes. What would be the result of this? A A percentage increase in price will cause demand to fall by a larger percentage. B A percentage increase in price will cause demand to increase by the same percentage. C Quantity demanded will always be the same whatever the price. D The firm’s revenue will always be the same whatever the price.

1 marks

Answer: D

This question in 9708/12 May/June 2021

Q217 · Knowledge of which combination of demand elasticities would be relevant to a firm trying… 9708/12 May/June 2021

13 Knowledge of which combination of demand elasticities would be relevant to a firm trying to increase its revenue? price elasticity | cross elasticity | income elasticity of demand of demand of demand v v v 0 0O WwW > v v x v x v x v v

1 marks

Answer: A

This question in 9708/12 May/June 2021

Q218 · The table gives information about the market for two models of car 9708/13 May/June 2021

13 The table gives information about the market for two models of car. number of cars sold cross elasticity of demand with model per week respect to the price of petrol 1200 cc 10 000 –0.25 2000 cc 5 000 –0.50 If the prices of the cars remain unchanged, but the price of petrol increases by 100%, what will be the effect on the number of cars sold per week? A increase by 5000 B no change C decrease by 5000 D decrease by 15 000

1 marks

Answer: C

This question in 9708/13 May/June 2021

Q219 · When the supply of a good decreases, equilibrium price stays the same 9708/11 Oct/Nov 2021

6 When the supply of a good decreases, equilibrium price stays the same. What is the price elasticity of demand of the good? A –1 B zero C +1 D infinite

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2021

Q220 · What can be measured by cross-elasticity of demand? 9708/11 Oct/Nov 2021

7 What can be measured by cross-elasticity of demand? A a change in real income as a result of a change in the price of consumer goods B a change in the demand for a good in response to a change in the price of a complement C a change in the price of a good in response to a change in the demand for a substitute D a change in the price of a good when the demand for it changes

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2021

Q221 · The diagram shows how a 10% increase in consumer incomes shifts the demand for good X… 9708/11 Oct/Nov 2021

13 The diagram shows how a 10% increase in consumer incomes shifts the demand for good X from D to D1. price ($) 10 D1 D 0 80 100 quantity (kg) Which statement about good X is correct? A It is a normal good with income elastic demand. B It is a normal good with income inelastic demand. C It is an inferior good with income elastic demand. D It is an inferior good with income inelastic demand.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2021

Q222 · The table shows the quantity demanded of three goods when the price of good X changes 9708/12 Oct/Nov 2021

11 The table shows the quantity demanded of three goods when the price of good X changes. price of X quantity of X quantity of Y quantity of Z ($) demanded demanded demanded 5 100 60 20 4 110 50 22 3 140 30 28 2 200 15 40 1 300 4 60 Which relationships between X, Y and Z can be deduced from the table? Y is Z is A a complement for X a complement for X B a complement for X a substitute for X C a substitute for X a complement for X D a substitute for X a substitute for X

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2021

Q223 · In an attempt to reduce crime, a government introduces a subsidy on the production of… 9708/12 Oct/Nov 2021

18 In an attempt to reduce crime, a government introduces a subsidy on the production of burglar alarms, but sales rise very little. Which possible characteristics of the good would lead to this outcome? price elasticity price elasticity of demand of supply A high high B high low C low high D low low

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2021

Q224 · What would be the price elasticity of demand for smartphones if their price fell from… 9708/13 Oct/Nov 2021

10 What would be the price elasticity of demand for smartphones if their price fell from US$100 to US$90 and the quantity demanded rose from 200 to 250? A 0.2 B 0.4 C 2.5 D 5.0

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2021

Q225 · The cross-elasticity of demand of good S with respect to the price of good P is +1.5 9708/13 Oct/Nov 2021

