Supply (DP IB Economics: HL)

Exam Questions

21 mins9 questions
12 marks

Case Study

Text A, Paragraph 1
The global coffee market has seen a rise in prices, prompting coffee growers in Colombia to increase their production levels. Many farmers are expanding their output in response to these higher prices, reflecting behaviour typically seen in the law of supply.

Define the term law of supply as indicated in bold (Text A, Paragraph 1).

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22 marks

Case Study

Text B, Paragraph 2
Steel production in India has been affected by several factors, including a shortage of skilled labour and improvements in production technology. These non-price determinants of supply are playing a key role in shaping the steel industry’s ability to meet market demand.

Define the term non-price determinants of supply indicated in bold (Text B, Paragraph 2).

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32 marks

Case Study

Text D, Paragraph 2
As factories in China increase their workforce, they initially experience higher output. Managers have noticed that this pattern changes as more workers are added to production lines. This trend highlights the principle of diminishing marginal returns.

Define the term diminishing marginal returns as indicated in bold (Text D, Paragraph 2).

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42 marks

Case Study

Text D, Paragraph 2

In an attempt to reduce plastic waste, the UK government introduced an indirect tax on single-use plastic products. Many manufacturers responded by reducing their production of plastic items, leading to a shift in the market supply.

Outline how indirect taxes can affect the supply of goods, as indicated in bold (Text D, Paragraph 2).

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53 marks

Case Study

Text A, Paragraph 2
A series of floods has severely impacted rice production in Southeast Asia. Many farmers have been unable to maintain their previous output levels, leading to a significant reduction in the supply of rice to the global market.

Draw a diagram showing the impact of the floods on rice production in Southeast Asia.

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62 marks

Case Study

Text C, Paragraph 3
The auto industry is experiencing growth as multiple car manufacturers increase their production rates. The supply of electric vehicles has risen sharply, increasing competition and availability.

State two factors that could increase the supply of electric vehicles.

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72 marks

Case Study

Text E, Paragraph 1

A dairy farm in Ireland produces 500 litres of milk per day. Across the country, numerous farms contribute to the market supply which is sufficient to meet the needs of the population.

Define what is meant by market supply (Text E, Paragraph 1)

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82 marks

Outline one assumption underlying the law of supply.

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14 marks

Case Study

Text A, paragraph 2

Additional reforms include upgrading old infrastructure and offering incentives to private sector firms to invest in projects that will improve productive capacity. Some government policies are already being implemented. These include a large power plant construction program, tax incentives to infant industries such as oil refining to help attract more investment, and tax cuts for industries like transport, telecommunications, metal production and agricultural processing. In addition, there has been a decision to reduce fuel subsidies to contribute funds towards the government’s record US$22 billion in infrastructure projects. The subsidies had kept fuel prices low in a country where millions of people live in poverty.

Using a demand and supply diagram, explain the impact on the market for fuel of the Government’s decision to cut fuel subsidies.

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