Price Elasticity of Demand (PED) (Cambridge (CIE) IGCSE Economics)

Exam Questions

1 hour28 questions
11 mark

In an African country with large areas of tropical desert the price elasticity of demand for salt is highly inelastic. This will result in greater consumer expenditure on salt when price changes from P1 to P2.

Which diagram illustrates this situation?

  • 646401-nov-2020-qp-13-fig-7a
  • 646401-nov-2020-qp-13-fig-7b
  • 646401-nov-2020-qp-13-fig-7c
  • 646401-nov-2020-qp-13-fig-7d

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21 mark

Price elasticity of demand (PED) measures the responsiveness of demand to a change in price. It can differ for different goods.

For which good is the PED most elastic according to the table?

 

good

percentage change in quantity demanded

percentage change in price

A

B

C

D

butter

cars

furniture

petrol

6.0

5.5

5.0

3.0

5.0

5.0

5.0

5.0

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    31 mark

    If a 10% increase in the price of a product leads to a 5% decrease in quantity demanded, what type of price elasticity of demand does this represent?

    • Perfectly elastic

    • Relatively elastic

    • Unit elastic

    • Relatively inelastic

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    41 mark

    If the price elasticity of demand for a good is greater than 1, how would you classify its elasticity?

    • Perfectly inelastic

    • Relatively inelastic

    • Unit elastic

    • Relatively elastic

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    51 mark

    If many close substitutes for a product become available in the market, what is likely to happen to its price elasticity of demand?

    • It would become more elastic

    • It would become less elastic

    • It would remain unchanged

    • It would become perfectly elastic

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    11 mark

    A mobile (cell) phone operator increases the price of making calls on its network. After the price increase, the revenue of the mobile phone operator falls by 10%. What is the price elasticity of demand (PED) for the mobile operator’s service?

    • elastic

    • inelastic

    • perfectly elastic

    • unit elastic

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    21 mark

    A product has a price elasticity of demand of – 0.5.

    What happens to the demand for a product if its price falls from $1 to $0.80?

    • It decreases by 10%.

    • It decreases by 20%.

    • It increases by 10%.

    • It increases by 20%.

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    31 mark

    The table shows the demand and supply for spices in a market in Africa.

    price per kg (US$)

    quantity demanded (kg)

    quantity supplied (kg)

    10

    20

    30

    40

    50

    40

    30

    20

    10

    20

    30

    40

    When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED) for spices?

    • 0.25

    • 0.5

    • 1.0

    • 2.0

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    41 mark

    In Portugal, the response to changes in the price of French cheese are considered to be unit elastic. 

    Which diagram illustrates this situation?

    • 2-7-1-calculation-and-determination-of-ped--perfectly-inelastic
    • 2-7-1-calculation-and-determination-of-ped--relatively-inelastic
    • 2-7-1-calculation-and-determination-of-ped---unitary-elasticity
    • 2-7-1-calculation-and-determination-of-ped---perfectly-elastic

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    11 mark

    How might the concept of price elasticity of demand (PED) be useful for a government?

    • to determine the effect on employment of a change in income tax

    • to determine the effect on government revenue of a rise in the rate of interest

    • to determine the effect of providing a public good

    • to determine the result of imposing a tariff on imports

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    21 mark

    A railway company increases ticket prices by 10% for travel between 06:00 and 09:00, causing a reduction in demand by 2%. After 09:00 it reduces ticket prices by 5%, resulting in a 7% increase in demand. What is the price elasticity of demand in response to these price changes?

     

    between 06:00 and 09:00

    after 09:00

    A

    B

    C

    D

    elastic

    elastic

    inelastic

    inelastic

    elastic

    inelastic

    elastic

    inelastic

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      31 mark

      What can be concluded from the demand curve for the product shown in the diagram?

      qp-june-2019v2-paper-1-cie-economics-igcse-q6
      • Price increases will raise the producers’ revenue.

      • Producers are unable to respond to a price rise.

      • The product is one with many substitutes.

      • There are 20 people able to buy the product.

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      4
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      1 mark

      The initial price of a product was $80, and the initial quantity demanded was 200 units. After a price increase to $120, the quantity demanded decreased to 150 units. Calculate the price elasticity of demand.

      • 2

      • 0.5

      • 1.25

      • 0.75

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      5
      Sme Calculator
      1 mark

      The price of a good increased by $10, resulting in a decrease in quantity demanded by 8%. If the initial price was $80 and the initial quantity demanded was 120 units, calculate the price elasticity of demand

      • 0.64

      • 1.56

      • 0.83

      • 1.0

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