Cambridge IGCSE Economics: Price elasticity of demand and supply (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 2.7 and 2.8 of the Cambridge IGCSE Economics 0455 syllabus for examination in 2026. Every name and figure is made up. The teaching sits in the study guide and the revision notes. Also useful: the Cambridge IGCSE Economics hub, the printable checklist, the wider Topic 2 practice set and the free diagnostics. Percentages are measured from the starting value.

Questions

1. Give a definition of price elasticity of demand. [2]

2. A school canteen (invented) raises the price of a pastry from 1.20 to 1.50. Weekly sales fall from 800 to 680.

(a) Calculate price elasticity of demand. [3] (b) State whether demand is elastic or inelastic, with a reason. [1] (c) Calculate the change in the shop’s revenue from notebooks. [2]

3. The price elasticity of demand for a good is -1.5. Its price rises by 6% and sales before the rise were 3,000 a week.

(a) Calculate the percentage change in quantity demanded. [1] (b) Calculate the new weekly sales. [1] (c) Explain what happens to revenue. [2]

4. Using a price and quantity diagram:

(a) Describe the demand curve when PED is zero. [1] (b) Describe the demand curve when PED is infinite. [1] (c) Two straight demand curves, D1 and D2, are drawn on the same scales. D1 is shallower. State which is more elastic over the range shown and why. [2]

5. Explain two reasons why demand for piped tap water is price inelastic. [4]

6. In Market M (invented) the demand schedule is:

Price	12	10	8	6	4
Quantity	20	40	60	80	100

(a) Calculate total revenue at each price. [2] (b) Calculate PED when price falls from 12 to 10. [3] (c) Calculate PED when price rises from 4 to 6. [3] (d) Explain what the answers to (b) and (c) tell a seller about changing price. [2]

7. Government B (invented) taxes a good so that its price rises by 12%. PED is -0.25. Sales before the tax were 40,000 units.

(a) Calculate the percentage change in quantity demanded. [2] (b) Calculate sales after the tax. [1] (c) Explain why the tax will raise revenue for the government. [2] (d) Explain whether the tax is likely to reduce consumption much. [2]

8. A workshop (invented) sees the price of its product rise from 40 to 46 and raises output from 200 to 230 units a month.

(a) Calculate price elasticity of supply. [3] (b) State what type of elasticity this is. [1] (c) Another firm has PES of 0.6. Price rises by 10% and it was producing 500 units. Calculate its new output. [2]

9. Explain two reasons why the supply of a manufactured good may be more elastic than the supply of a farm crop. [4]

10. Describe the supply curve with:

(a) PES of zero. [1] (b) infinite PES. [1] (c) PES of 1 at every point. [1]

11. Farmers in Country C (invented) grow a crop with PED of -0.4. A bumper harvest moves the price from 8 to 6 a kilo, and sales were 1,000 kilos at the old price.

(a) Calculate the percentage change in quantity demanded. [2] (b) Calculate farmers’ revenue before and after. [2] (c) Explain why revenue changed in this direction. [2] (d) Evaluate whether farmers are better off after a bumper harvest. [4]

12. In Town Z (invented) the supply of rented flats is inelastic in the short run (PES = 0.2). Rents rise by 30% and 2,000 flats were being offered.

(a) Calculate the new quantity of flats supplied. [2] (b) Explain one reason why supply is inelastic. [2] (c) Evaluate whether the government should subsidise builders to deal with high rents. [6]

Answers

1. How far quantity demanded responds [1] when the price changes [1]. [2] Examiner insight: Answers that give only the formula, or say “how much demand changes”, tend to lose the link to price. Name both quantity demanded and price.

2. (a) % change in price = (1.50 - 1.20) / 1.20 = +25% [1]. % change in quantity = (680 - 800) / 800 = -15% [1]. PED = -15 / 25 = -0.6 [1]. [3] (b) Inelastic, because the size (0.6) is less than 1 [1]. [1] (c) Before: 1.20 x 800 = 960; after: 1.50 x 680 = 1,020 [1]. Revenue rises by 60 [1]. [2] Examiner insight: Whether you quote PED with or without the minus sign, judge the type from its size. Showing both percentages makes the working easy to follow.

3. (a) -1.5 x 6 = -9% [1]. [1] (b) 3,000 x 0.91 = 2,730 [1]. [1] (c) Demand is elastic [1], so the percentage fall in quantity is larger than the percentage rise in price and revenue falls [1]. [2] Examiner insight: The explanation gains credit by comparing the two percentages. “Elastic, so revenue falls” without the comparison is thinner.

4. (a) A vertical line [1]. [1] (b) A horizontal line [1]. [1] (c) D1 [1], because a given fall in price produces a larger change in quantity (the curve is shallower) [1]. [2] Examiner insight: Diagram descriptions should name the axes. The comparison in (c) depends on the scales being equal, which is worth stating.

5. Piped tap water is a necessity [1], so households keep using it when its price rises [1]. It has no close substitute for washing and cooking [1], so buyers cannot switch away and quantity changes little [1]. [4] Examiner insight: Each reason needs the link to the good. A list of determinants with no application usually earns less.

6. (a) