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ib economics hl notes
IB ECONOMICS HL

IB Economics Past Paper: Sample Questions For Competitive Markets (Supply And Demand)

UPDATED ON - 20 APR 2020
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Resource Material for IB Economics HL

Past Paper Sample Questions for Section 1 Microeconomics

Topic - Competitive markets: Demand and Supply

  • Question 1
  • Question 2
  • Question 3                                                                              

 

Question 1  [Total: 25 marks]

  • In a demand function of the general form Qd =  a – bP, outline the meaning of the parameter a and of the parameter −b. [2 marks] 

 

  • Outline the meaning of the negative slope in this function. In the demand function Qd = 35 − 5P, Qd represents the quantity of good Z demanded per month in thousands of units, and P represents the price per unit of Z in $.                [2 marks]

 

  • Construct a graph of the corresponding demand curves.  [1 mark]

 

  • Calculate the values of Qd when P = $3, and P = $4.  [2 marks]

 

  • Calculate the values of P when Qd = 5 thousand, and Qd = 25 thousand.                [2 marks]

 

  • Calculate the vertical and horizontal intercepts using the function.  [2 marks]

 

  • Identify the vertical and horizontal intercepts on your graph.  [2 marks]

 

  • Assume that due to an increase in income levels, 5 thousand fewer units of Z are demanded at each Price. Determine the equation for the new demand function. [2 marks]

 

  • Identify the vertical and horizontal intercepts of the new demand function in your graph and graph the new demand curve.  [3 marks]

 

  • Assume that due to a change in tastes, 10 thousand more units of Z are demanded at each price (relative to the initial demand function). Determine the equation for the new demand function. [2 marks]

   

  • Draw the new demand curve on your graph. [1 mark]  

 

  • If the slope changes to −3, state the new demand function and outline how the change in slope affects the steepness of the demand curve. [2 marks]

 

  • Outline the relationship between an individual consumer’s demand and market demand. [2 marks]

Question 2  [Total: 25 marks]

  • In a supply function of the general form Q s = c + DP, outline the meaning of the Parameter c and of the parameter +d.  [2 marks] 

 

  • Outline the meaning of the positive slope in this function.  In the supply function Q s = −10 + 10P, Q s represents the quantity of good Z supplied per month in thousands of units, and P represents the price per unit of Z in $.  [2 marks]    

 

  •   Construct a graph of the corresponding supply curve, including only positive values for Q s, up to the points where P = 5.  [1 mark] 

 

  • Calculate the values of Q s when P = $3 and P = $4.  [2 marks]

 

  • Calculate the values of P when Q s = 10 thousand, and Q s = 25 thousand.  [2 marks] 

   

  • Calculate the vertical and horizontal intercepts using the function; which of these does not appear In your graph?   [3 marks]

 

  • Identify on your graph the intercept with a positive value.  [1 mark] 

 

  • Assume that due to new technology, 5 thousand more units of Z are supplied at each price. Determine the new supply function.  [2 marks]

 

  • Calculate the new vertical and horizontal intercepts using the function.  [2 marks]

 

  • Graph the new supply curve, including only positive values for Q s, up to the point where P = 4.  [1 mark]

 

  • Assume that due to a reduction in the number of the firm in the industry, 5 thousand fewer units of Z is supplied at each price (relative to the initial Supply function). Determine the new supply function.  [2 marks]

 

  • Draw the new supply curve on your graph.  [1 mark]

 

  • If the slope changes to +15, state the new supply function and outline how the change in slope affects the steepness of the supply curve.   [2 marks]

 

  • Outline the relationship between an individual firm’s supply and market supply.  [2 marks]

Question 3  [Total: 25 marks]

In the demand function, Q d = 35 − 5P and the supply function Q s = −10 + 10P, Q d, and Q s are quantities demanded and supplied per month in thousands of units of good Z and P is the price in $.

 

  • Calculate the equilibrium price and quantity.  [2 marks]

 

  • Plot the demand and supply curves, and identify the equilibrium price and quantity on your graph.  [4 marks]

 

  • When P = 6, and P = 2, determine whether there is excess demand or excess supply, and calculate the amount of this in each case.  [6 marks]

 

  • Explain how excess demand and excess supply work to restore equilibrium in the market.  [4 marks]

 

  • Due to an increase in resource prices, 15 thousand fewer units of Z are supplied at each price. State the new supply equation and plot the new supply curve on your graph.  [2 marks]

 

  • Determine the new equilibrium price and quantity mathematically and on your graph.  [3 marks]

 

  • ​​​​​​​Explain how price works as a signal and incentive to restore equilibrium in the market following the decrease in supply.  [4 marks]

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