The interaction of demand and supply — Paper 1 · A Level Economics 9708

10 In 2003 the outbreak in Asia of the SARS virus had a significant effect on the demand for travel to holiday destinations in the region. The response of airlines was to reduce the number of flights to Asian destinations. The original market equilibrium was at point X. Which point represents the new equilibrium in the market for travel to Asia? supply B price A X C D demand O quantity

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2005

11 The diagram shows the demand curve, DD1, and the supply curve, SS1, for eye operations. S D price P O S1 D1 number of operations The operations are provided free. Which statement is true? A The equilibrium price is zero. B The equilibrium price is P. C The equilibrium price is indeterminate, because the supply curve is vertical. D Consumer surplus from the operations is ODD1.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2005

13 The diagram shows the demand and supply curves of a commodity before and after a specific tax is removed. S S 12 10 8 price 6 4 2 D 0 quantity What is the tax per unit of output and what is the price after the removal of the tax? price after the tax per unit removal of the tax A 6 6 B 6 8 C 4 6 D 4 8

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2005

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

1 marks

Answer: D

This question in 9708/11 May/June 2006

10 The diagram shows the market for computer games. The market starts in equilibrium at X. What will be the new equilibrium if the tax on computer games is increased and incomes fall? S2 S1 S3 A price of X B computer games C D D2 D1 O quantity of computer games

1 marks

Answer: B

This question in 9708/11 May/June 2006

13 The diagram shows the demand and supply curves for parking spaces in a hospital car park. S price P D O number of spaces The managers decide to rely on the price mechanism to allocate parking spaces at the hospital most effectively. What is required in order for this to work? A Alternative means of transport must be provided for those unable to afford price OP. B A survey will be needed to find out the amount users are willing to pay. C The capacity of the car park will need to be expanded. D The price charged for parking spaces must be OP.

1 marks

Answer: D

This question in 9708/11 May/June 2006

5 The market demand for a product is made up of the demand from three firms, X, Y and Z. The table shows the demand from each firm and the market supply. price $ demand from X demand from Y demand from Z market supply 7 3300 3300 3300 3300 8 3100 2900 3100 6200 9 2800 2500 2900 8200 10 2500 2100 2700 10 000 What is the equilibrium price in the market? A $7 B $8 C $9 D $10

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2006

11 In the diagram, S1 and D1 are the initial supply and demand curves for tea and X is the original equilibrium. There is then a failure in the coffee harvest of a major coffee producer. Which point would represent the equilibrium position in the tea market as a result of this failure? D2 S3 S1 S2 D1 B C A price X D D2 S3 S1 S2 D1 O quantity

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2006

12 The diagram shows a market subject to a maximum price. S price P maximum price D O Q1 Q Q2 quantity What will happen if the maximum price is removed? A There will be allocation by a queuing system. B There will be allocation by government rationing. C There will be allocation by seller’s preference. D There will be allocation by the price system.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2006

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

1 marks

Answer: D

This question in 9708/11 May/June 2007

12 The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh represents domestic supply and Sm represents imports. Sh price Sm D O R T V quantity What will be the level of consumption and the associated volume of imports? consumption volume of imports A OT RT B OT OT C OV RT D OV RV

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2007

13 In a free market in disequilibrium, which combination of price and quantity will lead to a fall in price and a contraction in output to reach equilibrium? S P1 P2 price P3 D O Q1 Q2 Q3 quantity A P1Q1 B P1Q3 C P3Q1 D P3Q3

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2007

10 In the diagram, the supply curve shows the number of spaces in a car park and the demand curve shows the demand for spaces on four different days. S P4 P3 D4 price P2 D3 P1 D2 D1 O quantity The owner wishes to charge a parking fee on each of these days to allocate the spaces according to the market mechanism. Which pricing policy should the owner use? A set a fixed price at P1 B set a fixed price at P4 C vary prices between P2 and P3 D vary prices between P1 and P4

1 marks

Answer: D

This question in 9708/11 May/June 2008

11 In the diagram below, D1 and S1 represent the demand and supply curves of a Malaysian industry in its home market. Equilibrium is at X. The industry has to pay a large wage increase and at the same time faces increased competition from imported substitutes. Which point on the diagram could represent the new equilibrium? S3 S1 S2 D2 D1 D3 A price D X B C D2 S3 S1 S2 D1 D3 O quantity

1 marks

Answer: D

This question in 9708/11 May/June 2008

12 The diagram shows the demand curve and supply curve for a good on which the government imposes a specific tax. S D price D S O quantity What will be the result of this tax? A Most of the incidence of the tax will fall on the producer. B The new demand curve will be parallel to DD. C The price will rise by the full amount of the tax. D The quantity bought will fall proportionately to the tax rate.

1 marks

Answer: A

This question in 9708/11 May/June 2008

13 Which government policy might limit the rationing function of the price mechanism? A the imposition of tariffs on imported consumer goods B the levy of indirect taxes at varying rates on different goods C the payment of subsidies to food producers D the setting of maximum prices for rented housing

1 marks

Answer: D

This question in 9708/11 May/June 2008

9 There are three firms (X, Y and Z) supplying a market. The table shows their supply at four different prices. price ($) firm X’s supply firm Y’s supply firm Z’s supply 10 50 40 10 20 60 60 20 30 85 80 35 40 120 100 55 Which price change is required for market supply to double? A $10 to $20 B $10 to $30 C $20 to $30 D $20 to $40

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2008

10 What might explain a simultaneous increase in both price and quantity traded in the market for a normal good? A the removal of an effective maximum price on the good B technological progress in the production of the good C the imposition of a tax on the good D the granting of a subsidy to producers of the good

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2008

11 The diagram shows demand and supply curves for petrol. The present equilibrium is at X. What could be the new equilibrium if there were a large fall in the price of cars? D1 S2 D A S D2 S1 B price X S2 D C D1 S D S1 D2 O quantity

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2008

13 The diagram shows the average world price of coffee in US cents per pound weight (lb) between 1997 and 2005. The price of coffee, 1997 to 2005 150 125 100 US cents / lb 75 50 25 0 1997 2001 2005 year Which event is consistent with the price behaviour shown in the specified time period? A a continuous rise in the price of tea between 1997 and 2001 B the entry to the market of new producers of coffee between 1997 and 2001 C a series of good coffee harvests between 2001 and 2005 D increasing health worries about drinking coffee between 2001 and 2005

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2008

17 The diagram shows the market for apples. A government maintains a minimum price P2 by buying apples. D S V W P2 price Z P1 X Y S D O Q1 Q Q2 quantity Which area shows the amount of money the government has to spend to maintain the price P2? A P2WYP1 B P2VQ1O C P2WQ2O D VWQ2Q1

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2008

7 The table shows the demand and supply schedules for a good before and after the imposition of a tax. price quantity quantity supplied quantity supplied ($) demanded before tax after tax 20 340 440 380 19 340 430 340 18 340 410 290 17 340 380 230 16 340 340 160 15 340 290 80 14 340 230 0 What was the amount of the tax? A $1 B $2 C $3 D $4

1 marks

Answer: C

This question in 9708/11 May/June 2009

11 The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. S WP2 WP1 price D O W Y X Z quantity The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and exports? domestic consumption quantity of exports A OX to OZ OY to OX B OX to OZ OY to OZ C OY to OW YX to WZ D OY to OW YX to OZ

1 marks

Answer: C

This question in 9708/11 May/June 2009

12 Between 2006 and 2007, the price of skimmed milk powder on the world market rose from $1000 per tonne to $2400 per tonne. Assuming that the market is a free market, what will result from the price change? A Consumers will buy more complements to skimmed milk powder. B Farmers will increase the size of their dairy herds to supply more milk. C Firms processing milk into skimmed milk will switch to producing substitutes. D Governments will introduce a system of rationing.

1 marks

Answer: B

This question in 9708/11 May/June 2009

13 Which statement indicates that the price mechanism is allocating resources successfully? A Belgian chocolate companies increase supplies to China because of higher than expected sales. B Train operators in India lower fares because of overcrowding on trains. C US supermarkets throw away large amounts of food because of misjudging demand. D World fish stocks decline because of over-fishing.

1 marks

Answer: A

This question in 9708/11 May/June 2009

18 The market price of an agricultural commodity was so low that the government fixed a minimum price for it above the market equilibrium price. However, the government did not buy any of the commodity itself. What would happen as a result? A There would be an equilibrium in the market but the change in farmers’ incomes would be uncertain. B There would be a shortage on the market and farmers’ incomes would rise. C There would be a surplus on the market and farmers’ incomes would fall. D There would be a surplus on the market but the change in farmers’ incomes would be uncertain.

1 marks

Answer: D

This question in 9708/11 May/June 2009

5 A change in market conditions causes a reduction in supply. This results in a higher price for the product, which has a downward-sloping demand curve. What must be the outcome of this higher price? A an increase in the factors employed in the industry B an increase in producer’s revenue C a reduction in the quantity demanded D a reduction in the demand for substitutes

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2009

17 The diagram shows the market for wheat. S P2 price P1 D O X Y Z quantity What quantity of wheat must the government buy if it wishes to raise the market price from P1 to P2? A OZ B XY C XZ D YZ

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2009

18 The government places a maximum price P1 on an agricultural product. The supply and demand conditions for this product are shown. S P1 price D O quantity What will be the outcome in the market for this product? A There will be an equilibrium price and output. B There will be a surplus of the product. C There will be higher than expected profits. D There will be shortages of this product.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2009

16 The diagram shows the market for wheat. S P2 price P1 D O X Y Z quantity What quantity of wheat must the government buy if it wishes to raise the market price from P1 to P2? A OZ B XY C XZ D YZ

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2009

17 The government places a maximum price P1 on an agricultural product. The supply and demand conditions for this product are shown. S P1 price D O quantity What will be the outcome in the market for this product? A There will be an equilibrium price and output. B There will be a surplus of the product. C There will be higher than expected profits. D There will be shortages of this product.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2009

5 The table shows the market supply for a raw material and the individual demand of the three firms, X, Y and Z, which are its only buyers. price market demand demand demand $ supply by X by Y by Z (per kilo) (000s) (000s) (000s) (000s) 7 30 13 27 20 8 40 12 25 18 9 50 11 23 16 10 60 10 20 15 What is the equilibrium market price of the raw material? A $7 B $8 C $9 D $10