13 The cross-elasticity of demand of good S with respect to the price of good P is +1.5. The cross-elasticity of demand of good S with respect to the price of good R is –1.5. The cross-elasticity of demand of good P with respect to the price of good R is –1.5. What can be concluded about goods P, R and S? A S and P are complements; P and R are substitutes. B S and P are complements; R is an inferior good. C S and P are substitutes; P and R are complements. D S and P are substitutes; R is an inferior good.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2021

Q226 · A government wishes to impose a tax on a good so that the consumer pays most of the tax… 9708/13 Oct/Nov 2021

14 A government wishes to impose a tax on a good so that the consumer pays most of the tax increase. Which type of elasticity would best achieve this aim? A high price elasticity of supply B low price elasticity of supply C unitary price elasticity of supply D perfectly inelastic price elasticity of supply

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2021

Q227 · What is the measure of cross-elasticity of demand for good X in terms of good Y? 9708/12 Feb/March 2022

8 What is the measure of cross-elasticity of demand for good X in terms of good Y? A the change in the demand for X divided by the change in the price of Y B the change in the price of X divided by the change in the demand for Y C the percentage change in the demand for X divided by the percentage change in the price of Y D the percentage change in the demand for Y divided by the percentage change in the price of X

1 marks

Answer: C

This question in 9708/12 Feb/March 2022

Q228 · The producer of a good with a price-elastic demand observes that a rise in its price is… 9708/11 May/June 2022

5 The producer of a good with a price-elastic demand observes that a rise in its price is accompanied by a rise in total revenue. What might explain this? A The good is an inferior good. B The rise in price was due to an increase in demand for the good. C The supply of the good was inadequate to meet the demand. D The supply of the good was price-inelastic.

1 marks

Answer: B

This question in 9708/11 May/June 2022

Q229 · What can be concluded about a good with a positive cross-price elasticity of demand? 9708/11 May/June 2022

13 What can be concluded about a good with a positive cross-price elasticity of demand? A Its price will be sensitive to changes in prices of close substitutes. B Its price will be sensitive to changes in quantity demanded of close substitutes. C The quantity demanded for this good will be sensitive to changes in prices of close substitutes. D The quantity demanded for this good will be sensitive to changes in quantity demanded of close substitutes.

1 marks

Answer: C

This question in 9708/11 May/June 2022

Q230 · The table shows data from a bus company that was privatised in 2013 9708/11 May/June 2022

16 The table shows data from a bus company that was privatised in 2013. passenger journeys revenue year percentage change $000 from previous year (%) 2012 470 +5 2013 495 +2 2014 430 –2 2015 440 –1 What is the most likely conclusion that can be made from the data? A Average prices were higher in 2012 than 2015. B Average prices were higher in 2015 than 2014. C The number of passenger journeys remained the same since privatisation. D Profits have increased since privatisation.

1 marks

Answer: B

This question in 9708/11 May/June 2022

Q231 · What would be the most likely reason for a firm’s decision to calculate the price… 9708/12 May/June 2022

9 What would be the most likely reason for a firm’s decision to calculate the price elasticity of demand for its product? A to provide retail statistics for the government B to predict the change in its total revenue after it raises prices C to calculate the firm’s competitive position D to enable the firm to complete consumer satisfaction surveys

1 marks

Answer: B

This question in 9708/12 May/June 2022

Q232 · The cross-elasticity of demand of good S with respect to the price of good P is +1.5 9708/12 May/June 2022

10 The cross-elasticity of demand of good S with respect to the price of good P is +1.5. The cross-elasticity of demand of good S with respect to the price of good R is –1.5. The cross-elasticity of demand of good P with respect to the price of good R is –1.5. What can be concluded about goods P, R and S? A S and P are complements; P and R are substitutes. B S and P are complements; R is an inferior good. C S and P are substitutes; P and R are complements. D S and P are substitutes; R is an inferior good.

