WHSS Economics: Demand & Supply

Lithium is an essential metal for the production of electric cars. Following a 10% increase in the price of lithium, supplies increase by 15%. This led to a 5% increase in the price of electric cars. What is the price elasticity of supply (PES) for lithium?

A 0.33

B 0.66

C 1.50

D 2.0

• A

• B

• C

• D

The diagram shows market demand and supply curves.

To what extent is the market in disequilibrium at price P3?

A OQ1 – OQ2

B OQ1 – OQ3

C OQ2 – OQ4

D OQ3 – OQ5

• A

• B

• C

• D

The price of bread rose by 5% and the quantity demanded fell by 4%. What was the price elasticity of demand for bread?

A –0.4

B –0.8

C –1.25

D –2.0

• A

• B

• C

• D

The diagrams show the supply curve for an individual grower of tomatoes and for the total market supply of tomatoes.

What explains the similarity of the two curves?

A As costs rise growers need to get a higher price to increase output.

B At the lower prices each grower supplies more tomatoes.

C The profitability per unit is the same for all growers irrespective of output.

D Supply is not always influenced by price.

• A

• B

• C

• D

The diagram shows the supply curve for a good. What is the price elasticity of supply when the price rises from $10 to $12?

A 0.5

B 0.75

C 1.4

D 2.0

• A

• B

• C

• D

The diagram shows the global market for copper with an equilibrium point of X. Which point represents the new equilibrium after the copper producers’ costs increase and there is rapid global economic growth?

• A

• B

• C

• D

The diagram shows the demand curve for coffee in the US. Why did the quantity demanded move from Q1 to Q2?

A Coffee became cheaper.

B Incomes rose in the US.

C There was a successful advertising campaign by coffee retailers.

D The price of substitutes for coffee rose.

• A

• B

• C

• D

In an African country with large areas of tropical desert the price elasticity of demand for salt is highly inelastic. This will result in greater consumer expenditure on salt when price changes from P1 to P2. Which diagram illustrates this situation?

• A

• B

• C

• D

A newspaper reported that ‘The world market for coffee has returned to equilibrium’. Which situation supports this statement?

A A sequence of poor harvests resulted in shortages.

B Decreased transport costs led to a surplus of supply.

C Farmers matched demand by planting more coffee bushes.

D The price of coffee was fixed between producers.

• A

• B

• C

• D

The table shows the demand schedule for a good at different prices. The current market price for the good is $10. Following a 20% increase in price, what will be the change in the quantity demanded?

A – 60

B – 40

C +120

D +200

• A

• B

• C

• D