Cambridge IGCSE Economics: Micro and macro, markets and the price mechanism (0455) – 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.

This set tests sections 2.1 and 2.2 of the Cambridge IGCSE Economics 0455 syllabus for examination in 2026. All names and figures are invented. Teaching is in the study guide and the revision notes. Other links: the Cambridge IGCSE Economics hub, the printable checklist and the free diagnostics.

Questions

1. Explain the difference between microeconomics and macroeconomics. [3]

2. Classify each of the following as microeconomic or macroeconomic.

(a) The wage paid by one bakery. [1] (b) The total output of a country. [1] (c) A farmer’s choice between two crops. [1] (d) The rate of unemployment in an economy. [1]

3. Identify two decision makers studied in microeconomics and state one decision made by each. [4]

4. Country K (invented) has real output of 1,250 units in year 1 and 1,310 units in year 2. In year 2 it has 12,000 people in its labour force, of whom 900 are unemployed.

(a) Calculate the growth rate of output, to one decimal place. [2] (b) Calculate the unemployment rate. [2] (c) Explain why these figures are macroeconomic. [1]

5. The table shows the market for candles at a craft fair (invented). Price is per candle and quantities are per day.

Price	Quantity demanded	Quantity supplied
6	160	40
8	130	70
10	100	100
12	70	130
14	40	160

(a) Identify the equilibrium price and quantity. [2] (b) Calculate the shortage at a price of 6 and the surplus at a price of 14. [2] (c) Calculate the revenue sellers receive at a price of 12. [2]

6. Using the table in question 5, explain how the market moves from a price of 12 to equilibrium. [4]

7. Explain the roles of buyers and sellers in allocating scarce resources in a market system. [4]

8. Explain why the economic problem creates three key questions for any society. [5]

9. A small tailoring workshop (invented) can make 40 shirts a day in two ways. Method 1 uses 5 workers and tools costing 80 a day. Method 2 uses 2 workers and a cutting machine costing 260 a day. The daily wage per worker is w.

(a) Calculate the total daily cost of each method when w = 70. [2] (b) Calculate the cost per shirt of each method when w = 70. [2] (c) The wage falls to 40. Which method is cheaper, and what does this show about how production is decided? [2]

10. Explain the three functions of the price mechanism. [6]

11. In the candle market in question 5, demand rises by 30 candles at every price. The original demand is Qd = 250 - 15P and supply is Qs = 15P - 50.

(a) Find the excess demand at a price of 10 once demand has risen. [1] (b) Work out the price and quantity at which the market now settles. [2] (c) Calculate by what percentage the price has risen compared with before. [1] (d) Explain how the price mechanism restores equilibrium after the rise in demand. [3] (e) Explain what happens to the resources used to make candles. [2]

12. Discuss whether a market system is a fair way to decide for whom goods and services are produced. [8]

Answers

1. Microeconomics studies the choices of individual decision makers and individual markets [1]. Macroeconomics studies the economy as a whole [1]. For example, the price of one product is micro, and the general price level is macro [1]. [3] Examiner insight: “Distinguish” needs both sides stated, and a pair of examples shows the contrast clearly.

2. (a) Micro [1]. (b) Macro [1]. (c) Micro [1]. (d) Macro [1]. [4] Examiner insight: Learn the test: one decision maker or market is micro, the whole economy is macro.

3. Household or consumer [1]: decides which goods to buy, or how much to save [1]. Firm [1]: decides what to produce, which method to use, or what price to charge [1]. [4] Examiner insight: A worker is another decision maker you could name; make sure the decision you state belongs to the one you named.

4. (a) Growth = (1,310 - 1,250) / 1,250 x 100 [1] = 60 / 1,250 x 100 = 4.8% [1]. (b) Unemployment rate = 900 / 12,000 x 100 [1] = 7.5% [1]. (c) They measure output and unemployment for the whole country, not one firm or market [1]. [5] Examiner insight: Write the formula and each substitution line by line, so your working is easy to follow and a slip is easy to spot.

5. (a) Equilibrium price is 10 [1] and equilibrium quantity is 100 [1]. (b) At 6, shortage = 160 - 40 = 120 [1]. At 14, surplus = 160 - 40 = 120 [1]. (c) Only 70 are bought, the smaller quantity [1], so revenue = 12 x 70 = 840 [1]. [6] Examiner insight: In part (c), use the smaller of the two quantities, because that is what is actually traded.

