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S5 Economics | Price Control and Quota Practice Paper 1 (Foundation)
S5 Economics | Price Control and Quota Practice Paper 1 (Foundation)
Start with definitions: when a ceiling or floor actually binds, how to solve for equilibrium, and how to measure shortages and surpluses before quota rent.
Attempt first, mark afterwards Allow about thirty minutes; write the Qd and Qs figures, decide whether it is a shortage or a surplus, then state the conclusion.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 items |
| Suggested time | About 30 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: S5 Economics | Price Control and Quota |
| Level | S5 (Secondary 5) Economics |
02 Questions (10 items)
- FoundationFor a price ceiling to bite, where must it be set?
- FoundationFor a price floor to bite, where must it be set?
- FoundationDemand is Qd = 120 − 2P and supply is Qs = 4P. Find the equilibrium price and quantity.
- FoundationContinuing, the government imposes a price ceiling of 15. What happens?
- IntermediateMarket B has Qd = 90 − P and Qs = 2P with equilibrium 30. A price floor of 40 creates what surplus?
- IntermediateIf the floor were 20 instead, why is there no surplus?
- IntermediateMarket A gets a quota of 60 units. What is the highest price consumers will pay and the lowest producers will accept?
- ChallengeContinuing, what is the total quota rent created by the 60-unit quota?
- ChallengeWhat is the deadweight loss under the 15 price ceiling?
- Error redoError drill: a student claims any price ceiling causes a shortage. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | Below the equilibrium price; set above it, the market price stays at equilibrium and the ceiling has no effect | A ceiling forbids going higher, so a ceiling above equilibrium is not binding. |
| 2 | Above the equilibrium price; set below it, the market price stays lower and the floor does nothing | A floor forbids going lower, so a floor below equilibrium is not binding. |
| 3 | Equilibrium price 20, equilibrium quantity 80 units | Set Qd = Qs: 120 − 2P = 4P gives P = 20, and substituting back gives Q = 80. |
| 4 | A shortage of 30 units appears (quantity demanded 90, quantity supplied 60) | The ceiling is below equilibrium, so quantity demanded rises, quantity supplied falls, and the gap is the shortage. |
| 5 | A surplus of 30 units (supply 80, demand 50) | The floor is above equilibrium, so quantity supplied exceeds quantity demanded and the excess cannot be sold. |
| 6 | Because 20 is below the equilibrium 30, so the floor is not binding and trade stays at 30 | A non-binding floor does not move the equilibrium; it is only a rule on paper. |
| 7 | Consumers will pay 30 and producers will accept 15 | The quota fixes trade at 60, and the two prices are read off the demand and supply curves. |
| 8 | 15 per unit, 900 in total | Quota rent is the price gap times the quota: 15 × 60 = 900. |
| 9 | 150 | Trade falls from 80 to 60, each lost unit is valued between 15 and 30, so the triangle is 0.5 × 20 × 15 = 150. |
| 10 | Only a ceiling below equilibrium is binding and creates a shortage; a ceiling above equilibrium changes nothing | Always compare the controlled price with the equilibrium price before judging the effect. |
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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