1 marks

Answer: C

This question in 9708/11 May/June 2010

4 The table shows the market supply for a raw material and the individual demand of the three firms, X, Y and Z, which are its only buyers. price market demand demand demand $ supply by X by Y by Z (per kilo) (000s) (000s) (000s) (000s) 7 30 13 27 20 8 40 12 25 18 9 50 11 23 16 10 60 10 20 15 What is the equilibrium market price of the raw material? A $7 B $8 C $9 D $10

1 marks

Answer: C

This question in 9708/12 May/June 2010

6 Worldwide, the film industry has increased its expenditure to over $1 billion each year on successful anti-piracy measures which it finances by charges on DVD products. How would this be shown in a demand and supply diagram of the market for legally produced DVDs? demand curve supply curve A shifts left shifts left B shifts left shifts right C shifts right shifts left D shifts right shifts right

1 marks

Answer: C

This question in 9708/12 May/June 2010

9 In 2008 a disease killed a significant number of sheep used to produce wool. How would the short-run effect be shown on a demand and supply diagram for wool? A a movement down the existing supply curve B a movement up the existing supply curve C a shift to the left of the supply curve D a shift to the right of the supply curve

1 marks

Answer: C

This question in 9708/12 May/June 2010

3 The table shows the market supply for a raw material and the individual demand of the three firms, X, Y and Z, which are its only buyers. price market demand demand demand $ supply by X by Y by Z (per kilo) (000s) (000s) (000s) (000s) 7 30 13 27 20 8 40 12 25 18 9 50 11 23 16 10 60 10 20 15 What is the equilibrium market price of the raw material? A $7 B $8 C $9 D $10

1 marks

Answer: C

This question in 9708/13 May/June 2010

5 Worldwide, the film industry has increased its expenditure to over $1 billion each year on successful anti-piracy measures which it finances by charges on DVD products. How would this be shown in a demand and supply diagram of the market for legally produced DVDs? demand curve supply curve A shifts left shifts left B shifts left shifts right C shifts right shifts left D shifts right shifts right

1 marks

Answer: C

This question in 9708/13 May/June 2010

8 In 2008 a disease killed a significant number of sheep used to produce wool. How would the short-run effect be shown on a demand and supply diagram for wool? A a movement down the existing supply curve B a movement up the existing supply curve C a shift to the left of the supply curve D a shift to the right of the supply curve

1 marks

Answer: C

This question in 9708/13 May/June 2010

9 The table shows the market demand for a product and the individual supply of the three firms X, Y and Z in the industry. market supply supply supply price demand by X by Y by Z $ (000) (000) (000) (000) 40 60 50 10 20 30 70 41 11 18 20 80 34 10 16 10 90 30 9 11 What is the equilibrium market price? A $40 B $30 C $20 D $10

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2010

10 Domino Pizza, the largest US pizza chain, said that its profits had been reduced by price inflation on ingredients and by a reduction in consumers’ disposable income. How would these changes affect the demand and supply curve for its products? demand supply A move to the left move to the left B move to the left move to the right C move to the right move to the left D move to the right move to the right

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2010

12 Rising demand for oil from China and other countries is leading to concerns that there may be a world shortage of oil. How should a change in the price of oil prevent such a shortage developing? A Price should fall to reduce demand and encourage a search for more oil. B Price should fall to reduce supply and encourage a reduction in fuel use. C Price should rise to reduce demand and encourage a search for alternative fuels. D Price should rise to reduce supply and encourage a switch to alternative fuels.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2010

18 In the diagram, S1S1 and DD represent the original supply and demand curves for an agricultural product. S2 D S1 price P1 D S2 S1 O Q1 Q2 Q3 quantity Bad weather then reduces supply to S2S2. The government does not allow the price to rise above OP1. How much of the product will the government have to supply from stocks if the price is to be maintained at OP1? A OQ3 B Q1Q3 C Q1Q2 D Q2Q3

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2010

20 The supply of an imported good is shown by curve S. What will be the new supply curve if an ad valorem (percentage) tariff is imposed on the good? A B S C price D O quantity

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2010

9 The table shows the market demand for a product and the individual supply of the three firms X, Y and Z in the industry. market supply supply supply price demand by X by Y by Z $ (000) (000) (000) (000) 40 60 50 10 20 30 70 41 11 18 20 80 34 10 16 10 90 30 9 11 What is the equilibrium market price? A $40 B $30 C $20 D $10

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2010

10 Domino Pizza, the largest US pizza chain, said that its profits had been reduced by price inflation on ingredients and by a reduction in consumers’ disposable income. How would these changes affect the demand and supply curve for its products? demand supply A move to the left move to the left B move to the left move to the right C move to the right move to the left D move to the right move to the right

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2010

12 Rising demand for oil from China and other countries is leading to concerns that there may be a world shortage of oil. How should a change in the price of oil prevent such a shortage developing? A Price should fall to reduce demand and encourage a search for more oil. B Price should fall to reduce supply and encourage a reduction in fuel use. C Price should rise to reduce demand and encourage a search for alternative fuels. D Price should rise to reduce supply and encourage a switch to alternative fuels.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2010

18 In the diagram, S1S1 and DD represent the original supply and demand curves for an agricultural product. S2 D S1 price P1 D S2 S1 O Q1 Q2 Q3 quantity Bad weather then reduces supply to S2S2. The government does not allow the price to rise above OP1. How much of the product will the government have to supply from stocks if the price is to be maintained at OP1? A OQ3 B Q1Q3 C Q1Q2 D Q2Q3

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2010

8 The table shows the market demand for a product and the individual supply of the three firms X, Y and Z in the industry. market supply supply supply price demand by X by Y by Z $ (000) (000) (000) (000) 40 60 50 10 20 30 70 41 11 18 20 80 34 10 16 10 90 30 9 11 What is the equilibrium market price? A $40 B $30 C $20 D $10

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2010

9 Domino Pizza, the largest US pizza chain, said that its profits had been reduced by price inflation on ingredients and by a reduction in consumers’ disposable income. How would these changes affect the demand and supply curve for its products? demand supply A move to the left move to the left B move to the left move to the right C move to the right move to the left D move to the right move to the right

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2010

11 Rising demand for oil from China and other countries is leading to concerns that there may be a world shortage of oil. How should a change in the price of oil prevent such a shortage developing? A Price should fall to reduce demand and encourage a search for more oil. B Price should fall to reduce supply and encourage a reduction in fuel use. C Price should rise to reduce demand and encourage a search for alternative fuels. D Price should rise to reduce supply and encourage a switch to alternative fuels.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2010

12 The diagram shows the demand and supply curves for a good. S P1 P price D O Q1 Q Q2 quantity The government fixed a maximum price of OP1. What would this have achieved? A the guarantee of supplies of OQ2 B the market equilibrium of quantity OQ C the need for a government subsidy of PP1 D the rationing of the product for consumers to OQ1

1 marks

Answer: B

This question in 9708/11 May/June 2011

13 Global stocks of cod are currently under threat due to over-fishing whilst there are plentiful supplies of the less popular Alaskan pollock. How might the price mechanism operate to limit the depletion of fish stocks? A The price of both cod and Alaskan pollock will fall. B The price of both cod and Alaskan pollock will rise. C The price of cod will fall whilst the price of Alaskan pollock will rise. D The price of cod will rise whilst the price of Alaskan pollock will fall.

1 marks

Answer: D

This question in 9708/11 May/June 2011

18 In the diagram S and S1 are the supply curves for an agricultural product in years 1 and 2 respectively. D is the demand curve in years 1 and 2. In year 1 the government purchased an amount necessary to ensure that the price was OP. S S1 (year 1) (year 2) P price D O W X Y Z quantity The price is held at OP in year 2. How much more must the government buy in year 2 than it bought in year 1? A WX B XY C XZ D YZ

1 marks

Answer: D

This question in 9708/11 May/June 2011

6 The diagrams show changes in the market for a good. 1 2 3 S S S S1 price price price D1 D1 D D D O quantity O quantity O quantity Which diagrams represent ‘a change in the quantity demanded’? A 1 and 2 B 1 and 3 C 1 only D 3 only

1 marks

Answer: D

This question in 9708/12 May/June 2011

11 The diagram shows the demand and supply curves for a good. S P1 P price D O Q1 Q Q2 quantity The government fixed a maximum price of OP1. What would this have achieved? A the guarantee of supplies of OQ2 B the market equilibrium of quantity OQ C the need for a government subsidy of PP1 D the rationing of the product for consumers to OQ1

1 marks

Answer: B

This question in 9708/12 May/June 2011

12 Global stocks of cod are currently under threat due to over-fishing whilst there are plentiful supplies of the less popular Alaskan pollock. How might the price mechanism operate to limit the depletion of fish stocks? A The price of both cod and Alaskan pollock will fall. B The price of both cod and Alaskan pollock will rise. C The price of cod will fall whilst the price of Alaskan pollock will rise. D The price of cod will rise whilst the price of Alaskan pollock will fall.

1 marks

Answer: D

This question in 9708/12 May/June 2011

17 In the diagram S and S1 are the supply curves for an agricultural product in years 1 and 2 respectively. D is the demand curve in years 1 and 2. In year 1 the government purchased an amount necessary to ensure that the price was OP. S S1 (year 1) (year 2) P price D O W X Y Z quantity The price is held at OP in year 2. How much more must the government buy in year 2 than it bought in year 1? A WX B XY C XZ D YZ

1 marks

Answer: D

This question in 9708/12 May/June 2011

11 Global stocks of cod are currently under threat due to over-fishing whilst there are plentiful supplies of the less popular Alaskan pollock. How might the price mechanism operate to limit the depletion of fish stocks? A The price of both cod and Alaskan pollock will fall. B The price of both cod and Alaskan pollock will rise. C The price of cod will fall whilst the price of Alaskan pollock will rise. D The price of cod will rise whilst the price of Alaskan pollock will fall.