1 marks

Answer: C

This question in 9708/12 May/June 2022

Q233 · The table gives different combinations of possible values for a country’s price… 9708/12 May/June 2022

24 The table gives different combinations of possible values for a country’s price elasticity of demand for exports and price elasticity of demand for its imports. Following the devaluation of the country’s currency, under which combination of elasticities would the country’s balance of payments on the current account worsen? price elasticity of price elasticity of demand for exports demand for imports A 0.3 0.3 B 0.2 0.9 C 0.6 0.5 D 1.2 1.2

1 marks

Answer: A

This question in 9708/12 May/June 2022

Q234 · The diagram shows the demand curve for a normal product 9708/13 May/June 2022

13 The diagram shows the demand curve for a normal product. price W X demand Y Z O quantity Which two points indicate a move from a price inelastic point to a less price inelastic point? A W to X B X to W C Y to Z D Z to Y

1 marks

Answer: D

This question in 9708/13 May/June 2022

Q235 · Each day there are hundreds of airline flights 9708/14 May/June 2022

9 Each day there are hundreds of airline flights. Which combination would make the demand for flights most price-inelastic? distance of purpose of income of flight flight traveller A long business high B long leisure low C short business low D short leisure high

1 marks

Answer: A

This question in 9708/14 May/June 2022

Q236 · The price elasticity of demand for a high-quality smartphone is elastic 9708/14 May/June 2022

11 The price elasticity of demand for a high-quality smartphone is elastic. The price of the smartphone decreases. Which combination describes the impact of a fall in the smartphone’s price on the quantity demanded and total revenue? quantity demanded total revenue A rises by a greater percentage than the price fall falls B rises by a greater percentage than the price fall rises C rises by a smaller percentage than the price fall falls D rises by a smaller percentage than the price fall rises

1 marks

Answer: B

This question in 9708/14 May/June 2022

Q237 · When the price of good X rises, total spending on good X rises, but the demand for good Y… 9708/14 May/June 2022

12 When the price of good X rises, total spending on good X rises, but the demand for good Y falls. What can be concluded about good X and good Y? cross-elasticity of price elasticity of demand for good Y demand for good X with respect to the price of good X A > 1 > 0 B > 1 < 0 C < 1 > 0 D < 1 < 0

1 marks

Answer: D

This question in 9708/14 May/June 2022

Q238 · What will be the result of a subsidy that is given to the producers of a good with an… 9708/14 May/June 2022

16 What will be the result of a subsidy that is given to the producers of a good with an inelastic demand curve? A The equilibrium price of the good will fall by a larger percentage than the fall in equilibrium quantity. B The equilibrium price of the good will fall by a larger percentage than the rise in equilibrium quantity. C The equilibrium price of the good will fall by a smaller percentage than the fall in equilibrium quantity. D The equilibrium price of the good will fall by a smaller percentage than the rise in equilibrium quantity.

1 marks

Answer: B

This question in 9708/14 May/June 2022

Q239 · The currency of country X has a floating exchange rate against other currencies 9708/14 May/June 2022

25 The currency of country X has a floating exchange rate against other currencies. Under which circumstances will the value of country X’s currency fluctuate the most against other currencies on the foreign exchange market? price elasticity of price elasticity of demand for the supply for the currency of country X currency of country X A elastic elastic B inelastic elastic C elastic inelastic D inelastic inelastic

1 marks

Answer: D

This question in 9708/14 May/June 2022

Q240 · Which products are likely to have a positive cross-elasticity of demand with tea? 9708/11 Oct/Nov 2022

8 Which products are likely to have a positive cross-elasticity of demand with tea? A biscuits and cakes B coffee and hot chocolate C cups and saucers D sugar and milk

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2022

Q241 · What does the Marshall–Lerner condition state must be present for a depreciation of a… 9708/11 Oct/Nov 2022

27 What does the Marshall–Lerner condition state must be present for a depreciation of a currency to cause an improvement in the current account balance? A The price elasticity of demand for exports and the price elasticity of demand for imports are both greater than one. B The price elasticity of demand for exports and the price elasticity of demand for imports are both less than one. C The sum of the price elasticity of demand for exports and the price elasticity of demand for imports is greater than one. D The sum of the price elasticity of demand for exports and the price elasticity of demand for imports is less than one.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2022

