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WorksheetsIB Economics Y12 Microeconomics review
Total questions: 103
Worksheet time: 57mins
Describe your demand for a product if you buy the same amount of it or just a small amount less after a large price increase.
elastic
unitary elastic
inelastic
hyperelastic
Which of the following is an example of inelastic demand?
Jason wants the most expensive cellphone. He decides to get a cheaper model.
Priya wants to go to the season-opening game. Tickets to another game cost less, but she still buys tickets for the opener.
Tianna wants to try out a new, expensive restaurant. She goes to another restaurant whose food is excellent and costs less.
Shawn wants to buy a house in one neighborhood. But after searching, he decides to buy a house elsewhere instead.
How does elasticity affect potential revenue for a firm?
If demand for a good is inelastic, lowering the price could raise revenue.
If demand for a good is inelastic, raising the price could reduce revenue.
If demand for a good is elastic, raising the price must increase revenue.
If demand for a good is elastic, raising the price could reduce revenue.
Which of the following two goods is more likely to be inelastically demanded?
Demand for tangerines
Demand for fruit
Which of the following two goods is more likely to be inelastically demanded?
Demand for insulin
Demand for vitamins
The price elasticity of demand for the vertical demand curve is
unitary elastic
perfectly elastic
inelastic
perfectly inelastic
Price elasticity of supply for goods is the ratio between
change in percentage of supply quantity with changes in the percentage of goods price
change in price and changes in percentage in supply quantity
change in price and changes in supply quantity
change in quantity supply and changes in price
A mother who buys her son two sets of school uniforms every year regardless of changes in their prices has a perfectly inelastic demand for school uniforms
TRUE
FALSE
The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that:
Cheerios are a luxury
there are more substitutes for Cheerios than for cereals as a whole
cereals are a necessity
consumption of cereals as a whole is greater than consumption of Cheerios
If a 3 percent decrease in the price of BMW cars results in a 5 percent increase in the number of BMW cars sold, the demand for BMW cars is unit elastic
TRUE
FALSE
The price elasticity of demand for a textbook is estimated to be 1 no matter what the price or quantity demanded. In this case,
a 10 percent increase in price will result in a 10 percent increase in the quantity demanded
an increase in price will decrease the total revenue of sellers
a decrease in price will increase the total revenue of sellers
a 10 percent increase in price will result in a 10 percent decrease in the quantity demanded
If the price elasticity of demand for a good is zero, this means that the goods
will still be in demand when there is an increase in price
will be purchased in the same quantity at any price level
will not be in demand when there is an increase in price
will be purchased in smaller quantities when there is an increase in price
The price of goods A increases from RM200 to RM300, the quantity supplied increases from 100 units to 180 units. Compute the price elasticity of supply for goods A
1.6
0.42
0.89
1.2
Calculate the co-efficient if the price of good A increased by 10% and the demand for good B fell by 5%
2
-2
0.5
-0.5
What does income elasticity measure?
Measures responsiveness of changes in quantity demanded to changes in price.
Measures the responsiveness of the quantity demanded of
a good or service to a change in income.
Measures the responsiveness of the quantity demanded of one good to changes in price of another good.
What are substitutes?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are complements?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are necessities?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
when consumers have an urgent need for a product
the demand curve is inelastic
the demand curve is elastic
the demand curve is complementary
the demand curve is unit demand
The Price elasticity of milk is 1.4, therefore we can say that milk is...
Elastic
Inelastic
Unit elastic
The Price elasticity of Bread is 1, therefore we can say that bread is...
Elastic
Inelastic
Unit elastic
Petrol is inelastic on the short and the long run because...
It is very expensive.
We depend on oil to make it.
There are very few subtitutes to petrol.
Water has seen an increase in demand 8% this summer, while the price has decreased 12%
1.5 inelastic
1.5 elastic
.67 inelastic
.67 elastic
Wheat has seen a decrease in demand of 5%, while the price has increased 7%
1.4 inelastic
1.4 elastic
.71 inelastic
.71 elastic
The graph of a demand curve that is perfectly elastic is:
positively sloped.
horizontal.
vertical
negatively sloped.