1 marks

Answer: D

This question in 9708/13 May/June 2011

9 An industry is comprised of three firms, R, S and T which produce product X. price of X output of X $ firm R firm S firm T 36 80 59 85 29 73 48 76 22 52 0 68 By how much is a rise in the price of product X from $22 to $36 likely to increase the market supply of X? A 27 B 77 C 104 D 224

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2011

7 In a free market in disequilibrium, which combination of price and quantity will lead to a fall in price and a contraction in output to reach equilibrium? S P1 P2 price P3 D O Q1 Q2 Q3 quantity A P1Q1 B P1Q3 C P3Q1 D P3Q3

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2011

9 The table shows demand and supply schedules for red peppers. The equilibrium price is initially 15 cents per kg. price per kg amount demanded amount supplied cents kg (thousands) kg (thousands) 30 11 22 25 12 19 20 13 17 15 15 15 10 17 13 5 20 11 The government pays a subsidy of 10 cents per kg to producers. What will be the new equilibrium price charged to consumers? A 5 cents B 10 cents C 15 cents D 20 cents

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2011

10 The diagram shows the market for new houses. S2 S1 Y price X D2 D1 O quantity What would cause the change in the market equilibrium position from X to Y? A a fall in income tax and a rise in building costs B a fall in interest rates and increased efficiency in house-building C a fall in population and a rise in taxes on building materials D a rise in building subsidies and a fall in incomes

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2011

13 When is a rise in the price of a product likely to cause more resources to be allocated to its production? A if demand increases when the supply curve is perfectly inelastic B if the demand curve shifts to the right when the supply curve is inelastic C if supply increases when the demand curve is perfectly inelastic D if the supply curve shifts to the left when the demand curve is elastic

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2011

5 What could cause a shift in the supply curve of good X and a movement along its supply curve? shift in the curve movement along the curve A a change in consumer preferences an increase in the price of a substitute good B a decrease in factor productivity the imposition of a tax on good X C an increase in the price of a an increase in factor productivity complementary good D an increase in the wage rates a change in consumer preferences in the industry

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2011

7 An industry is comprised of three firms, R, S and T which produce product X. price of X output of X $ firm R firm S firm T 36 80 59 85 29 73 48 76 22 52 0 68 By how much is a rise in the price of product X from $22 to $36 likely to increase the market supply of X? A 27 B 77 C 104 D 224

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2011

10 The demand for a good falls at the same time as its costs of production decrease. What will be the combined effect of these changes on the price and on the quantity supplied of the good? price quantity supplied A decrease decrease B decrease uncertain C uncertain decrease D uncertain uncertain

1 marks

Answer: B

This question in 9708/11 May/June 2012

12 The diagram shows the average world price of coffee in US cents per pound weight (lb) between 1997 and 2005. The price of coffee, 1997 to 2005 150 125 100 US cents / lb 75 50 25 0 1997 2001 2005 year Which event is consistent with the price behaviour shown in the specified time period? A a continuous rise in the price of tea between 1997 and 2001 B the entry to the market of new producers of coffee between 1997 and 2001 C a series of good coffee harvests between 2001 and 2005 D increasing health worries about drinking coffee between 2001 and 2005

1 marks

Answer: B

This question in 9708/11 May/June 2012

18 The diagram shows the market for spectacles. Initially the market equilibrium price is PO and quantity Q3 is bought and sold. S PX price PO PM D O Q1 Q2 Q3 Q4 Q5 quantity The government then sets both a maximum price of PX and a minimum price of PM. What effect will these measures have on the market for spectacles? A create a shortage of spectacles equal to Q1Q5 B create a surplus of spectacles equal to Q2Q4 C create a surplus of spectacles equal to Q3Q4 D leave the quantity bought and sold unchanged

1 marks

Answer: D

This question in 9708/11 May/June 2012

9 The diagram shows the demand and supply curves of a commodity before and after a specific tax is removed. S S 12 10 8 price 6 4 2 D 0 quantity What is the tax per unit of output and what is the price after the removal of the tax? price after the tax per unit removal of the tax A 6 6 B 6 8 C 4 6 D 4 8

1 marks

Answer: A

This question in 9708/12 May/June 2012

10 The demand for a good falls at the same time as its costs of production decrease. What will be the combined effect of these changes on the price and on the quantity supplied of the good? price quantity supplied A decrease decrease B decrease uncertain C uncertain decrease D uncertain uncertain

1 marks

Answer: B

This question in 9708/12 May/June 2012

11 The diagrams show a change in demand from D1 to D2 and a change in supply from S1 to S2 for four different goods. Which diagram illustrates the good for which additional new uses have been found and which receives an increase in government subsidy? A B C D S2 S2 S1 S1 S1 S1 S2 S2 price price price price D2 D2 D1 D2D1 D1 D2D1 O quantity O quantity O quantity O quantity

1 marks

Answer: C

This question in 9708/12 May/June 2012

13 The diagram shows the demand and supply curves for parking spaces in a hospital car park. S price P D O number of spaces The managers decide to rely on the price mechanism to allocate parking spaces at the hospital. What is required for this to work? A Alternative means of transport must be provided for those unable to afford price OP. B A survey will be needed to find out the amount users are willing to pay. C The capacity of the car park will need to be expanded. D The price charged for parking spaces must be OP.

1 marks

Answer: D

This question in 9708/12 May/June 2012

17 In the diagram, D is the demand curve for an agricultural commodity and S1 is the initial supply curve. 6 S1 5 4 S2 price 3 ($) 2 1 D 0 0 1 2 3 4 5 6 quantity (’000 tonnes) A good harvest causes the supply curve to shift to S2. By how much will the demand curve have to shift to leave farm incomes unchanged? A 500 tonnes B 1000 tonnes C 2000 tonnes D 4000 tonnes

1 marks

Answer: B

This question in 9708/12 May/June 2012

10 The diagram shows the equilibrium price (OP) and quantity (OQ) in the market for maize. S P1 P price P2 D O Q Q1 quantity The government wants to achieve a target price of OP1. What will be the outcome if the government enters the market and increases the demand by Q-Q1? A The original equilibrium price will continue to operate. B The equilibrium price will be at the target price. C The equilibrium price will be OP2. D The equilibrium price will be between the target price and the original equilibrium price.

1 marks

Answer: D

This question in 9708/13 May/June 2012

12 The diagram shows the average world price of coffee in US cents per pound weight (lb) between 1997 and 2005. The price of coffee, 1997 to 2005 150 125 100 US cents / lb 75 50 25 0 1997 2001 2005 year Which event is consistent with the price behaviour shown in the specified time period? A a continuous rise in the price of tea between 1997 and 2001 B the entry to the market of new producers of coffee between 1997 and 2001 C a series of good coffee harvests between 2001 and 2005 D increasing health worries about drinking coffee between 2001 and 2005

1 marks

Answer: B

This question in 9708/13 May/June 2012

10 Which combination of price and quantity will lead to a rise in price and a contraction in quantity to reach equilibrium? S P1 P2 price P3 D O Q1 Q2 Q3 quantity A P1Q1 B P1Q3 C P3Q1 D P3Q3

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2012

11 In a market economy, demand for a product rises and price increases but output remains unchanged. What could explain this? A a lack of financial incentives for entrepreneurs B a perfectly inelastic supply of factors of production C consumer influence exceeding producer influence D social benefits equalling private benefits

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2012

8 A free market is in disequilibrium with a shortage of a product. As the market moves towards equilibrium, what will happen to the price, the quantity demanded and the quantity supplied? price quantity demanded quantity supplied A decrease decrease increase B decrease increase decrease C increase decrease increase D increase increase decrease

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2012

9 The market demand equation for a good is given by Qd = 310 - 20p and the supply equation by Qs = 10 + 10p where p denotes the price of the good. What is the equilibrium price? A 5 B 10 C 15 D 20

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2012

10 The diagram shows the market for computer games. The market starts in equilibrium at X. What will be the new equilibrium if the tax on computer games is increased and incomes fall? S2 S1 S3 A B price of X computer games C D D2 D1 O quantity of computer games

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2012

11 The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh represents domestic supply and Sm represents imports. Sh price Sm D O R T V quantity What will be the level of consumption and the associated quantity of imports? consumption quantity of imports A OT RT B OT OT C OV RT D OV RV

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2012

6 There are three firms, X, Y and Z, supplying a market. The table shows their supply at four different prices. firm X’s firm Y’s firm Z’s price ($) supply supply supply 70 60 60 30 80 65 70 65 90 75 80 95 100 80 90 130 Which price change is required for market supply to halve? A $90 to $70 B $90 to $80 C $100 to $70 D $100 to $90

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2012

10 The diagram shows the market for coffee. The initial equilibrium position is X. The price of tea, a substitute, falls and an indirect tax is imposed on coffee. What will be the new equilibrium position? S1 B price of X C coffee A D D1 O quantity of coffee

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2012

11 The diagram shows the demand curve, DD1, and the supply curve, SS1, for eye operations. S D price P O S1 D1 number of operations The operations are provided free to the consumer. Which statement is correct? A Consumer surplus from the operations is ODD1. B The equilibrium price is P. C The equilibrium price is indeterminate, because the supply curve is vertical. D The equilibrium price is zero.

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2012

13 Which government policy might limit the rationing function of the price mechanism? A the imposition of tariffs on imported consumer goods B the levy of indirect taxes at varying rates on different goods C the payment of subsidies to food producers D the setting of maximum prices for rented housing

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2012

18 A government introduces a maximum price for house rentals (maxPh) and a minimum price for cleaning services (minPc). Both markets have identical demand and supply curves. Which diagram shows that the maximum price will be effective and the minimum price will be ineffective in the respective markets? A B S S maxPh minPc price price minPc maxPh D D O quantity O quantity C D S S maxPh minPc price price maxPh minPc D D O quantity O quantity

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2012

9 Which combination of price and quantity will lead to a fall in price and a contraction in quantity produced to reach equilibrium? S P1 P2 price P3 D O Q1 Q2 Q3 quantity A P1Q1 B P1Q3 C P3Q1 D P3Q3

1 marks

Answer: B

This question in 9708/11 May/June 2013

10 In the diagram below, D1 and S1 represent the demand and supply curves of a Malaysian industry in its home market. Equilibrium is at X. The industry has to pay a large wage increase and at the same time faces increased competition from imported substitutes. Which point on the diagram could represent the new equilibrium? S3 S1 S2 D2 D1 D3 A price D X B C D2 S3 S1 S2 D1 D3 O quantity

1 marks

Answer: D

This question in 9708/11 May/June 2013

11 The diagram shows the demand curve and supply curve for a good on which the government imposes a specific tax. S D price D S O quantity What will be the result of this tax? A Most of the incidence of the tax will fall on the producer. B There will be a new demand curve parallel to DD. C The price will rise by the full amount of the tax. D The quantity bought will fall proportionately to the tax rate.