Q242 · An indirect tax is imposed on a product, causing total expenditure by consumers to… 9708/12 Oct/Nov 2022

6 An indirect tax is imposed on a product, causing total expenditure by consumers to increase. Which row identifies this situation? price price elasticity A decreases elastic B decreases inelastic C increases elastic D increases inelastic

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2022

Q243 · The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and… 9708/12 Oct/Nov 2022

14 The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and cinema tickets. Lee Yim restaurant meals –1.2 –0.8 cinema tickets –0.7 –0.3 There is a rise in the price of both products. What can definitely be concluded after these price changes? A Restaurant owners will receive more income. B Lee will spend more money on both products. C Yim will spend more money on both products. D Cinema owners will receive less income.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2022

Q244 · The diagram shows the relationship between total expenditure and price for three… 9708/13 Oct/Nov 2022

8 The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3. 1 2 price 3 O total expenditure Which curves represent the products with price-elastic and unitary price-elastic demand? elastic unitary A 1 2 B 2 3 C 3 1 D 3 2

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2022

Q245 · Which product has the lowest price elasticity of demand? 9708/13 Oct/Nov 2022

12 Which product has the lowest price elasticity of demand? quantity demanded price rises by falls by (%) (%) A 0 10 B 5 5 C 10 5 D 10 0

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2022

Q246 · The market for good Z is in equilibrium with 1000 units sold at a price of $10 9708/13 Oct/Nov 2022

16 The market for good Z is in equilibrium with 1000 units sold at a price of $10. The government pays a subsidy of $2 per unit to producers of good Z. Under which conditions will the total spending by the government on the subsidy be smallest? price elasticity of price elasticity of demand for good Z supply for good Z A < 1 < 1 B < 1 > 1 C > 1 < 1 D > 1 > 1

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2022

Q247 · A sports stadium has two prices of seats 9708/12 Feb/March 2023

8 A sports stadium has two prices of seats. The cheaper seats are $10 and the more expensive seats are $20. When the prices of all seats are increased by 10%, the effects on demand are a fall of 5% for the cheaper seats and a fall of 12% for the more expensive seats. What describes the responsiveness of demand to the change in price? more expensive cheaper seats seats A elastic elastic B elastic inelastic C inelastic elastic D inelastic unitary elasticity

1 marks

Answer: C

This question in 9708/12 Feb/March 2023

Q248 · Which row correctly describes the relationship between two goods implied by the value of… 9708/11 May/June 2023

5 Which row correctly describes the relationship between two goods implied by the value of the cross elasticity of demand? value of the cross description elasticity of demand A –2.0 weak complements B –0.5 weak substitutes C +0.5 weak substitutes D +2.0 strong complements

1 marks

Answer: C

This question in 9708/11 May/June 2023

Q249 · In which situation is the demand for a product said to be price elastic? 9708/11 May/June 2023

9 In which situation is the demand for a product said to be price elastic? A The quantity demanded responds to a change in price. B An increase in price brings about a decrease in the quantity demanded. C An increase in price induces consumers to spend more on the product. D A decrease in price brings about an increase in revenue.

1 marks

Answer: D

This question in 9708/11 May/June 2023

Q250 · The cross elasticity of demand between bus travel and rail travel is +2 9708/12 May/June 2023

8 The cross elasticity of demand between bus travel and rail travel is +2. A rise in the price of bus fares caused the demand for rail travel to rise by 10%. Which change in bus fares would have caused this? from to (cents) (cents) A 20 21 B 30 33 C 40 45 D 50 60

1 marks

Answer: A

This question in 9708/12 May/June 2023

Q251 · A change in the price of a good causes an increase in the quantity of the good demanded 9708/12 May/June 2023

9 A change in the price of a good causes an increase in the quantity of the good demanded. What would be the nature of the good and the direction of price change for this to be certain to happen? nature of good price change A inferior fall B inferior rise C normal fall D normal rise

