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IB Economics: Demand Elasticity – Practice Paper 2 (10 Questions)
IB Economics: Demand Elasticity – Practice Paper 2 (10 Questions)
Paper two focuses on arc elasticity, supply elasticity and tax incidence: compute PED with the midpoint formula, use PES for the supply response, let the two elasticities decide the tax split, then explain revenue and farm income with elasticity.
Quick answer The inelastic side bears more of a tax, and the consumer share equals PES over PES plus the absolute PED.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 questions |
| Suggested time | 25 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: IB Economics: Demand Elasticity – Tutor Lesson Plan |
| Level | IB SL |
02 Questions (10 items)
- FoundationPrice falls from ten dollars to eight and quantity demanded rises from one hundred to one hundred twenty-five. Find PED using the midpoint formula.
- FoundationThe price elasticity of supply is one point five. How much does quantity supplied change when price rises ten percent?
- FoundationA good has an income elasticity of minus zero point eight. What happens to demand when income rises ten percent, and what type of good is it?
- FoundationGood A has a cross elasticity of plus two point five. How does demand for A change when the price of B rises four percent, and how are the two related?
- IntermediateThe government imposes a six-dollar tax. Demand elasticity is minus zero point five and supply elasticity is two. How is the tax shared?
- IntermediateA nine-dollar tax applies where demand elasticity is minus two and supply elasticity is one. How is it shared?
- IntermediateWhy is a tobacco tax mostly borne by consumers?
- ChallengeA good sells one hundred units at twenty dollars, giving revenue of two thousand. Demand elasticity is minus one point five. What is revenue after a ten percent price cut?
- ChallengeWhy does a bumper harvest often reduce farmers income? Explain with elasticity.
- Error redoA student computes a PED of minus two and then writes that demand falls by two percent. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | PED equals minus one, that is unit elastic | The quantity change over the average is 25 over 112.5, and the price change over its average is minus 2 over 9, giving minus one. |
| 2 | it rises by fifteen percent | Multiplying ten percent by one point five gives fifteen percent. |
| 3 | demand falls by eight percent, so it is an inferior good | A negative value marks an inferior good, and ten percent times minus zero point eight is minus eight. |
| 4 | demand for A rises by ten percent, so they are substitutes | A positive value marks substitutes, and four percent times two point five is ten. |
| 5 | consumers bear four dollars eighty and producers one dollar twenty | The consumer share is two over two and a half, so the tax splits as stated. |
| 6 | consumers bear three dollars and producers six | The consumer share is one third of nine, leaving six with producers. |
| 7 | demand for tobacco is inelastic while supply is relatively elastic | The side that cannot adjust quantity easily absorbs more of the tax. |
| 8 | two thousand and seventy dollars, a rise of three and a half percent | Output rises fifteen percent to one hundred fifteen units, and eighteen times that is two thousand and seventy. |
| 9 | demand for farm produce is inelastic, so price falls by more than quantity rises | A rightward supply shift along a steep demand curve cuts revenue despite higher output. |
| 10 | the coefficient is a ratio of two percentage changes, not the percentage change in quantity | Minus two means a one percent price rise cuts quantity by two percent; the price change itself is still needed. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
Questions and answers are written originally by the TutorZone team and are not taken from any school, publisher or examination authority paper. Every value is checked by computer.