1 marks

Answer: A

This question in 9708/11 May/June 2013

18 In the diagram, S1S1 and DD represent the original supply and demand curves for an agricultural product. S2 D S1 price P1 D S2 S1 O Q1 Q2 Q3 quantity Bad weather then reduces supply to S2S2. How much of the product will the government have to supply from stocks if it wishes to keep the price at OP1? A OQ3 B Q1Q3 C Q1Q2 D Q2Q3

1 marks

Answer: B

This question in 9708/11 May/June 2013

6 If the price of maize rises, the quantity of maize demanded should fall. If the demand for maize decreases, the price of maize should rise. What can be said about these two statements? 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 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

11 A country’s government announces that the penalties imposed on those found guilty of supplying an illegal drug to others are to be increased but that possession of small quantities of the drug for an individual’s own use will no longer be illegal. What effect are these changes likely to have on the illegal market price of that drug and on the quantity consumed? illegal market quantity price consumed A increase decrease B increase uncertain C uncertain decrease D uncertain uncertain

1 marks

Answer: B

This question in 9708/12 May/June 2013

12 A specific tax is placed upon each bottle of perfume sold. In the diagram, SS is the supply curve before tax, StSt is the supply curve after tax. D St S W R price U Q X P T St D S O Y Z quantity Which area represents that part of the tax revenue paid by consumers? A ORWY B PQUT C PRWT D QRWU

1 marks

Answer: D

This question in 9708/12 May/June 2013

16 A tax on a product is removed causing supply to increase from SS to S1S1 as shown in the diagram. S S1 D 20 18 price D $ S 15 S1 0 40 60 quantity What effect does the move have on government tax revenue and consumer expenditure? consumer tax revenue expenditure A reduce by $80 increase by $280 B reduce by $80 increase by $480 C reduce by $200 increase by $280 D reduce by $200 increase by $480

1 marks

Answer: C

This question in 9708/12 May/June 2013

18 In the diagram, D is the demand curve of an agricultural commodity and S is the initial supply curve. The government promises to maintain farmers’ incomes at least at this initial level. The harvests in four subsequent years are shown by supply curves S1 – S4. 6 S1 S 5 S2 4 S3 price 3 ($) S4 2 1 D 0 1 2 3 4 5 6 quantity (’000 tonnes) In which years will the government need to provide extra income to farmers? A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

1 marks

Answer: B

This question in 9708/12 May/June 2013

9 There are three firms (X, Y and Z) supplying a market. The table shows their supply at four different prices. price ($) firm X’s supply firm Y’s supply firm Z’s supply 10 50 40 10 20 60 60 20 30 85 80 35 40 115 100 55 Which price change is required for market supply to halve? A $20 to $10 B $30 to $10 C $30 to $20 D $40 to $20

1 marks

Answer: B

This question in 9708/13 May/June 2013

12 A specific tax is placed on the sale of bottles of lemonade. In the diagram, SS is the supply curve before imposition of the tax and StSt is the supply curve after tax. St D W S U price X St D T S O quantity Which distance represents the specific tax on each bottle? A UT B WT C WU D WX

1 marks

Answer: B

This question in 9708/13 May/June 2013

18 The diagram shows the market for wheat. S P2 P1 price D O X Y Z quantity If the government wishes to fix the price at OP2 what quantity of wheat must the government buy? A OZ B XY C XZ D YZ

1 marks

Answer: C

This question in 9708/13 May/June 2013

7 A product has a normal demand curve and a normal supply curve. What would explain a rise in the price of the product and a fall in the quantity of the product traded? A The decrease in demand is double the decrease in supply. B The decrease in supply is double the decrease in demand. C The increase in demand is double the increase in supply. D The increase in supply is double the increase in demand.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2013

11 The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh shows domestic supply and Sw shows world supply. Domestic supply then shifts to Sh1. Sh Sh1 price Sw D O R T U V quantity What will be the level of consumption and the associated volume of imports after the supply shift? consumption volume of imports A OU TU B OU UV C OV TV D OV UV

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2013

13 In the diagram, the supply curve shows the number of spaces in a car park and the demand curves show the demand for spaces on four different days (D1, D2, D3 and D4). S P4 P3 D4 price P2 D3 P1 D2 D1 O quantity The owner wishes to charge a parking fee on each of these days to allocate the spaces according to the market mechanism. Which pricing policy should the owner use? A set a fixed price at P1 B set a fixed price at P4 C vary prices between P2 and P3 D vary prices between P1 and P4

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2013

28 In the diagram, D1D1 and S1S1 are the initial demand and supply curves of the pound sterling (£) on the foreign exchange market. D2 S2 D1 S1 price of £s in $US D2 D1 S2 S1 O quantity of £ What will cause the demand curve to shift to D2D2 and the supply curve to S2S2? A an appreciation of the pound B an increase in UK interest rates C a reduction in the level of UK import tariffs D a reduction in the quality of UK goods

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2013

9 The diagram shows the demand and supply curves for tractors. The present equilibrium point is at X. What could be the new equilibrium if the government were to tax the country’s tractor manufacturers? S2 A S1 D price C X D2 B D1 D3 O quantity

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2013

10 The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. S WP2 WP1 price D O W Y X Z quantity The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and exports? domestic consumption quantity of exports A OX to OZ OY to OX B OX to OZ OY to OZ C OY to OW YX to WZ D OY to OW YX to OZ

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2013

9 A car rental firm rents out the cars in its fleet on weekdays to business users and at weekends to tourists. What is likely to result from an increase in the demand by tourists for car rentals? price of weekend price of weekday size of car fleet rentals rentals A decrease unchanged decrease B decrease unchanged unchanged C increase increase decrease D increase increase unchanged

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2013

10 The table shows the demand and supply schedules for a good before and after the imposition of a tax. price quantity quantity supplied quantity supplied ($) demanded before tax after tax 20 340 440 380 19 340 430 340 18 340 410 290 17 340 380 230 16 340 340 160 15 340 290 80 14 340 230 0 What was the amount of the tax revenue raised for the government? A $1020 B $1360 C $5440 D $6460

1 marks

Answer: A

This question in 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

5 The market demand for a product is made up of the demand from three firms, X, Y and Z. The table shows the demand from each firm and the market supply. price $ demand from X demand from Y demand from Z market supply 7 3300 3300 3300 3 300 8 3100 2900 3100 6 200 9 2800 2500 2900 8 200 10 2500 2100 2700 10 000 What is the equilibrium price in the market? A $7 B $8 C $9 D $10

1 marks

Answer: C

This question in 9708/11 May/June 2014

10 In 2010, poor harvests reduced fruit crops, and furniture producers gave big discounts on furniture products. How might these changes have affected the position of the supply curve for the products? fruit furniture producers A no change shift to the left B shift to the left no change C shift to the left shift to the left D shift to the right no change

1 marks

Answer: B

This question in 9708/11 May/June 2014

12 The table shows a competitive market in equilibrium in two periods. period market price quantity traded 1 50 cents 10 000 units 2 60 cents 12 000 units What could explain the change from period 1 to period 2? A an increase in the price of a complement B an increase in the price of a substitute C the imposition of a minimum price of 60 cents by a government D the imposition of an indirect tax on suppliers

1 marks

Answer: B

This question in 9708/11 May/June 2014

13 A country experiences a very wet and cold summer. How might this affect the price of umbrellas and the price of ice creams? price of umbrellas price of ice creams A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/11 May/June 2014

6 The diagram shows the market for milk. Two conditions change. The cost of cattle feed rises sharply and this is followed by the government raising the tax on cheese which uses milk in its production. Z W price Y X D D D O quantity Which changes in position on the diagram of demand curves for milk are consistent with these events? A from W to X, followed by X to Z B from W to Z, followed by Z to X C from X to Z, followed by Z to Y D from Z to X, followed by X to Y

1 marks

Answer: C

This question in 9708/12 May/June 2014

13 In a market for a good both demand and supply change at the same time. Which combination of changes would enable an economist to predict with confidence that more resources will be needed in its production but not the direction of the associated price change? demand supply A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9708/12 May/June 2014

18 In the diagram, the initial quantity traded was Q and the price was P. D S1 S P1 price P S1 S D O Q Q1 quantity The price then rose to P1 and the quantity traded rose to Q1. Which combination of government policy measures could explain this change? A the removal of a maximum price and the imposition of an income tax on consumers B the removal of a maximum price and the removal of a subsidy to producers C the removal of a minimum price and the granting of a subsidy to producers D the removal of a minimum price and the imposition of an indirect tax on the product

1 marks

Answer: B

This question in 9708/12 May/June 2014

11 Demand and supply in a competitive market both decrease by 10% at all prices. What will be the effect on the equilibrium price and quantity sold? price quantity sold A 10% decrease 10% decrease B 10% decrease no change C 5% decrease 5% decrease D no change 10% decrease

1 marks

Answer: D

This question in 9708/13 May/June 2014

13 Between 2006 and 2007, the price of skimmed milk powder on the world market rose from $1000 per tonne to $2400 per tonne. Assuming that the market is a free market, what will result from the price change? A Consumers will buy more complements to skimmed milk powder. B Farmers will increase the size of their dairy herds to supply more milk. C Firms processing milk into skimmed milk will switch to producing substitutes. D Governments will introduce a system of rationing.