6. At 12, quantity supplied is 130 and quantity demanded is 70, a surplus of 60 [1]. Stock goes unsold, so sellers lower the price [1]. A lower price makes buyers want more and sellers offer less [1]. This continues until the price reaches 10, where both are 100 and the surplus has gone [1]. [4] Examiner insight: Put the steps in order: cause, seller response, buyer and seller reaction, end point. Quote figures from the table.

7. Buyers show what they want by being willing and able to pay, which makes up demand [1]. Sellers supply goods and services to earn profit, which makes up supply [1]. Resources are scarce, so they go to products that buyers will pay enough for sellers to cover their costs [1]. Their interaction sets a price and quantity, which settles where resources are used [1]. [4] Examiner insight: Link each side to scarce resources rather than only describing demand and supply.

8. Wants are unlimited but resources are scarce [1], so society must choose how to use its resources. This creates the questions of what to produce, for example more food or more housing [1], how to produce, for example by hand or by machine [1], and for whom, for example who gets the output [1]. Each choice has an opportunity cost because using resources one way means giving up another [1]. [5] Examiner insight: An example for each question shows you understand what the question means.

9. (a) Method 1 = 5 x 70 + 80 = 430 [1]. Method 2 = 2 x 70 + 260 = 400 [1]. (b) Method 1 = 430 / 40 = 10.75 per shirt [1]. Method 2 = 400 / 40 = 10.00 per shirt [1]. (c) At w = 40, Method 1 = 5 x 40 + 80 = 280 and Method 2 = 2 x 40 + 260 = 340, so Method 1 is cheaper [1]. How goods are produced depends on the relative prices of labour and capital, so firms choose the cheapest method [1]. [6] Examiner insight: Write the cost for both methods before you compare them, so the conclusion is supported by working.

10. Signalling [1]: prices tell producers what buyers want; a rising price shows demand is strong [1]. Incentive [1]: a higher price means more profit for producers, so they supply more, and buyers have a reason to buy less [1]. Rationing [1]: when goods are scarce the price rises until only those willing and able to pay buy them [1]. [6] Examiner insight: For each function, name it and then say what it does, ideally with a short example.

11. (a) At 10, new Qd = 130 and Qs = 100, so excess demand = 30 [1]. (b) New Qd = 280 - 15P. Set 280 - 15P = 15P - 50 [1], so 30P = 330, P = 11, and Q = 280 - 165 = 115 [1]. (c) (11 - 10) / 10 x 100 = 10% [1]. (d) At the old price there is a shortage of 30 [1]. Sellers see excess demand and raise the price [1]. A higher price contracts quantity demanded and extends quantity supplied until both are 115 at a price of 11 [1]. (e) More resources move into candle making [1], because the higher price and profit encourage sellers to supply more, which draws land, labour and capital from other uses [1]. [9] Examiner insight: Part (d) does best when it follows the chain from shortage to price change to new equilibrium and gives both figures.

12. For: people who earn more can buy more, and the system rewards effort and skill [1]. Buyers choose what suits them, and no one decides for them [1]. The same price rule applies to everyone alike [1]. Against: output goes to those with the ability to pay, not those with greatest need, so a low-income household may go without essentials [1]. A person’s income may reflect luck or inheritance as well as effort, so the result may not be seen as fair [1]. A person with no income has no demand, however great the need [1]. Judgement: whether it is fair depends on what fair means. It rewards effort but leaves unequal outcomes [1], so a justified conclusion states which side is stronger and why [1]. [8] Examiner insight: “Discuss” calls for both sides and a reasoned conclusion. Strong answers define fairness before they judge.

Where marks are usually lost

• Answering a question on the difference between two terms by describing only one.
• Describing micro and macro by size alone.
• Using the larger quantity to find revenue at a disequilibrium price.
• Saying a surplus raises the price.
• Showing no working for growth or unemployment rates.
• Giving the three allocation questions without saying why scarcity creates them.
• Writing “for whom” answers in terms of need rather than ability to pay.
• Listing the price mechanism’s functions with no explanation of each.
• Stopping at one side of a “discuss” question or giving no conclusion.

Next steps

• Re-read the revision notes and the study guide.
• Tick off what you have covered on the printable checklist and see the course hub.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

The Cambridge IGCSE Economics 0455 syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment (Cambridge International Education), sections 2.1 and 2.2.