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S4 Economics Demand and Supply Practice Paper 3 | Consumer Surplus, Price Floor and Subsidy: 10 Questions with Answers
S4 Economics Demand and Supply Practice Paper 3 | Consumer Surplus, Price Floor and Subsidy: 10 Questions with Answers
Ten demand and supply questions in a third paper, moving from consumer surplus and price floors to equilibrium calculations and the sharing of a per-unit subsidy, with answers and a one-line explanation.
Direct answers This paper has 10 questions covering surplus concepts, price floors, equilibrium calculations and the allocation of a per-unit subsidy; suggested time is 20 minutes.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 |
| Suggested time | 20 minutes |
| Difficulty mix | Foundation 3 · Intermediate 4 · Challenge 2 · Error redo 1 |
| Chapter | S4 Economics: Demand and Supply |
| Level | S4 (DSE) |
02 Questions (10 items)
- FoundationWhat is consumer surplus?
- FoundationWhat is producer surplus?
- FoundationThe government sets a minimum wage above the equilibrium wage. What happens in the labour market?
- IntermediateDemand Qd = 300 – 5P and supply Qs = 20 + 5P. Find the equilibrium price and quantity.
- IntermediateFollowing the previous question, if the market price is 20, does the market show a surplus or a shortage, and by how much?
- IntermediateFollowing the previous question, if the market price is 34, does the market show a surplus or a shortage, and by how much?
- IntermediateFollowing the previous question, what is consumer surplus at equilibrium? The demand curve meets the price axis at P = 60.
- ChallengeThe government gives a per-unit subsidy of $6, so supply becomes Qs = 20 + 5(P + 6). Find the new equilibrium price and quantity.
- ChallengeFollowing the previous question, what is the total subsidy outlay, and how much benefit goes to consumers and to producers?
- Error redoWhat is wrong with the claim that a price floor causes a shortage?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | The total difference between the highest price consumers are willing to pay and the price they actually pay. | The part of willingness to pay above the market price is the benefit consumers gain. |
| 2 | The total difference between the price producers actually receive and the lowest price they are willing to accept. | The part of the transaction price above the supply price goes to producers. |
| 3 | A labour surplus appears, that is unemployment or reduced working hours. | The price floor is above equilibrium, so quantity supplied, the people wanting work, exceeds quantity demanded, the jobs offered. |
| 4 | P = 28, Q = 160. | Set Qd = Qs: 300 – 5P = 20 + 5P, so 10P = 280. |
| 5 | A shortage of 80 units. | Qd = 200 and Qs = 120, so excess demand is 80. |
| 6 | A surplus of 60 units. | Qd = 130 and Qs = 190, so excess supply is 60. |
| 7 | 2,560. | Area of the triangle: (60 – 28) * 160 / 2. |
| 8 | P = 25, Q = 175. | 300 – 5P = 50 + 5P gives P = 25, and substituting gives Q = 175. |
| 9 | 1,050 in total; consumers pay $3 less and producers receive $3 more, so each side gets half. | 6 * 175 = 1,050, and equal slopes mean the benefit is shared equally. |
| 10 | A floor above the equilibrium price means excess supply, so it causes a surplus; a shortage appears with a price ceiling or when the price is below equilibrium. | Remember: a high floor leaves goods unsold, while a low ceiling leaves buyers short. |
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.
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