1 marks

Answer: B

This question in 9708/13 May/June 2014

12 Consumer X is the largest of five consumers and buys 50% of sales. The table shows the quantity of the good demanded by consumer X and the market supply of the good. price demand from market supply $ consumer X 4 20 28 6 16 32 8 12 40 10 10 45 What would be the market equilibrium price? A $4 B $6 C $8 D $10

1 marks

This question in 9708/11 Oct/Nov 2014

9 The diagram shows the supply curve of coffee in an economy. supply Y price X O quantity The market equilibrium is initially at point X, but a change moves it to point Y. What might explain this? A an increase in wages paid by producers of coffee B a switch in consumer tastes from coffee to tea C an increase in the price of tea D a tax imposed on coffee producers

1 marks

Answer: C

This question 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

17 The diagram shows the demand for and supply of a foreign-made mobile (cell) phone. The initial position in the domestic market is X. S E S1 F price G X D1 D O quantity Importers increased the supply of the phone and there was an increase in demand for the phone. The government considered whether to protect domestic manufacturers with a limit on imports which would keep the supply at the initial quantity. How would the price change between the new equilibrium without a limit on imports and the equilibrium with a limit on imports? A a movement from E to F B a movement from F to G C a movement from G to E D a movement from G to F

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2014

18 The government imposes a maximum price of P2 on a product. S P2 P1 price D O Q2 Q1 Q3 quantity What will be the position after this action? A an equilibrium with price P1 and quantity Q1 B an equilibrium with price P2 and a quantity between Q2 and Q3 C an oversupply in the market by Q2Q3 D a shortage in the market of Q2Q3

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

29 The diagram shows the market for Japanese Yen. S2 S1 price of Yen in terms of other currencies D O quantity of Yen What could have caused the change in the supply of Yen from S1 to S2? A a reduction in the level of international investment into Japan B a reduction in the level of Japanese tariffs C a reduction in the value of foreign goods imported into Japan D a reduction in the value of Japanese goods exported

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2014

12 In a free market in disequilibrium, which combination of price and quantity will lead to a fall in price and a contraction in output to reach equilibrium? S P1 P2 price P3 D O Q1 Q2 Q3 quantity A P1Q1 B P1Q3 C P3Q1 D P3Q3

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2014

18 The diagram illustrates a market for wheat. The government sets a maximum price of OP. S P price D O quantity What could cause the maximum price to have an impact on the market? A a fall in the price of rice B an advertising campaign for bread C an increased wheat harvest D an increase in subsidies to wheat farmers

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2014

10 In a market there is a surplus of a good. Which change would cause the market to come to an equilibrium? A a decrease in demand B a fall in price C a government minimum price D an increase in supply

1 marks

Answer: B

This question in 9708/11 May/June 2015

11 The market for sugar is in equilibrium. A disease affects the sugar crop and newspapers report harmful health effects of consuming sugar. Which combination of changes in demand and supply matches these events? demand supply A falls falls B falls rises C rises falls D rises rises

1 marks

Answer: A

This question in 9708/11 May/June 2015

6 Assume that Tiger Woods, a famous golfer, announces that his final golf appearance will be at the next US Open Tournament. How might this affect the demand for tickets for the tournament? A It will cause a movement downward along the demand curve. B It will cause a movement upward along the demand curve. C It will cause a shift to the left in the position of the demand curve. D It will cause a shift to the right in the position of the demand curve.

1 marks

Answer: D

This question in 9708/12 May/June 2015

11 Many people used to smoke in restaurants. Restaurant owners have found that the decline in smoking caused by a tax on cigarettes has decreased their sales of meals. How would this be shown on demand and supply diagrams for cigarettes and for meals? cigarettes meals A a movement along the demand curve a shift inwards of the demand curve B a movement along the supply curve a movement along the demand curve C a shift outwards of the demand curve a shift outwards of the supply curve D a shift outwards of the supply curve a movement along the supply curve

1 marks

Answer: A

This question in 9708/12 May/June 2015

12 S1 and D1 show the original supply and demand curves for cola. Point X is the initial equilibrium. What will be the new equilibrium position following a rise in production costs and a fall in the price of lemonade? S3 S1 S2 B price X A C of cola D D2 D1 D3 O quantity of cola

1 marks

Answer: A

This question in 9708/12 May/June 2015

5 Buses currently run every two hours between X and Y. The bus company which operates the service decides to introduce an hourly service. How will this most likely affect the number of passengers carried per day and the number of passengers carried per journey? number of number of passengers per day passengers per journey A increase decrease B increase uncertain C unchanged decrease D unchanged uncertain

1 marks

Answer: B

This question in 9708/13 May/June 2015

8 The Toyota Motor Corporation makes cars in response to customer orders rather than attempting to sell cars it has already built. If the company received a large increase in orders for its Prius model, what will be expected of its current supply curve on a demand and supply diagram? A It will be unchanged. B It will become flatter. C It will shift to the left. D It will shift to the right.

1 marks

Answer: A

This question in 9708/13 May/June 2015

9 The table shows the demand and supply schedules for a good before and after the imposition of a tax. price quantity quantity supplied quantity supplied ($) demanded before tax after tax 20 340 440 380 19 340 430 340 18 340 410 290 17 340 380 230 16 340 340 160 15 340 290 80 14 340 230 0 What was the amount of the tax? A $1 B $2 C $3 D $4

1 marks

Answer: C

This question in 9708/13 May/June 2015

11 During a certain period, 10 000 units of a normal good are sold at a price of US$20. During a later period, 12 000 units are sold at a price of US$22. What could explain this change? A an increase in indirect taxation B an increase in the cost of raw materials C an increase in the price of a substitute commodity D an increase in the productivity of factors of production

1 marks

Answer: C

This question in 9708/13 May/June 2015

12 The final of a major sports event is held in a stadium which has a fixed capacity of 40 000 people. The price for a seat is set at PF but when the tickets go on sale all tickets are sold very quickly with many disappointed people unable to buy a ticket. Which diagram best represents this? A B S S PF price price PF D D O O 40 000 40 000 quantity quantity C D S S PF price price PF D D O O 40 000 40 000 quantity quantity

1 marks

Answer: D

This question in 9708/13 May/June 2015

13 In recent years, downloading music to computers and other electronic devices has become more popular replacing other ways of buying music, e.g. compact discs (CDs). What is likely to happen to the price and the amount of resources allocated to each of these markets? downloaded music market CD market resources resources price price allocated allocated A decrease decrease increase decrease B decrease increase increase increase C increase decrease decrease increase D increase increase decrease decrease

1 marks

Answer: D

This question in 9708/13 May/June 2015

18 The diagram shows the demand and supply curves of a good. S PM price D O X Y Z quantity If the government sets a maximum price of OPM, what will be the quantity bought by consumers and the quantity supplied by producers? quantity bought quantity supplied by consumers by producers A OX OX B OX OZ C OY OY D OY OZ

1 marks

Answer: C

This question in 9708/13 May/June 2015

10 A competitive industry producing textbooks experiences an increase in demand for its product. Which diagram illustrates the effect on the industry of this increase in demand in the short-run? A B C D D1 D2 S S D1 S S price price price price D2 D1 D2 D1 D2 O quantity O quantity O quantity O quantity

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2015

11 The table shows demand and supply schedules for red peppers. The equilibrium price is initially 15 cents per kilogram (kg). price per kg amount demanded amount supplied cents kg (thousands) kg (thousands) 30 11 22 25 12 19 20 13 17 15 15 15 10 17 13 5 20 11 The government pays a subsidy of 10 cents per kg to producers. What will be the new equilibrium price? A 5 cents B 10 cents C 15 cents D 20 cents

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2015

12 An eighteenth century clockmaker made a total of 12 identical clocks. There are currently just three collectors of these clocks, X, Y and Z. The diagram shows their demand curves. 4 3 Dz Dy price 2 ($000) Dx 1 0 2 4 6 8 10 12 14 quantity X, Y and Z initially own 4 clocks each. They come together to trade between themselves. At the market clearing price (or equilibrium price), what is correct? buyer(s) seller(s) A X Y and Z B Y and Z X C X Z D Z X

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2015

11 In a particular year, 12 000 units of a good are sold at $1 per unit. In a later year, 14 000 units are sold at $1.20 per unit. If consumer tastes have remained constant, what could account for the change between the two years? A a decrease in the price of raw materials used by producers B an increase in the price of a substitute good C an increase in the rate of tax imposed on producers D the formation of a monopoly in the production of the good

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2015

12 The diagram shows demand and supply curves for petrol (gas). The initial equilibrium is at X. What could be the new equilibrium if there were a large fall in the price of cars? S2 A S S1 B price X D C D1 D D2 O quantity

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2015

11 The market for onions is in equilibrium. A disease strikes the onion crop and new health benefits of consuming onions are discovered. Which combination of changes in demand and supply matches these events? demand supply A falls falls B falls rises C rises falls D rises rises

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2015

13 The diagram shows the demand and supply curves for a good. S P1 P price D O Q1 Q Q2 quantity The government fixes a maximum price of OP1. What would happen? A Consumers would have to be rationed to quantity OQ1. B The government would have to introduce a subsidy of PP1. C The market equilibrium quantity OQ would be demanded and supplied. D The supply of quantity OQ2 would be guaranteed.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2015

10 The demand for tablets increases, while the cost of producing them decreases. What will be the effect on the price of tablets and on the quantity supplied? price quantity A fall uncertain B rise increase C uncertain increase D uncertain uncertain

1 marks

Answer: C

This question in 9708/12 Feb/March 2016

12 In which market would equilibrium not be achieved at point E if price were above Op? A B S D S price price p E p E D O q O q quantity quantity C D S D D S price price p E p E O q O q quantity quantity

1 marks

Answer: C

This question in 9708/12 Feb/March 2016

9 The price elasticity of supply of an ‘App’ for a phone is perfectly elastic. The current selling price for the ‘App’ is $10 and 200 ‘Apps’ are sold per day. The ‘App’ becomes more popular and, as a result, demand increases by 50% at every price. What will be the outcome of the change in demand? A The price increases by 50% and the firm’s revenue increases by 50%. B The price increases by less than 50% and the firm’s revenue increases by less than 50%. C The price stays the same and the firm’s revenue increases by 50%. D The price stays the same and the firm’s revenue increases by an infinite amount.

