Cambridge A Level Economics: Price elasticity of supply and consumer and producer surplus (9708) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover sections 2.3 and 2.5 of the Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028. They are AS Level content, assumed knowledge for A Level Papers 3 and 4. All markets, firms and figures are invented, and money is in currency units (cu). Read the study guide and the revision notes first. The course hub and checklist show the rest of the syllabus.

Questions

1. Define price elasticity of supply. [2]

2. Calculate the price elasticity of supply when: (a) price rises from 5.00 cu to 5.60 cu and quantity supplied rises from 1,500 to 1,590 units. [3] (b) price falls from 80 cu to 68 cu and quantity supplied falls from 2,000 to 1,640 units. [3]

3. State whether the price elasticity of supply is above 1, equal to 1 or below 1 at every point on a straight-line supply curve that (i) passes through the origin, (ii) meets the price axis at a positive price, (iii) meets the quantity axis at a positive quantity. [3]

4. Explain two reasons why the price elasticity of supply of fresh strawberries is lower in the short run than in the long run. [4]

5. When the price of a service rises from 30 cu to 36 cu, the quantity supplied falls from 500 to 470 units. (a) Calculate the price elasticity of supply. [2] (b) Explain what the sign and the size of your answer show. [2]

6. Explain what is meant by consumer surplus and why it matters when a government is judging a policy. [4]

7. In Market K demand is Qd = 800 - 8P and supply is Qs = 10P - 100. Calculate the equilibrium price and quantity, consumer surplus and producer surplus. [5]

8. Demand in Market K rises to Qd = 1,160 - 8P. Supply is unchanged. (a) Calculate the new equilibrium price and quantity. [2] (b) Calculate the new consumer surplus and producer surplus. [3] (c) Explain why both surpluses have increased. [2]

9. The same leftward shift of supply raises price in two markets, M and N. In M the price rises from 20 cu to 26 cu and quantity falls from 500 to 470. In N the price rises from 20 cu to 22 cu and quantity falls from 500 to 400. (a) Calculate the price elasticity of demand in each market. [2] (b) Calculate the fall in consumer surplus in each market. Fall in consumer surplus = rise in price x average of old and new quantity. [2] (c) Explain how price elasticity of demand affects the extent of the fall in consumer surplus. [2]

10. A tax of 9 cu per unit is placed on producers in Market K (demand Qd = 800 - 8P, supply Qs = 10P - 100). (a) Calculate the new equilibrium price and quantity. [3] (b) Calculate consumer surplus and producer surplus after the tax. [3] (c) Calculate the tax revenue. [1] (d) Calculate the loss of total surplus. [2]

11. A severe frost destroys much of the fruit crop in Country A. Demand for the fruit is price inelastic and short-run supply is price inelastic. Analyse the effects on price, quantity and consumer surplus, and evaluate how the effects may differ in the long run. [10]

Answers

1. Price elasticity of supply shows how strongly quantity supplied reacts when the good’s own price changes [1]. It is measured as the percentage change in quantity supplied divided by the percentage change in price [1]. [2] Examiner insight: Name both the quantity supplied and the good’s own price. Saying supply is “sensitive” leaves out what is measured.

2. (a) Percentage change in price = 0.60 / 5.00 x 100 = +12% [1]. Percentage change in quantity = 90 / 1,500 x 100 = +6% [1]. PES = 6 / 12 = 0.5, so supply is inelastic [1]. [3] (b) Percentage change in price = -12 / 80 x 100 = -15% [1]. Percentage change in quantity = -360 / 2,000 x 100 = -18% [1]. PES = -18 / -15 = 1.2, so supply is elastic [1]. [3] Examiner insight: Show both percentage changes before dividing. Check that quantity goes on top and that the original value is the base.

3. (i) Equal to 1 at every point [1]. (ii) Above 1 at every point [1]. (iii) Below 1 at every point [1]. [3] Examiner insight: Answer in terms of where the curve starts, not its steepness.

4. Production time [1]: strawberry plants take a season or more to grow, so in the short run output cannot be raised quickly even if price rises [1]. Fixed factors [1]: land and plants are fixed in the short run, but in the long run farmers can plant more fields and new growers can enter, so output responds more [1]. [4] Examiner insight: Each factor needs a reason linked to responsiveness of output. A list of factors with no explanation of how they limit supply in the short run gains little.

5. (a) Percentage change in price = 6 / 30 x 100 = +20% [1]. Percentage change in quantity = -30 / 500 x 100 = -6%, so PES = -6 / 20 = -0.3 [1]. [2] (b) The negative sign shows that quantity supplied moves in the opposite direction to price [1]. The size, 0.3, shows that the response is weak, as quantity changes by less than the price does [1]. [2] Examiner insight: Keep the minus sign. Dropping it turns an unusual result into a normal one.

6. Consumer surplus is the gap between the highest price consumers would pay and the price they do pay [1], shown as the area beneath the demand curve and over the price line [1]. A government can compare the change in consumer surplus before and after a policy to judge whether consumers gain or lose [1]. It can also weigh this against producer surplus and tax revenue to see whether total surplus, and so efficiency, rises or falls [1]. [4] Examiner insight: “Matters” needs a use for the idea, such as judging a policy. A definition alone answers half the question.

