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Competitive Market Equilibrium · Paper 1 — Free Economics HL Practice Questions
1FoundationSAQ-SThe concept of equilibrium price and quantity7 marksPaper 1~11 min
A local government introduces a subsidy for electric bicycle manufacturers, reducing their production costs. The market for electric bicycles was initially in equilibrium.
(a)
Define the term equilibrium quantity. [1 mark]
(b)
Explain how the subsidy is likely to affect the equilibrium price and equilibrium quantity of electric bicycles. [2 marks]
(c)
Evaluate whether the subsidy will necessarily result in a significant increase in the quantity of electric bicycles sold. [4 marks]
Solutions
2FoundationSAQ-SThe concept of equilibrium price and quantity12 marksPaper 1~18 min
The equilibrium price for cinema tickets in a city is USD 12 and the equilibrium quantity is 8000 tickets per week. During a prolonged heatwave, many consumers choose to stay indoors and stream movies at home instead of visiting cinemas.
(a)
Define the term market equilibrium. [1 mark]
(b)
Using a demand supply , explain how the cinema ticket market adjusts to a new equilibrium following the heatwave. [3 marks]
(c)
Evaluate the extent to which the price mechanism alone will restore equilibrium in the cinema ticket market following the heatwave. [4]
Total: [8 marks]
Solutions
3MasterySAQ-SThe concept of equilibrium price and quantity4 marksPaper 1~6 min
The market for ride-sharing services in Mumbai is initially in equilibrium at a price of rupees per kilometre, with kilometres demanded and supplied per day. The Mumbai city government imposes a specific tax of rupees per kilometre on ride-sharing companies. The price elasticity of demand for ride-sharing in Mumbai is relatively inelastic, while supply is relatively elastic.
(a)
Draw a fully labelled to show the effect of this tax on the equilibrium price paid by consumers, the price received by producers, and the equilibrium quantity. [2 marks]
(b)
Using the concept of price elasticity, explain why the price paid by consumers rises by less than rupees following the imposition of the tax. [2 marks]
Solutions
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