1 marks

Answer: C

This question in 9708/12 May/June 2023

Q252 · In the diagram, area OP1M1Q1 is equal to area OP2M2Q2 9708/12 May/June 2023

14 In the diagram, area OP1M1Q1 is equal to area OP2M2Q2. price P1 M1 M2 P2 D O Q1 Q2 quantity What is the value of the price elasticity of demand if the price is halved from P1 to P2? A –1 B –0.5 C zero D infinity

1 marks

Answer: A

This question in 9708/12 May/June 2023

Q253 · The table shows changes in a consumer’s expenditure on various goods when her income… 9708/12 May/June 2023

15 The table shows changes in a consumer’s expenditure on various goods when her income increases from $20 000 to $24 000. income income $20 000: $24 000: good amount spent amount spent on good on good ($) ($) W 100 96 X 100 100 Y 200 224 Z 200 248 Assuming all else remains unchanged, for which goods is the consumer’s income elasticity of demand greater than 1.0? A W, Y and Z B W and Z only C W only D Z only

1 marks

Answer: D

This question in 9708/12 May/June 2023

Q254 · When is the price elasticity of demand for a product most likely to be price elastic? 9708/13 May/June 2023

5 When is the price elasticity of demand for a product most likely to be price elastic? A A large percentage of income is spent on the product. B It is measured in the short run. C It is a necessity product. D There are few substitutes available.

1 marks

Answer: A

This question in 9708/13 May/June 2023

Q255 · When the price of a firm’s product falls by 5%, its total revenue also falls by 5% 9708/13 May/June 2023

10 When the price of a firm’s product falls by 5%, its total revenue also falls by 5%. What describes the product’s price elasticity of demand? A elastic B infinite C unitary D zero

1 marks

Answer: D

This question in 9708/13 May/June 2023

Q256 · The table shows how an individual’s weekly consumption of biscuits and coffee varies with… 9708/13 May/June 2023

11 The table shows how an individual’s weekly consumption of biscuits and coffee varies with income. income biscuits coffee ($) (packs) (cups) 100 0 5 150 5 10 Which statement about the income elasticity of demand over the range of income shown is correct? A For biscuits it is greater than 1. B For biscuits it is zero. C For coffee it is less than 1. D For coffee it is unitary.

1 marks

Answer: A

This question in 9708/13 May/June 2023

Q257 · The diagram shows a demand curve for pineapples 9708/11 Oct/Nov 2023

6 The diagram shows a demand curve for pineapples. 2 price ($) X 1.5 1 Y 0.5 0 D 0 3 6 9 12 quantity (000s) What happens to the value of price elasticity of demand (PED) when there is a movement from point X to point Y and what describes the value of PED at point Y? effect on value of value of PED PED at Y A fall elastic B fall inelastic C rise elastic D unchanged unitary

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2023

Q258 · The cross-elasticity of demand between good P and good Q is –0.4 9708/11 Oct/Nov 2023

8 The cross-elasticity of demand between good P and good Q is –0.4. The cross-elasticity of demand between good P and good R is +0.6. Which combination of goods is most likely to be represented by this information? good P good Q good R A cream yoghurt raspberry B yoghurt strawberry raspberry C strawberry cream raspberry D strawberry raspberry cream

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2023

Q259 · The table shows the demand schedule for textbooks 9708/11 Oct/Nov 2023

11 The table shows the demand schedule for textbooks. price quantity $ demanded 50 0 40 100 30 200 20 300 10 400 0 500 What can be concluded from this information? A Profit would be maximised at a price of $30. B Profit would not change if the price rose from $20 to $30. C Revenue would increase if the price was decreased from $40 to $30. D Revenue would be maximised at a price of $40.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2023

Q260 · After a 10% decrease in a consumer’s income, the consumer’s demand for a good rises from… 9708/12 Oct/Nov 2023