7. Equilibrium: 800 - 8P = 10P - 100, so 900 = 18P and P = 50 cu [1], Q = 400 [1]. Demand meets the price axis at P = 800 / 8 = 100 cu [1]. Supply meets the price axis at P = 100 / 10 = 10 cu. Consumer surplus = 1/2 x (100 - 50) x 400 = 10,000 cu [1]. Producer surplus = 1/2 x (50 - 10) x 400 = 8,000 cu [1]. [5] Examiner insight: Find both price-axis intercepts before calculating areas.

8. (a) 1,160 - 8P = 10P - 100, so 1,260 = 18P and P = 70 cu [1], Q = 600 [1]. [2] (b) Demand now meets the price axis at 1,160 / 8 = 145 cu. Consumer surplus = 1/2 x (145 - 70) x 600 = 22,500 cu [1]. Producer surplus = 1/2 x (70 - 10) x 600 = 18,000 cu [1]. The supply intercept is unchanged at 10 cu [1]. [3] (c) Consumer surplus rose by 12,500 cu even though price rose, because the demand curve has moved up and consumers are willing to pay more for each unit [1]. Producer surplus rose by 10,000 cu because producers receive a higher price on each unit and sell more units [1]. [2] Examiner insight: In part (c), explain why consumer surplus rises despite the higher price.

9. (a) Market M: percentage change in price = +30% and in quantity = -6%, so PED = -6 / 30 = -0.2 (inelastic) [1]. Market N: price +10%, quantity -20%, so PED = -2 (elastic) [1]. [2] (b) Market M: 6 x (500 + 470) / 2 = 6 x 485 = 2,910 cu [1]. Market N: 2 x (500 + 400) / 2 = 2 x 450 = 900 cu [1]. [2] (c) With inelastic demand, quantity demanded hardly falls, so the supply shift raises price by more [1]. Consumers then pay far more on the units they still buy, so consumer surplus falls by more, as in M compared with N [1]. [2] Examiner insight: Use your figures from parts (a) and (b) in part (c).

10. (a) The tax raises supply by 9 cu at each quantity: Qs = 10(P - 9) - 100 = 10P - 190 [1]. 800 - 8P = 10P - 190, so 990 = 18P and P = 55 cu [1], Q = 360 [1]. [3] (b) Consumer surplus = 1/2 x (100 - 55) x 360 = 8,100 cu [1]. Producers keep 55 - 9 = 46 cu per unit [1]. Producer surplus = 1/2 x (46 - 10) x 360 = 6,480 cu [1]. [3] (c) Tax revenue = 9 x 360 = 3,240 cu [1]. [1] (d) Total surplus before the tax = 10,000 + 8,000 = 18,000 cu. After the tax it is 8,100 + 6,480 + 3,240 = 17,820 cu [1]. The loss is 180 cu [1]. [2] Examiner insight: Producers receive the price minus the tax, so use that lower figure for producer surplus. Include tax revenue in the total.

11. The frost reduces supply sharply, shifting the supply curve to the left [1]. Because both supply and demand are inelastic, the shortage cannot be met by extra output and price rises sharply [1]. Quantity falls and consumers cut their purchases only a little, because demand is inelastic [1]. Consumer surplus falls because consumers pay a higher price and buy fewer units, so the area under demand and above price shrinks [1]. The fall is large because inelastic demand lets price rise by a large amount [1]. Producer surplus is uneven: growers with surviving crops gain a higher price, but those who lost fruit lose [1]. In the long run farmers can replant, new growers can enter and imports can be arranged, so supply becomes more elastic [1]. The supply curve shifts back to the right, price falls and quantity recovers, so consumer surplus is restored [1]. How fast this happens depends on how long trees or plants take to regrow and on whether stocks or imports exist [1]. Overall the damage to consumers is greatest in the short run, and a judgement on its size rests on how inelastic demand is and how quickly supply recovers [1]. [10] Examiner insight: Give a clear judgement and say what it depends on. Listing short-run and long-run effects without weighing them is incomplete.

Where marks are usually lost

• Using the new price or quantity, not the original, as the base for percentages.
• Putting price change on top of the fraction, which gives the reciprocal of PES.
• Dropping a negative sign, or describing 1.2 as inelastic.
• Treating a steeper supply curve as always less elastic.
• Listing factors affecting PES without explaining how they limit or help output.
• Shading consumer surplus below the price or producer surplus above it.
• Forgetting the half in the area of a triangle, or using zero as the base for producer surplus when supply meets the price axis higher up.
• Using the old price when working out producer surplus after a tax.
• Stating that consumer surplus must fall when price rises, even when demand has risen.
• Evaluating without saying which time period, or which elasticity, the judgement depends on.

Next steps

• Review the revision notes and the study guide.
• Return to the course hub and the printable checklist.
• Try the price system practice set for the rest of topic 2.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028, sections 2.3 and 2.5 (Cambridge University Press & Assessment).