4EC / 3EC

1.1
2018 - 2019 THE MARKET SYSTEM

Revision Book
Exercises
ECONOMICS
IGCSE
1. DEMAND, SUPPLY AND EQUILIBRIUM

1)

Figure 1a: The wheat market in Russia

Study Figure 1a. The price of wheat increased from $2 per tonne in June 2009 to $3 per tonne
in September 2010. One reason for this change was the drought in Russia, a major wheat
producing country. Label the demand curve D and the supply curve S.

2)

Figure 1b

Figure 1b shows the UK sales of compact disk (CD) music albums and music albums
downloaded from the internet (digital albums) in 2010 and 2011.The term used to describe
the relationship between CD music albums and digital albums is:

☐ A supplements
☐ B substitutes
☐ C complements
☐ D necessities

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3)

Figure 1c

Figure 1c above represents the world market for natural rubber. Between October 2011 and
October 2012 the price of natural rubber decreased by 21%. This fall in price was due to a
decrease in the world demand for rubber. On Figure 1c, draw a new demand curve D1 to show
the decrease in world demand for natural rubber.

4)

Figure 1d

Cards for You is a firm based in Finland. It produces personalised birthday and special occasion
cards which can be ordered on the internet. The demand and supply for the cards is shown in
Figure 1d. What is the equilibrium price of a birthday card?

☐ A 4 euros
☐ B 5 euros
☐ C 6 euros
☐ D 7 euros

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5)

Figure 1e: The wheat market in Russia

Study Figure 1e. The price of wheat increased from $2 per tonne in June 2009 to $3 per tonne
in September 2010. One reason for this change was the drought in Russia, a major wheat
producing country. Label the equilibrium price Pe.

6)

Figure 1f

The world price of a barrel of crude oil (which can be refined into petrol and diesel) increased
by almost 50% from January 2010 to January 2012. Figure 1f shows the demand and supply of
crude oil. On Figure 1f above, draw a new supply curve S2 to show the effect of a supply factor
which could have led to the increase in the world price of crude oil from January 2010 to
January 2012.

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7)

Figure 1g

Table 1g shows the demand and supply schedules for boxes of chocolates in a market. At a
price of $7 per box of chocolates there is:

☐ A excess supply
☐ B equilibrium
☐ C excess demand
☐ D no supply

8)

Figure 1h

Table 1h shows the demand and supply schedules for boxes of chocolates in a market. As a
result of an increase in the cost of cocoa, an ingredient in the production of chocolate, supply
decreases by 20 boxes at all prices. The new equilibrium price for a box of chocolates is:

☐ A $10
☐ B $9
☐ C $8
☐ D $7

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9)

Figure 1i

Figure 1i shows the demand and supply of mobile phones in a country. The original demand
curve is D and the original supply curve is S. Using Figure 1i, identify the new demand curve
(D1 or D2) or the new supply curve (S1 or S2) which will apply after the government places an
indirect tax on mobile phones.

☐ A D1
☐ B D2
☐ C S1
☐ D S2

10)

Figure 1j

Figure 1j shows the age distribution of the population of Russia in 2009 and the projected age
distribution in 2025. Which of the following is the most likely consequence of an ageing
population?

☐ A Demand for toys will increase.

☐ B More teachers will be employed.
☐ C Government expenditure on health services will increase.
☐ D Tax rates will fall.

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11)
An inferior good is one for which a rise in income will cause demand for it to:

☐ A rise by a small amount

☐ B fall
☐ C rise by a large amount
☐ D stay the same

12)
The world price of a barrel of crude oil (which can be refined into petrol and diesel) increased
by almost 50% from January 2010 to January 2012. Briefly explain one demand factor which
could have led to the increase in the world price of crude oil from January 2010 to January
2012.

13)
Identify and briefly explain one factor besides a sales tax that might change the price of laptop
computers.

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14)

Figure 1k

Figure 1k shows the demand and supply for laptop computers. When price rises from $800 to
$900 demand is:

☐ A elastic
☐ B inelastic
☐ C perfectly elastic
☐ D normal

15)

Figure 1l The wheat market in Russia

The price of wheat increased from $2 per tonne in June 2009 to $3 per tonne in September
2010. One reason for this change was the drought in Russia, a major wheat producing country.
In Figure 1l the price elasticity of supply of wheat is:

☐ A perfectly elastic
☐ B perfectly inelastic
☐ C unit elastic

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16)

Figure 1m

‘Cards for You’ is a firm based in Finland. It produces personalised birthday and special
occasion cards which can be ordered on the internet. The demand and supply for the cards is
shown in Figure 1m. The demand for cards produced by ‘Cards for You’ is price elastic. Explain
this statement with reference to the total amount spent on cards when the price rises from 5
euros to 6 euros. Show your calculations.

17)

Figure 1n

Alison Lefevre makes woollen hats. Table 1n shows the weekly demand and supply for her
hats. Using the data in Table 1n, explain the relationship between total revenue and price
elasticity of demand.

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18)
In 2009 Russian tea experts forecast that as incomes in Russia fall due to recession people will
drink more tea. This suggests that in Russia tea is:

☐ A a normal good
☐ B a luxury good
☐ C an inferior good
☐ D a complementary good

19)
With reference to income elasticity of demand, explain the difference between a normal good
and an inferior good.

20)
In most countries the demand for petrol and diesel is price inelastic. Identify and briefly
explain two factors which might cause the demand for petrol and diesel to be price inelastic
in a country.

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