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IB Economics: Demand Elasticity – Practice Paper 3 (10 Questions)
IB Economics: Demand Elasticity – Practice Paper 3 (10 Questions)
Paper 3 focuses on calculation: percentage changes and point elasticity, then total revenue, cross elasticity, sharing of a specific tax, and arc elasticity between two points.
Quick answer A five percent price fall with a ten percent rise in quantity gives an elasticity of two. At P = 15 on Q = 120 − 4P the point elasticity is minus one. With PED 0.5 a ten percent price rise lifts revenue by 4.5 percent to two thousand and ninety dollars; with PED 2 revenue falls twelve percent.
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 five percent and quantity demanded rises ten percent. What is the absolute price elasticity of demand?
- FoundationDemand is Q = 120 − 4P. At P = 15, what are the quantity and the point elasticity?
- FoundationWhat does a price elasticity of supply of zero mean?
- FoundationIncome elasticity is 1.5. What kind of good is this?
- IntermediatePED is 0.5, so demand is inelastic. Price rises ten percent from twenty dollars. What happens to total revenue from two thousand dollars?
- IntermediatePED is 2, so demand is elastic. Price rises ten percent from twenty dollars. What happens to total revenue from two thousand dollars?
- IntermediateCross elasticity is +1.8. The price of good Y rises five percent. How much does demand for good X change, and how are the goods related?
- ChallengeA specific tax of ten dollars per unit is imposed, with PED 0.4 and PES 1.6. How much does each side bear?
- ChallengePrice rises from ten to twelve dollars and quantity falls from two hundred to one hundred and sixty. Find the arc elasticity, in absolute value.
- Error redoCommon error: the value minus twenty from the slope is reported as the elasticity. What is the correct answer?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | 2 | Ten percent divided by five percent equals two. |
| 2 | Q = 60, PED = −1 | Quantity is sixty, and minus four times fifteen over sixty gives minus one. |
| 3 | Supply is perfectly inelastic: the supply curve is vertical, so quantity does not change with price | This happens when capacity or stock is completely fixed in the short run. |
| 4 | A normal good, and a luxury good because income elasticity exceeds one | A positive value means a normal good; above one means demand grows faster than income. |
| 5 | $2,090, up 4.5 percent | Quantity falls five percent to ninety-five, and twenty-two times ninety-five is two thousand and ninety. |
| 6 | $1,760, down 12 percent | Quantity falls twenty percent to eighty, and twenty-two times eighty is one thousand seven hundred and sixty. |
| 7 | It rises 9 percent; the goods are substitutes | A positive cross elasticity means substitutes, and one point eight times five is nine percent. |
| 8 | Consumers $8, producers $2 | The consumer share is one point six over two, which is eighty percent. |
| 9 | About 1.22 | Forty over one hundred and eighty divided by two over eleven is about one point two two. |
| 10 | About −1.22 | Elasticity multiplies the slope by price over quantity; minus twenty is only the slope. |
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.