8 After a 10% decrease in a consumer’s income, the consumer’s demand for a good rises from 100 to 105. What is the value of the consumer’s income elasticity of demand for this good? A –2.0 B –0.5 C +0.5 D +2.0

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2023

Q261 · When the incomes of consumers of good X fall by 5%, under which conditions will the… 9708/13 Oct/Nov 2023

7 When the incomes of consumers of good X fall by 5%, under which conditions will the demand curve shift furthest to the right? income elasticity of nature of good X demand for good X A inferior good –0.8 B inferior good –1.2 C normal good +0.9 D normal good +1.5

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2023

Q262 · The price elasticity of demand for a product is –0.6 9708/13 Oct/Nov 2023

10 The price elasticity of demand for a product is –0.6. The supplier wants to clear all surplus stock of a product and reduces the price of a good by 50%. What is the effect of this price change on the quantity purchased and the expenditure on the good? quantity expenditure demanded A rises by 30% falls B rises by 30% rises C rises by 60% falls D rises by 60% rises

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2023

Q263 · In a town, bus fares fall by 50% and this leads to an increase in bus use by 30% 9708/13 Oct/Nov 2023

12 In a town, bus fares fall by 50% and this leads to an increase in bus use by 30%. The effect on car use is very low with only a 1% reduction. What is the value of the cross-elasticity of demand between car travel and bus travel? A –0.60 B –0.02 C +0.02 D +0.60

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2023

Q264 · The price elasticity of demand for good X is –2.4, its income elasticity of demand is… 9708/12 Feb/March 2024

7 The price elasticity of demand for good X is –2.4, its income elasticity of demand is –0.4 and the cross elasticity of demand for good X with respect to good Y is +0.8. What is the correct description of good X? A inferior good, price-elastic demand and substitute for good Y B inferior good, price-inelastic demand and complement to good Y C normal good, price-elastic demand and complement to good Y D normal good, price-inelastic demand and substitute for good Y

1 marks

Answer: A

This question in 9708/12 Feb/March 2024

Q265 · The diagram shows two straight line demand curves, X and Y 9708/12 Feb/March 2024

8 The diagram shows two straight line demand curves, X and Y. price X Y O quantity What is correct about curves X and Y? A Both X and Y are unit price elastic over their whole length. B Both X and Y have the same elasticity at every price. C X has a higher price elasticity than Y at every price. D Y is more likely to have substitutes than X.

1 marks

Answer: C

This question in 9708/12 Feb/March 2024

Q266 · Which statement is correct? 9708/11 May/June 2024

8 Which statement is correct? A Demand for an inferior good has a positive relationship to income and a negative relationship to price. B Demand for an inferior good has a negative relationship to income and a negative relationship to price. C Demand for a normal good has a positive relationship to income and a positive relationship to price. D Demand for a normal good has a negative relationship to income and a positive relationship to price.

1 marks

Answer: B

This question in 9708/11 May/June 2024

Q267 · A firm calculates that the income elasticity of demand for its product is –3.0 9708/11 May/June 2024

10 A firm calculates that the income elasticity of demand for its product is –3.0. What can be deduced from this information? A In a period of economic growth, its total revenue should increase. B In a period of economic recession, its total revenue should increase. C It has few substitutes so it should increase its price to increase total revenue. D It has many substitutes so it should decrease price to increase total revenue.

1 marks

Answer: B

This question in 9708/11 May/June 2024

Q268 · The tables show the different quantities of a good demanded at different prices and… 9708/12 May/June 2024

8 The tables show the different quantities of a good demanded at different prices and levels of income. price quantity income quantity $ demanded $ demanded 5 9 48 120 4 10 24 40 3 20 16 20 2 40 10 10 1 120 8 9 Within the range of these figures, when are both price elasticity of demand and income elasticity of demand for this good inelastic? A when price is low and income is high B when price is high and income is low C when price and income are both high D when price and income are both low

1 marks

This question in 9708/12 May/June 2024

Q269 · A firm is charging a price of $12 for its product and using 80% of its production… 9708/13 May/June 2024

