IB Middle Years Programme (MYP) · Individuals and Societies

Markets: supply, demand and price: Practice Questions

5 multiple-choice questions marked as you go, and 4 written questions with worked solutions. All on Markets: supply, demand and price.

9 questions17 marksFree, no account

Question 1

1 mark

In economic theory, what does the Law of Demand suggest happens when the price of a product increases, assuming all other factors remain constant?

Question 2

1 mark

Suppose the price of coffee increases significantly. If tea is a substitute for coffee, what will happen to the market for tea?

Question 3

1 mark

If the cross-price elasticity of demand between Good A and Good B is \(-1.5\), and the price of Good A increases, what will happen to the equilibrium in the market for Good B?

Question 4

1 mark

Market equilibrium occurs at the point where:

Question 5

1 mark

An improvement in technology that reduces the cost of producing smartphones will result in which of the following changes in the smartphone market?

Question 6

2 marks

According to the Law of Demand, what is the general relationship between the price of a good and the quantity demanded, assuming all other factors remain constant?

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Question 7

3 marks

Suppose the government introduces a new subsidy for electric vehicle manufacturers. Explain the resulting shift in the supply curve and the effect on the equilibrium price.

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Question 8

2 marks

If the market price of a product is currently set above the equilibrium price, will there be a shortage or a surplus in the market?

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Question 9

5 marks

Consider the market for electric bicycles. Explain, with the aid of the concepts of supply and demand, how the following two simultaneous events would affect the equilibrium price and equilibrium quantity:
1. A technological breakthrough significantly reduces the production cost of lithium batteries used in the bicycles.
2. A new government subsidy is provided to consumers who purchase electric bicycles to encourage green transportation.
Discuss whether the final equilibrium quantity and price can be determined with certainty.

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