1 marks

Answer: C

This question in 9708/11 May/June 2016

10 In the diagram shown, D1 and S1 are the initial demand and supply curves for the US car market. S1 S2 price D2 D1 O quantity What will cause the demand curve for cars to shift to D2 and the supply curve for cars to shift to S2? A a fall in real income and an increase in a unit tax on cars B a fall in unemployment and the removal of subsidies from the car industry C a rise in the price of bus fares and a fall in the cost of production of the car industry D a rise in the price of petrol and a fall in the number of firms in the car market

1 marks

Answer: C

This question in 9708/11 May/June 2016

11 A specific tax is placed upon each bottle of perfume sold. In the diagram, SS is the supply curve before tax, StSt is the supply curve after tax. D St S W R price U Q X P T St D S O Y Z quantity Which area represents that part of the tax revenue paid by consumers? A ORWY B PQUT C PRWT D QRWU

1 marks

Answer: D

This question in 9708/11 May/June 2016

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

1 marks

Answer: D

This question in 9708/11 May/June 2016

10 A US study, published in July 2014, warned teenagers to reduce the amount of fizzy drink they consume. One can of fizzy drink contains an adult’s entire daily sugar allowance. If the advice were accepted, how might the effect be illustrated on demand and supply diagrams for fizzy drinks and for sugar? diagram for fizzy drinks diagram for sugar A demand curve moves to the left movement up the supply curve B demand curve moves to the left movement down the supply curve C movement up the demand curve supply curve moves to the right D movement up the demand curve supply curve moves to the left

1 marks

Answer: B

This question in 9708/12 May/June 2016

11 In the diagram, the supply curve shows the number of spaces in a car park and the demand curves show the demand for spaces on four different days (D1, D2, D3 and D4). S P4 P3 D4 price P2 D3 P1 D2 D1 O quantity The owner wishes to charge a parking fee on each of these days to allocate the spaces according to the market mechanism. Which pricing policy should the owner use? A set a fixed price at P1 B set a fixed price at P4 C vary prices between P2 and P3 D vary prices between P1 and P4

1 marks

Answer: D

This question in 9708/12 May/June 2016

11 In the market for a good the quantity supplied (QS) and the quantity demanded (QD) are given by QS = P – 30 and QD = 240 – 2P where P = price in dollars. A change in the tax on the good makes QS = P – 36. How will the change affect equilibrium price? A It will fall by $2. B It will fall by $6. C It will rise by $2. D It will rise by $6.

1 marks

Answer: C

This question in 9708/13 May/June 2016

12 The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh1 shows domestic supply and Sw shows world supply. Domestic supply then shifts to Sh2. Sh1 Sh2 price Sw D O R T U V quantity What will be the level of consumption and the associated volume of imports after the supply shift? volume consumption of imports A OU TU B OU UV C OV TV D OV UV

1 marks

Answer: C

This question in 9708/13 May/June 2016

11 The diagram shows the market for coffee in a small coffee-producing country. The domestic supply of coffee is represented by Sd. The supply curve of imports was initially Sm1. A bad harvest that affects only other coffee-producing countries shifts the supply curve of imports to Sm2. Sd Sm2 price Sm1 D O T V W quantity How will consumption and imports be affected by the supply change? A Consumption falls by VW and imports fall to OT. B Consumption falls by VW and imports fall to zero. C Consumption is unchanged and imports fall to OT. D Consumption is unchanged and imports fall to zero.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2016

12 When demand for a good falls, its price falls. What is the function of the price fall? A to eliminate shortages B to reduce consumer surplus C to send a signal to producers D to stimulate a further fall in demand

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2016

14 The diagram shows the demand and supply curves of a good. S price J D O quantity The government sets a maximum price of OJ for the good. How will this affect the consumers and producers of the good? effect on consumers effect on producers A All consumers will gain. Producers will lose. B All consumers will gain. Producers will gain. C Some consumers will gain and some will lose. Producers will gain. D Some consumers will gain and some will lose. Producers will lose.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2016

16 The diagram shows possible demand and supply curves for places in colleges in a country. The initial equilibrium position is X. To increase the number of students in colleges, a government subsidises the colleges and also gives a grant of money to the students. What would be the new equilibrium position? D1 B S1 A price X C S1 D D1 O college places

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2016

11 The diagram shows the market for a luxury brand of smartphones. The initial equilibrium is at point X. What will be the new equilibrium following a rise in the price of batteries used by the manufacturer of smartphones and a rise in consumer incomes? supply A D X price B C demand O quantity

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2016

12 When will it not be possible to use price as a rationing mechanism? A when a good has a number of close substitutes B when a good is an inferior good C when the demand for a good is infinitely inelastic D when the quantity of a good is in fixed supply

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2016

17 Which government policy might limit the rationing function of the price mechanism? A the abolition of tariffs on imported consumer goods B the levy of indirect taxes at varying rates on different goods C the payment of subsidies to exporters D the setting of minimum prices for milk

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2016

24 In the diagram, curves D1D1 and SS relate to the demand for and supply of £ sterling in the foreign exchange market. D1 S D2 price of £ sterling in $US S D1 D2 O quantity of £ sterling What may cause the demand curve to shift from D1D1 to D2D2? A an increase in the price of US goods sold in the UK B an increase in UK interest rates C the development of US substitutes for UK goods D the removal of UK tariffs against US goods

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2016

11 The diagram shows a country’s domestic supply of, and demand for, a commodity that it both consumes and exports. S WP2 WP1 price D O W Y X Z quantity The world price changes from WP1 to WP2. What are the resulting changes in domestic consumption and quantity of exports? domestic consumption quantity of exports A OX to OZ OY to OX B OX to OZ OY to OZ C OY to OW YX to OZ D OY to OW YX to WZ

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2016

12 The diagram shows demand and supply for bread made from wheat and X is the original equilibrium point. What will the new equilibrium position be following removal of subsidies to the wheat industry and successful advertising about the benefits of a wheat-free diet? S1 A price X B D C D1 O quantity

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2016

13 The diagram shows an increase in the demand for a good from D1 to D2. S V W P2 price P1 Y D2 D1 O quantity What effect does the change in demand have on producer surplus? A decrease by P1YWP2 B decrease by P2VYP1 C increase by P1YWP2 D increase by P2VYP1

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2016

14 The diagram shows the market demand and supply curves for rice. S 10 price 8 ($) D O Q1 Q2 Q3 quantity What would happen if a government imposed a maximum price of $10? A The government would need to supply Q1 to Q3. B The quantity sold would be Q1. C The quantity sold would be Q2. D The quantity sold would increase from Q2 to Q3.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2016

6 In 2014, in an attempt to find new uses for seven sites previously used to bury rubbish, the Hong Kong government announced it would allow private companies to bid to redevelop the sites. Which diagram shows the change in the market for these sites? A B C D price S price S price D price S1 S2 S1 S2 D2 D1 D1 D2 D O O O O quantity quantity quantity quantity

1 marks

Answer: A

This question in 9708/12 Feb/March 2017

9 The diagram shows the market for coffee. The initial equilibrium position is X. The price of tea, a substitute, falls and an indirect tax is imposed on coffee. What will be the new equilibrium position? S1 price of coffee B X C A D D1 O quantity of coffee

1 marks

Answer: A

This question in 9708/12 Feb/March 2017

10 The diagram shows the market for new houses. S2 S1 price Y X D2 D1 O quantity What would cause the change in the market equilibrium position from X to Y? A a fall in income tax and a rise in building costs B a fall in interest rates and increased efficiency in house-building C a fall in population and a rise in the price of building land D a rise in building subsidies and a fall in incomes

1 marks

Answer: A

This question in 9708/12 Feb/March 2017

11 Jam and honey are substitutes. Honey and beeswax are in joint supply. Other things being equal, what will be the result of an increase in the price of jam? price of honey price of beeswax A fall fall B fall rise C rise fall D rise rise

1 marks

Answer: C

This question in 9708/12 Feb/March 2017

12 For price to act as a rationing mechanism for a final product, the effect of a rising price must be to A attract new firms into the market. B generate additional profits for producers. C reduce the quantity demanded by some individuals. D signal the need for redeployment of labour.

1 marks

Answer: C

This question in 9708/12 Feb/March 2017

14 In 2014 some supermarkets reduced the price they were willing to pay farmers for milk to below what was then the market equilibrium price. They passed the lower price onto the consumers in order to try and encourage them into the store. The government then fixed an effective minimum price which the supermarkets had to pay the farmers. These two actions are shown in the diagram. price S D 0 4 6 9 13 17 ’000 litres What would be the outcome after the supermarket action and then the government action? after supermarket action after government action A a shortage of 5000 litres a surplus of 4000 litres B a shortage of 5000 litres a surplus of 7000 litres C a shortage of 13 000 litres a surplus of 4000 litres D a shortage of 13 000 litres a surplus of 7000 litres

1 marks

Answer: D

This question in 9708/12 Feb/March 2017

17 In the diagram, D is the demand curve of an agricultural commodity and S is the initial supply curve. The government promises to maintain farmers’ incomes at least at this initial level. The harvests in four subsequent years are shown by supply curves S1–S4. 6 S price S1 5 ($) S2 4 S3 3 S4 2 1 D 0 1 2 3 4 5 6 quantity (’000 tonnes) How much in total will the government need to pay to support farmers over the four subsequent years? A $0 B $3000 C $6000 D $10 000

1 marks

Answer: A

This question in 9708/12 Feb/March 2017

10 There is a reduction in world oil supplies due to war in some supplying countries at a time when the winter in some importing countries was much colder than usual. The diagram shows the original equilibrium price, P. S1 price of oil S S2 P4 P P3 P2 P1 D1 D D2 O quantity of oil What will be the equilibrium price of oil in these circumstances? A P1 B P2 C P3 D P4

1 marks

Answer: D

This question in 9708/11 May/June 2017

6 D1 and S1 are the initial demand and supply curves for a normal product. They then change to D2 and S2. price of good X2 D2 X1 D1 S1 S2 O quantity of good Which pair of changes would result in the market equilibrium for the product changing from X1 to X2? A a fall in the price of a raw material used in the manufacturing and a decrease in the price of a complementary good B an increase in average consumer incomes and an increase in the level of an indirect tax imposed C an increase in the price elasticity of demand for the product and a fall in its price elasticity of supply D a rise in the population and an increase in the price of labour used in manufacturing

1 marks

Answer: A

This question in 9708/12 May/June 2017

6 Ethiopia is Africa’s largest producer of coffee. S1 and D1 are the original supply and demand curves for Ethiopian coffee. D2 is a new demand curve. S1 price of coffee P1 P2 D1 D2 O Q2 Q1 quantity of coffee What would have caused the change shown in the diagram? A a fall in incomes worldwide B a fall in the cost of producing Ethiopian coffee C a rise in output from Ethiopian coffee harvests D a rise in the price of coffee produced in Kenya

1 marks

Answer: A

This question in 9708/13 May/June 2017

10 In a free market in disequilibrium, which combination of price and quantity will lead to a fall in price and a contraction in output to reach equilibrium? S P1 price P2 P3 D O Q1 Q2 Q3 quantity A P1Q1 B P1Q3 C P3Q1 D P3Q3

1 marks

Answer: B

This question in 9708/13 May/June 2017

11 A change in market conditions causes a reduction in supply. This results in a higher price for the product, which has a downward-sloping demand curve. What must be the outcome of this higher price? A a decrease in the demand for substitutes B a decrease in the quantity demanded C an increase in the factors employed in the industry D an increase in producer’s revenue

1 marks

Answer: B

This question in 9708/13 May/June 2017

14 The diagram shows a market subject to a maximum price. S price P maximum price D O Q1 Q Q2 quantity What will happen if the maximum price is removed? A There will be allocation by a queuing system. B There will be allocation by government rationing. C There will be allocation by seller’s preference. D There will be allocation by the price system.