8 A firm is charging a price of $12 for its product and using 80% of its production capacity of 10 000 units per month. Assuming the product has unitary price elastic demand, which price should the firm charge to utilise its full capacity? A $9.00 B $9.60 C $10.00 D $10.60

1 marks

Answer: A

This question in 9708/13 May/June 2024

Q270 · The diagram shows the effect of an indirect tax imposed on cigarettes 9708/13 May/June 2024

13 The diagram shows the effect of an indirect tax imposed on cigarettes. The market is initially in equilibrium at point X. price S1 Z S P1 W X Pe P2 Y D O Q1 Qe quantity Which area represents the incidence of the tax on consumers? A P1ZYP2 B P1ZWPe C PeWYP2 D PeXZP1

1 marks

Answer: B

This question in 9708/13 May/June 2024

Q271 · The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and… 9708/11 Oct/Nov 2024

8 The table shows Lee’s and Yim’s price elasticity of demand for restaurant meals and cinema tickets. Lee Yim restaurant meals –1.2 –0.8 cinema tickets –0.7 –1.3 There is a rise in the price of restaurant meals and a fall in the price of cinema tickets. What can be concluded after these price changes? A Restaurant owners will receive more income. B Lee will spend more money on both cinema tickets and restaurant meals. C Yim will spend more money on both cinema tickets and restaurant meals. D Cinema owners will receive less income.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2024

Q272 · A product with infinite elasticity of supply has sales of 1000 units a week at a price of… 9708/12 Oct/Nov 2024

14 A product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit. Price elasticity of demand is 1.5 over the relevant range. The government imposes a tax of 10%. What will be the government’s weekly tax revenue from this product? A $15 B $85 C $100 D $150

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2024

Q273 · A good has the following elasticity values 9708/13 Oct/Nov 2024

9 A good has the following elasticity values. cross elasticity of demand +1.4 income elasticity of demand –0.8 Which statement is correct? A The good is a complement and inferior. B The good is a complement and normal. C The good is a substitute and inferior. D The good is a substitute and normal.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2024

Q274 · The diagram shows the impact on equilibrium due to an increase in the costs of production 9708/12 Feb/March 2025

8 The diagram shows the impact on equilibrium due to an increase in the costs of production. The original price is $72. The price elasticity of demand is –2.0. price S2 $ S1 P2 72 D 0 0 60 80 quantity What is the new equilibrium price, P2? A $81.00 B $84.00 C $92.00 D $108.00

1 marks

Answer: A

This question in 9708/12 Feb/March 2025

Q275 · A decrease in the quantity demanded of a product results in a proportionate decrease in… 9708/12 Feb/March 2025

11 A decrease in the quantity demanded of a product results in a proportionate decrease in sales revenues. What is true about its price elasticity of demand? A It is between zero and one. B It is infinite. C It is unitary. D It is zero.

1 marks

Answer: B

This question in 9708/12 Feb/March 2025

Q276 · Cars and petrol (gasoline) are in joint demand 9708/11 May/June 2025

7 Cars and petrol (gasoline) are in joint demand. What is the effect of an increase in the price of cars on the demand for petrol? A B price price P2 P1 P1 P2 D D O Q2 Q1 O Q1 Q2 quantity quantity C D price price D1 D2 D2 D1 O quantity O quantity

1 marks

Answer: C

This question in 9708/11 May/June 2025

Q277 · Too much sugar causes an increase in a consumer’s weight 9708/11 May/June 2025

12 Too much sugar causes an increase in a consumer’s weight. A government has introduced a ‘sugar tax’ on the consumption of soft drinks that have a high sugar content. How might this policy help to reduce the number of overweight people? A Consumers switch to cheaper brands of soft drink with a high sugar content. B Consumers switch to other high-sugar substitute goods, such as alcohol or sweets. C The price elasticity of demand for soft drinks is inelastic. D The tax revenue is spent on education about the dangers of soft drink consumption.

