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Elasticity of Demand · Paper 1 — Free Economics HL Practice Questions
1FoundationSAQ-SPrice elasticity of demand (PED)5 marksPaper 1~8 min
A local cinema sells tickets at USD 10 each and currently sells 2,000 tickets per week. After increasing the price to USD 12, weekly ticket sales fall to 1,400.
(a)
State the formula for price elasticity of demand (PED). [1 mark]
(b)
Calculate the PED for cinema tickets using the data provided. [2 marks]
(c)
Explain one determinant of PED that accounts for the relatively elastic demand for cinema tickets. [2 marks]
Solutions
2FoundationSAQ-SPrice elasticity of demand (PED)6 marksPaper 1~9 min
A farmer sells wheat to a large bread-making company. When the market price of wheat falls from USD 200 per tonne to USD 180 per tonne, the quantity of wheat demanded by the company increases from 500 tonnes to 520 tonnes.
(a)
State the formula for price elasticity of demand (PED). [1 mark]
(b)
Calculate the PED for wheat, showing your working. [2 marks]
(c)
Using your answer to (b), evaluate whether the fall in price is likely to benefit the farmer's total revenue. [3 marks]
Solutions
3MasterySAQ-SPrice elasticity of demand (PED)4 marksPaper 1~6 min
In Mumbai, India, the local government is considering a fare increase on the suburban railway network, the primary mode of transport for millions of commuters. The estimated price elasticity of demand (PED) for suburban rail travel is . A competing ride-sharing service, CityCabs, has a PED of for its services in the same area.
(a) Explain why the government could increase total revenue by raising suburban railway fares, while CityCabs could not increase its total revenue by raising its fares. [4]
Solutions
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