For luxury goods, Income Elasticity of Demand will typically be.....
Positive
Negative
What type of good would have an Y Elasticity of -4
Luxury
Necessity
Inferior
Most things in Aldi
What type of good would have an Y Elasticity of 0.5
Luxury
Necessity
Inferior
A person's income rises by 10%, their demand for Big Macs drops by 5%. Calculate Income elasticity of Demand.
0.5
-0.5
2
-2
During a recession, firms can expect...
A. An increase in demand for normal goods
B. An increase in demand for inferior goods
C. A decrease in demand for normal goods
D. Both B and C
Which of these best describes the law of demand?
if prices go up, quantity demanded will fall and if prices go down, quantity demanded will go up
if prices go up, quantity demanded will also go up and if prices go down, quantity demanded will also go down
there is no law of demand, each situation is unique and demand and prices cannot be predicted
prices will go up for certain goods when quantity demanded goes up and vice versa
Elasticity refers to
how producers of goods and services react to price changes
how consumers of goods and services react to price changes
how far a supply of scarce goods can be stretched
how often the price of a good or service changes when quantity demanded changes
Ford Trucks have seen a increase in demand of 27%, while the price has decreased 15%
.56 inelastic
.56 elastic
1.8 inelastic
1.8 elastic
What does it mean?
Ed = 1
Perfectly inelastic demand
Inelastic demand
Unitarily elastic demand
Elastic demand
Perfectly elastic demand
What does it mean?
Ed = ∞
Perfectly inelastic demand
Inelastic demand
Unitarily elastic demand
Elastic demand
Perfectly elastic demand
Which of the following has more elastic demand?
Which of the following has more elastic demand?
Which of the following has more elastic demand?
Which of the following has more inelastic demand?
What area represents producer surplus in the graph shown here if this market is in equilibrium?
P2MP0
P4MP2
LMN
P4PLN
P0MP4
Consumer surplus is the buyer's willingness to pay minus the seller's cost.
True
False
Consumer surplus decreases when the price in that market increases.
True
False
Consumer surplus is the area
below the demand curve and above the price.
above the supply curve and below the price.
above the demand curve and below the price.
above the demand curve and below the price.
A buyer's willingness to pay is that buyer's
minimum amount they are willing to pay for a good.
producer surplus.
consumer surplus.
maximum amount they are willing to pay for a good.
Producer Surplus is the area
Below the price and above the supply curve
Under the supply curve
Between the supply and demand curves
Under the demand curve, and above the price
Other things being equal, if the price of a good falls, the consumer surplus
May increase, decrease, or remain unchanged
Increases
Is unchanged
Decreases
If a buyer's willingness to pay for a new Honda is €20,000 and she is able to actually buy it for €18,000, her consumer surplus is
€18,000
€20,000
€2,000
€38,000
When the price is P1, consumer surplus is
A
A + B
A + B + C
A + B + D
Another kind of resources are useful materials that
come from the earth. Many kinds of these resources are needed to make goods. Examples are water, soil, and wood.
human
natural
capital
What are the resources called that are needed to produce goods and services? Examples are computers, tools, and money.
human
natural
capital
Choose right answer. What is consumer surplus?
Consumer surplus=Value to buyers +Amount paid by buyers
Consumer surplus = Amount received by sellers - Cost to sellers
Consumer surplus =Amount received by sellers +Cost to sellers
Consumer surplus=Value to buyers - Amount paid by buyers
Jen values her time at $60 an hour. She spends 2 hours giving Colleen a math class. Colleen was willing to pay as much at $300 for the math class, but they negotiate a price of $200. In this transaction,
consumer surplus is $20 larger than producer surplus.
consumer surplus is $40 larger than producer surplus
producer surplus is $20 larger than consumer surplus
producer surplus is $40 larger than consumer surplus
The demand curve for cookies is downward-sloping. When the price of cookies is $2, the quantity demanded is 100. If the price rises to $3, what happens to consumer surplus?