1 marks

Answer: D

This question in 9708/13 May/June 2017

9 The Chinese government relaxed controls on private house ownership. Private house ownership rose sharply, replacing demand for apartments rented from the state. What would have been most likely to happen to private house prices and the rents of apartments? private house prices apartment rents A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2017

10 What might explain a simultaneous increase in both price and quantity traded in the market for a normal good? A the removal of an effective maximum price on the good B technological progress in the production of the good C the imposition of a tax on the good D the granting of a subsidy to producers of the good

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2017

11 The diagram shows the demand and supply curves for parking spaces in a hospital car park. S price P D O number of spaces The managers decide to rely on the price mechanism to allocate parking spaces at the hospital. What is required for this to work? A Alternative means of transport must be provided for those unable to afford price OP. B A survey will be needed to find out the amount users are willing to pay. C The capacity of the car park will need to be expanded. D The price charged for parking spaces must be OP.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2017

12 The diagram shows a market for a good which is supplied partly from domestic production and partly from imports. Sh represents domestic supply and Sm represents imports. Sh price Sm D O R T V quantity What will be the level of consumption and the associated quantity of imports? consumption quantity of imports A OT RT B OT OT C OV RT D OV RV

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2017

9 Prices of gold, silver and copper fell considerably in 2011 and again in 2015. The fall in 2011 was said to be because miners increased production. The fall in 2015 was because demand, especially from China, decreased. Assuming that the equilibrium before 2011 was X, how would these movements in 2011 and subsequently in 2015 be shown on the demand and supply diagram? price X T Q S R O quantity initial 2011 2015 equilibrium equilibrium equilibrium A X Q R B X R Q C X S R D X T S

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2017

10 Consumer X is the largest of five consumers and buys 50% of sales. The table shows the quantity of the good demanded by consumer X and the market supply of the good. price demand from market supply $ consumer X 4 20 28 6 16 32 8 12 40 10 10 45 What would be the market equilibrium price? A $4 B $6 C $8 D $10

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2017

5 There is a fall in the world price of tea traded on wholesale international markets. How will this most likely affect the supply curve of a major tea retailer? A It will cause a contraction along the supply curve. B It will cause an extension along the supply curve. C It will cause the supply curve to shift to the left. D It will cause the supply curve to shift to the right.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2017

9 In the diagram, D is the demand curve for an agricultural commodity and S1 is the initial supply curve. A good harvest causes the supply curve to shift to S2. 6 S1 price 5 ($) 4 S2 3 2 1 D 0 0 1 2 3 4 5 6 quantity (’000 tonnes) By how much will the demand curve have to shift to leave farm incomes unchanged? A 500 tonnes at all prices B 1000 tonnes at all prices C 2000 tonnes at all prices D 4000 tonnes at all prices

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2017

10 A market is in an unstable disequilibrium when it does not return to its equilibrium point from a disequilibrium position. The diagram shows a market with two equilibrium points. At which price is the market in an unstable disequilibrium? D S price A B C D O quantity

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2017

13 A market is in equilibrium at price $5. Market supply changes from being inelastic at each price to become elastic at each price. The market equilibrium price does not change. What is the effect on consumer surplus and producer surplus? consumer producer surplus surplus A rises falls B rises unchanged C unchanged falls D unchanged unchanged

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2017

14 A government has introduced an effective maximum price on rice. Which combination of changes must cause an existing shortage of rice to increase the most? A a fall in the maximum price and a less price-elastic supply B a fall in the maximum price and a more price-elastic supply C a rise in the maximum price and a less price-elastic supply D a rise in the maximum price and more price-elastic supply

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2017

17 The table shows the demand and supply schedules for a good before and after the imposition of a tax. price quantity quantity supplied quantity supplied ($) demanded before tax after tax 20 340 440 380 19 340 430 340 18 340 410 290 17 340 380 230 16 340 340 160 15 340 290 80 14 340 230 0 What was the tax and the price change? tax price change ($) ($) A 3 2 B 3 3 C 4 3 D 4 4

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2017

8 In 2016 car drivers bought more fuel (gas) because the price of oil from which it was made had fallen. Which diagram represents this change in the market for fuel? A B price S price of fuel of fuel S D2 D2 D1 D1 O O quantity quantity of fuel of fuel C D price price S1 S of fuel of fuel S2 D1 D2 D O O quantity quantity of fuel of fuel

1 marks

Answer: D

This question in 9708/12 Feb/March 2018

9 The market demand for a product is made up of the demand from three firms, X, Y and Z. The table shows the demand from each firm and the market supply. price $ demand from X demand from Y demand from Z market supply 7 3300 3300 3300 3 300 8 3100 2900 3100 6 200 9 2800 2500 2900 8 200 10 2500 2100 2700 10 000 What is the equilibrium price in the market? A $7 B $8 C $9 D $10

1 marks

Answer: C

This question in 9708/12 Feb/March 2018

10 The diagram represents the market for diamonds. S2 price P2 S1 P1 D O Q2 Q1 quantity What could have caused price to change from P1 to P2? A a fall in the price of substitute gems B a fall in the tax on diamonds C a rise in the productivity of diamond miners D a rise in the wages of diamond miners

1 marks

Answer: D

This question in 9708/12 Feb/March 2018

11 Good X has a substitute, good Y, and a complement, good Z. The price of good Y decreases and the price of good Z increases. Why might the equilibrium price of good X remain unchanged? A Producers of good X adopt new technology. B Producers of good X receive a subsidy. C Some firms stop production of good X. D The tax on the production of good X is cut.

1 marks

Answer: C

This question in 9708/12 Feb/March 2018

13 The diagram shows the European airline market. F S1 price S2 M G H N J K D O R T quantity New entrants have come into the market, shifting supply from S1 to S2. Which area represents the new producer surplus? A GMJ B HNF C HNK D KNTO

1 marks

Answer: C

This question in 9708/12 Feb/March 2018

15 The diagram shows the equilibrium price and quantity of good X. price S F E D O quantity The initial market equilibrium is shown by point E. What might cause the market equilibrium to move to point F? A a decrease in the costs of producing good X B a decrease in the demand for good X C an increase in the price of a substitute good D the imposition of a specific sales tax on producers of good X

1 marks

Answer: D

This question in 9708/12 Feb/March 2018

12 A specific tax is placed upon each bottle of perfume sold. In the diagram, S is the supply curve before tax and St is the supply curve after tax. St price S W R U Q X P T D O Y Z quantity Which area represents the revenue received by the government from the tax? A ORWY B PQUT C PRWT D QRWU

1 marks

Answer: C

This question in 9708/11 May/June 2018

14 Which statement about maximum and minimum prices is correct? A With an effective maximum price for a product, a shortage will develop. B With an effective maximum price for a product, the market price will rise. C With an effective minimum price for a product, rationing will be necessary. D With an effective minimum price for a product, the market price will fall.

1 marks

Answer: A

This question in 9708/11 May/June 2018

9 The diagram shows S1 and D1, the original supply and demand curves for fast food in an economy. Point X is the original equilibrium. Fast food is an inferior good. What would be the new equilibrium position following a tax imposed on fast food and a fall in real income? S2 price S1 A S3 D X B C D2 D1 D3 O quantity

1 marks

Answer: A

This question in 9708/12 May/June 2018

10 When will the price mechanism not function as a system for allocating goods? A when the government bans advertising B when the government maintains an effective maximum price C when there is a limited supply of the good D when there is a powerful company able to set the market price

1 marks

Answer: B

This question in 9708/12 May/June 2018

11 During a certain period, 10 000 units of a normal good are sold at a price of US$20. During a later period, 12 000 units are sold at a price of US$22. What could explain this change? A an increase in indirect taxation B an increase in the cost of raw materials C an increase in the price of a substitute commodity D an increase in the productivity of factors of production

1 marks

Answer: C

This question in 9708/12 May/June 2018

12 A free market is in disequilibrium with a shortage of a product. As the market moves towards equilibrium, what will happen to the price, the quantity demanded and the quantity supplied? price quantity demanded quantity supplied A decrease decrease increase B decrease increase decrease C increase decrease increase D increase increase decrease

1 marks

Answer: C

This question in 9708/12 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

10 The diagrams show some information about oil. world oil production brent crude oil price 97.5 150 millions of 95.0 $ per barrel barrels per day 100 92.5 90.0 50 87.5 85.0 0 2013 2014 2015 2013 2014 2015 Which diagram represents the change in the oil market between 2013 and 2015? A B S2015 S2013 price price S2013 S2015 D D O O quantity quantity C D S2015 S price price S2013 D2013 D2015 D2015 D2013 O O quantity quantity

1 marks

Answer: B

This question in 9708/13 May/June 2018

14 The demand and supply functions for a product are quantity demanded = 1500 + 50P and quantity supplied = 300P – 2000 where P = price. With government regulation, the current price in the market is $15. What can be concluded about the form of price regulation and the balance of demand and supply in the market? form of price regulation balance of demand and supply A effective maximum price excess demand B effective maximum price excess supply C effective minimum price excess demand D effective minimum price excess supply

