Pearson Edexcel IGCSE · Economics

Demand, supply and market equilibrium: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Demand, supply and market equilibrium.

10 questions24 marksFree, no account

Question 1

1 mark

In the context of Demand, supply and market equilibrium, which of the following factors would most likely cause a shift in the demand curve for a product due to demographic changes?

Question 2

1 mark

The government decides to provide a subsidy to firms that produce electric bicycles. What is the most likely effect on the market for electric bicycles?

Question 3

1 mark

In the market for premium smartphones, there is a simultaneous increase in consumer income (assuming they are normal goods) and a significant reduction in the cost of microchips. What is the certain effect on the market equilibrium?

Question 4

1 mark

In the market for printers, there is a significant increase in the price of ink cartridges, which are a complementary good. What is the most likely effect on the demand curve for printers?

Question 5

1 mark

In a free market, if the current market price is above the equilibrium price, which of the following describes the resulting situation and the market force that will return it to equilibrium?

Question 6

2 marks

Define substitute goods and explain how an increase in the price of one affects the demand for the other.

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Question 7

3 marks

Explain how market forces act to remove an excess supply in a competitive market to return to equilibrium.

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Question 8

5 marks

In the market for beef, there is a simultaneous increase in the price of cattle feed and a successful marketing campaign promoting beef consumption. Using economic theory, explain the definite effect on equilibrium price and why the equilibrium quantity is indeterminate.

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Question 9

5 marks

The market for smartphones is initially in a state of equilibrium.

(a) Define the term demand.
(b) Explain, with reference to a supply and demand diagram, how a significant increase in indirect taxes on smartphone manufacturers would affect the equilibrium price and equilibrium quantity.
(c) Explain why excess supply occurs if the market price is accidentally set above the equilibrium level.

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Question 10

4 marks

A company produces high-quality headphones.
(a) Explain the difference between a movement along the demand curve and a shift of the demand curve.
(b) In a market diagram for headphones, show the effect of a significant increase in advertising expenditure by the company. Clearly identify the impact on the equilibrium price \( (P) \) and equilibrium quantity \( (Q) \).

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