It falls by more than $100
It rises by less than $100
It falls by less than $100
It rises by more than $100
What is the producer surplus?
Producer surplus = Amount received by sellers - Cost to sellers
Producer surplus = Amount received by sellers +Cost to sellers
Consumer surplus =Amount received by sellers + Cost to sellers
Producer surplus = Amount received by sellers - Amount paid by buyers
Find the consumer surplus triangle from the graph.
BDC
ABCD
ACD
ABD
Find the producer surplus triangle from the graph.
ABD
BCD
ACD
ABCD
An efficient allocation of resources maximizes............
consumer surplus
producer surplus
consumer surplus plus producer surplus
consumer surplus minus producer surplus
When a market is in equilibrium, the buyers are those with the ________ willingness to pay and the sellers are those with the ________ costs.
highest, highest
highest, lowest
lowest, highest
lowest, lowest
John has been working as a tutor for $300 a semester. When the university raises the price it pays tutors to $400, Jasmine enters the market and begins tutoring as well. How much does producer surplus rise as a result of this price increase?
by less than $100
between $200 and $300
between $100 and $200
by more than $300
Producing the goods that society wants at the lower possible cost is the concept of ________
Efficiency
Consumer surplus
Producer surplus
PPF
Consumer surplus is ________
The difference between what a producer is prepared to sell at and what they actually sell at
Total benefits - total costs
The difference between what a consumer is prepared to pay and what they actually pay
Total costs - total benefits
The diagram shows the demand for pizza. What is the consumer surplus on the first pizza?
$5
$12
$3
$4
The diagram shows the demand for pizza. What is the consumer surplus on the last pizza?
$0
$12
$3
$4
When market price falls, what happens?
Consumer surplus decreases
Consumer surplus increases
Demand shifts right
Demand shifts left
Economic efficiency occurs when ___________
Consumer surplus is greater than producer surplus
Producer surplus is greater than Consumer surplus
Total surplus is maximised
The government levies a tax on the good
The war in Ukraine leads to a decrease in supply of fuel. Which of the following would happen?
Decrease in deadweight loss
Increase in deadweight loss
Increase in demand
Decrease in supply
You are the manager of Fun World, a small amusement park that only charges per ride. The diagram shows the demand curve for a typical customer. At $5 per ride, how much consumer surplus does each customer get? (Hint = you need to calculate the area of a triangle)
$5
$15
$25
$50
Now suppose you consider lowering the price per ride to $0. How much consumer surplus would each individual customer get? (Hint = you need to calculate the area of a triangle)
$50
$75
$100
$200
Now that you have lowered the price per ride to $0, what is the maximum admission fee Fun World could charge to the typical customer? (Hint = consider the amount of consumer surplus!)
$50
$75
$100
$200
A cap is introduced on the number of taxi licenses. What happens in the market? (more than one answer)
Shortage of supply
Supply surplus
Decrease in price
Increase in price
A _________ is a legislated maximum price that sellers are allowed to charge in the market.
Equilibrium price
Price ceiling
Price floor
Deadweight loss
What is a price ceiling design to do?
Reduce deadweight loss
Keeps the price below the market clearing price
Maximise economic welfare
Keeps the price above the market clearing price
A price ceiling results in ________
A surplus because Qs exceeds Qd
A shortage because Qd exceeds Qs
A shortage because Qs exceeds Qd
A surplus because Qd exceeds Qs
After the price ceiling is introduced, what is the effect?
Producers sell less at a lower price
Producers sell more at a lower price
Decrease in economic welfare
Increase in economic welfare
A _______ is a legislated minimum price that sellers are allowed to charge in the market
Price floor
Price ceiling
Equilibrium price
Surplus