1 marks

Answer: D

This question in 9708/11 May/June 2025

Q278 · A government decides to raise most of its revenues from indirect taxes 9708/11 May/June 2025

22 A government decides to raise most of its revenues from indirect taxes. What would increase the effectiveness of this policy? A an increasing trend towards bartering of goods B increasing interest rates on household savings C increasing occurrence of informal markets in the economy D placing taxes on goods and services which have a price-inelastic demand

1 marks

Answer: D

This question in 9708/11 May/June 2025

Q279 · When can a product be said to have a negative income elasticity of demand? 9708/12 May/June 2025

7 When can a product be said to have a negative income elasticity of demand? A When it is a luxury good. B When it is a necessity good. C When it is a normal good. D When it is an inferior good. The diagram shows the short-run supply curve (SSR) and long-run supply curve (SLR) for a bakery.

1 marks

Answer: D

This question in 9708/12 May/June 2025

Q280 · An indirect tax is imposed on good X 9708/12 May/June 2025

11 An indirect tax is imposed on good X. Which situation is most likely to result in producers bearing a higher burden of the tax? A price elasticity of demand is elastic B price elasticity of demand is inelastic C price elasticity of supply is elastic D price elasticity of supply is inelastic

1 marks

Answer: A

This question in 9708/12 May/June 2025

Q281 · What is true for income elasticity of demand but not for price elasticity of demand? 9708/13 May/June 2025

9 What is true for income elasticity of demand but not for price elasticity of demand? A It helps firms differentiate between goods with elastic and inelastic demand. B It helps firms differentiate between normal and inferior goods. C It helps firms predict the changes in the quantity demanded. D It helps firms predict the changes in sales revenues.

1 marks

Answer: B

This question in 9708/13 May/June 2025

Q282 · Which statement is true if the income elasticity of demand for a good has a value of –0.2? 9708/11 Oct/Nov 2025

8 Which statement is true if the income elasticity of demand for a good has a value of –0.2? A When income rises less of the good is bought. B When income rises more of the good is bought. C When price falls more of the good is bought. D When price rises less of the good is bought.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2025

Q283 · The table shows the price of a good and total expenditure on the good during specific… 9708/11 Oct/Nov 2025

9 The table shows the price of a good and total expenditure on the good during specific periods when the market is in equilibrium. price total expenditure period ($) ($) 1 12 96000 2 5 40000 3 8 64000 4 10 80000 5 4 32000 What can be deduced from this data? A The good has constant opportunity cost. B The good is an inferior good. C The price elasticity of demand is equal to one. D The price elasticity of supply is equal to zero.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2025

Q284 · The diagram shows the demand curve for a product 9708/12 Oct/Nov 2025

8 The diagram shows the demand curve for a product. 100 price $ 50 demand 0 0 50 100 quantity What is the price at which the price elasticity of demand is unit elastic? A $0 B $50 C $100 D every price along the demand curve

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2025

Q285 · Public transport in an economy has an income elasticity of demand of –0.36 9708/12 Oct/Nov 2025

9 Public transport in an economy has an income elasticity of demand of –0.36. What does this mean about public transport? A It is an inferior good. B It is a necessity. C It is a normal good. D It has close substitutes.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2025

Q286 · Good X has an income elasticity of demand (YED) value of −0.8 9708/13 Oct/Nov 2025

9 Good X has an income elasticity of demand (YED) value of −0.8. Its cross elasticity of demand (XED) with respect to good Y is also −0.8. What are the characteristics of good X? A a normal good that is a complement to good Y B a normal good that is a substitute for good Y C an inferior good that is a complement to good Y D an inferior good that is a substitute for good Y

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2025

Q287 · Assuming demand is price elastic, what will rise the most if an indirect tax is removed? 9708/13 Oct/Nov 2025

13 Assuming demand is price elastic, what will rise the most if an indirect tax is removed? A consumer expenditures B price of the product C producers’ revenues D tax receipts

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2025