1 marks

Answer: D

This question in 9708/13 May/June 2018

16 A government decides to encourage apple consumption as a report states that eating apples is good for health. It subsidises apple growers. The diagram shows the market for apples. S1 price P3 P2 P1 D1 O Q1 Q2 quantity of apples What would the subsidy need to be to change the market equilibrium quantity from Q1 to Q2? A OP1 B P1P2 C P1P3 D P2P3

1 marks

Answer: C

This question in 9708/13 May/June 2018

10 The demand for a good falls at the same time as its costs of production decrease. What will be the combined effect of these changes on the price and on the quantity supplied of the good? price quantity supplied A decrease decrease B decrease uncertain C uncertain decrease D uncertain uncertain

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2018

11 The final of a major sports event is held in a stadium which has a fixed capacity of 40 000 people. The price for a seat is set at PF, but when the tickets go on sale all tickets are sold very quickly with many disappointed people unable to buy a ticket. Which diagram best represents this? A B S S price price PF PF D D O O 40 000 40 000 quantity quantity C D S S price PF price PF D D O O 40 000 40 000 quantity quantity

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2018

12 In the diagram S and S1 are the supply curves for an agricultural product in years 1 and 2 respectively. D is the demand curve in years 1 and 2. In year 1 the government purchased an amount necessary to ensure that the price was OP. S S1 price (year 1) (year 2) P D O W X Y Z quantity The price is held at OP in year 2. How much more must the government buy in year 2 than it bought in year 1? A WZ B XY C XZ D YZ

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2018

10 The diagram shows the market for cocoa, which is a normal good. Initially the market is in equilibrium with price Pe and quantity Qe bought and sold. S2 price S1 X Pe D2 D1 O Qe quantity Which sequence of events (event 1 followed by event 2) must have occurred in order to move to the new equilibrium at point X? event 1 event 2 A a decline in the removal of a subsidy popularity of cocoa previously paid to cocoa producers B a decrease in a decrease in costs disposable income of producing cocoa C an increase in an increase in the number disposable income of cocoa producers D a successful advertising an increase in the campaign by cocoa producers taxation of cocoa

1 marks

Answer: D

This question in 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

14 The government fixes a maximum price for wheat flour below the market equilibrium price. After the maximum price is imposed, which statement is not correct? A Producers’ revenue is increased. B Some consumers may encourage illegal sales. C The quantity supplied of flour will decrease. D There will be an excess demand for flour.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2018

16 In 2014 Egypt reduced subsidies on fossil fuels such as gasoline and diesel. The diagram shows the initial equilibrium at point X. What will be the new equilibrium after the reduction of subsidies? S1 price B C X A D D1 O quantity

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2018

9 Consumers wishing to listen to music at home can now access it online. This has resulted in the closure of shops selling music CDs. How can this be represented on a demand and supply diagram for music CDs? A B C D S2 S1 price price price S price S S1 S2 D1 D2 D D D2 D1 O O O O quantity quantity quantity quantity of CDs of CDs of CDs of CDs

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2018

11 The table shows a competitive market in equilibrium in two periods. market price period quantity traded (cents) 1 50 10 000 2 60 12 000 What could explain the change from period 1 to period 2? A an increase in the price of a complement B an increase in the price of a substitute C the imposition of a minimum price of 60 cents by a government D the imposition of an indirect tax on suppliers

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2018

7 A taxi firm raises fares at its busiest times by as much as five times the normal fare. Taxi drivers and customers are notified of the changes by mobile (cell) phone. What will result from this policy? A It will be less likely that there is a market equilibrium. B Potential customers will have less perfect information. C The market surplus will become a shortage. D The supply of taxi rides will become more price elastic.

1 marks

Answer: D

This question in 9708/12 Feb/March 2019

10 In the diagram, the supply of a product increases while the demand curve does not shift. S1 price S2 D1 P1 P2 S1 D1 S2 O quantity Which row correctly identifies the resulting impact on consumer and producer surplus? consumer surplus producer surplus A has fallen has fallen B has fallen has risen C has risen has fallen D has risen has risen

1 marks

Answer: D

This question in 9708/12 Feb/March 2019

11 The diagram shows the market demand and supply for a good. Which statement is not valid? D1 S1 price U V P1 W P2 Y X P3 D1 S1 O quantity A At price OP1, UV represents the market surplus. B At price OP3, P3X represents the quantity that consumers would like to buy. C If price were to fall from OP1 to OP3, the extra quantity demanded would be equal to the extra quantity supplied. D Price OP2 is the market equilibrium price.

1 marks

Answer: C

This question in 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

6 The diagram shows the demand for, and supply of, carrots. S price P1 D O quantity What is true at price P1? A There will be a shortage of carrots. B There will be a surplus of carrots. C There will be an increase in the sale of carrots. D There will be market clearing of carrots.

1 marks

Answer: B

This question in 9708/11 May/June 2019

12 An unstable disequilibrium is when a market does not return to an original equilibrium point from a disequilibrium position. The diagram shows a market with two equilibrium points. PO/QO is the original market equilibrium. At which price is the market in an unstable disequilibrium? S A price B C PO D D O QO quantity

1 marks

Answer: A

This question in 9708/11 May/June 2019

7 The diagram shows the demand for and supply of cream. The original equilibrium is point X. Strawberries and cream are complementary goods. If the price of strawberries falls and the cost of producing cream increases which point represents the new equilibrium? S2 price S1 S3 of cream B C A X D D3 D2 D1 O quantity of cream

1 marks

Answer: B

This question in 9708/12 May/June 2019

5 Which statement about market disequilibrium is correct? A Price is likely to change. B Supply is equal to demand. C The government must intervene. D There must be shortages.

1 marks

Answer: A

This question in 9708/13 May/June 2019

6 In the diagram, D1 and S1 represent the demand for and supply of luxury watches. Equilibrium is initially at point X. The cost of raw materials for manufacturing watches rises. At the same time the incomes of the rich increase. Which point on the diagram is most likely to represent the new equilibrium? S2 B price S1 A S3 X C D D3 D1 D2 O quantity

1 marks

Answer: B

This question in 9708/13 May/June 2019

7 The equation for the quantity demanded (QD) of a product is QD = 400 – 20P where P = price in dollars. The quantity supplied (QS) is given by QS = 100 + 40P. What can be concluded about the market when price is $5? A Consumers will face a shortage. B Government will intervene in the market. C Producers will have a surplus of the product. D The market will be in equilibrium.

1 marks

Answer: D

This question in 9708/13 May/June 2019

10 The table shows the demand schedule for avocados in a market on a particular day. The supply of avocados was fixed on that day. $ per quantity avocado demanded 2.60 500 2.40 640 2.20 740 2.00 820 1.80 900 Which statement is correct? A If the supply was 490, at a price of $2.60 there was an excess demand of 10 avocados. B If the supply was 650, at a price of $2.40 there was an excess demand of 10 avocados. C If the supply was 810, at a price of $2.00 there was an excess supply of 10 avocados. D If the supply was 890, at a price of $1.80 there was an excess supply of 10 avocados.

1 marks

Answer: A

This question in 9708/13 May/June 2019

11 The diagram shows the demand and supply curves of a normal good (X). Q1P1 is the initial equilibrium. S2 price S1 P2 P1 D2 D1 O Q1 Q2 quantity Other things being equal, what may cause the change in the market equilibrium to Q2P2? A a fall in household incomes and an increase in interest rates B a rise in workers’ real wages in all sectors of the economy C an increase in income tax and a rise in the specific tax levied on X D an increase in the price of a substitute product for X and a fall in the costs of producing X

1 marks

Answer: B

This question in 9708/13 May/June 2019

13 The diagram represents the market for electric cookers. S price Y X D2 D1 O quantity What is most likely to explain the change in the equilibrium from point X to point Y? A a fall in the price of electric cookers B an increase in a specific tax on electric cookers C an increase in the number of households D an increase in the price of electricity

1 marks

Answer: C

This question in 9708/13 May/June 2019

5 The table shows the market demand and supply for bananas over a year. At a market price of 8 cents per kg there is disequilibrium in the market. total market total market price of bananas demand (million supply (million (cents per kg) tonnes) tonnes) 4 1000 150 6 800 300 8 600 450 10 400 600 12 200 750 What action would the government have to take to achieve market equilibrium at a price of 8 cents per kg? A grant a subsidy of 2 cents per kg to producers B impose a tax of 4 cents per kg on consumers C purchase the entire supply at 8 cents and sell at 4 cents D ration consumers to 75 kg each per year

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2019

9 The diagram shows the market for a good. price S P2 maximum price P P1 minimum price D O quantity If the government imposes a minimum price at OP1 and maximum price at OP2 what would happen? A The price will be unchanged at OP. B The price will fall to OP1. C The price will rise to OP2. D There will need to be rationing by the government.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2019

17 A government gives a subsidy to a producer of a product. What will be the likely effect of this? A a shift to the left in the demand curve and a rise in equilibrium quantity B a shift to the left in the supply curve and a rise in equilibrium quantity C a shift to the right in the demand curve and a fall in equilibrium price D a shift to the right in the supply curve and a fall in equilibrium price

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2019

9 The diagram shows the market for air travel in Asia. The initial market equilibrium is at X. What will be the new equilibrium if the price of aviation fuel rises and incomes are falling in Asia? price of S3 air travel S1 B S2 A X C D D1 D2 D3 O quantity of air travel

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2019

11 The diagram shows supply and demand for a good. The original equilibrium is X. What will be the new equilibrium if subsidies are given to firms for new machinery? S3 price B S1 S2 C A X D D2 D1 D3 O quantity

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2019

12 The diagram shows the market for a normal good. price S D O quantity What is likely to cause both demand and supply curves to shift to the right? A a fall in the price of the good and a fall in the rate of indirect tax on the good B a rise in the price of a complementary good and an increase in the number of firms in the industry C a rise in the price of a substitute good and a fall in the price of a raw material used in the production of the good D an improvement in production techniques and a fall in the incomes of consumers

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2019

13 The diagrams relate to the markets for four different products. In which market would a 10% decrease in demand and simultaneously a 10% increase in supply definitely result in both a fall in equilibrium price and a rise in equilibrium quantity? A B S S price price D D O quantity O quantity C D D S price price S D O quantity O quantity

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2019