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Demand · Paper 2 — Free Economics HL Practice Questions
1MasteryLAQLaw of demand and its determinants10 marksPaper 2~15 min
In 2022, average monthly household income in Vietnam rose from VND 5.5 million to VND 6.5 million, driven by strong economic growth. Over the same period, the demand for premium coffee (a normal good) increased by , while the demand for instant coffee (an inferior good) fell by . The price of premium coffee remained stable at VND 80,000 per kilogram throughout this period.
(a)
Using the data provided, distinguish between a movement along a demand curve and a shift of the demand curve for premium coffee. [4 marks]
(b)
Evaluate the relative importance of two determinants of demand in explaining the changes observed in the markets for premium coffee and instant coffee. [6 marks]
Solutions
2MasteryLAQLaw of demand and its determinants14 marksPaper 2~21 min
The government of Kenya introduced a tax on sugar-sweetened beverages in 2023 to address rising obesity rates and healthcare costs. Following the tax, the price of a typical soft drink rose from to per litre. Monthly quantity demanded fell from million litres to million litres. Sales of bottled water, a close substitute, rose by .
(a)
Explain the law of demand, using the data on soft drinks to support your answer. [4 marks]
(b)
Explain how two determinants of demand account for the increase in demand for bottled water. [4 marks]
(c)
Using a demand supply for bottled water, evaluate the likely impact of the sugar-sweetened beverage tax on the equilibrium price and quantity of bottled water. [6 marks]
Solutions
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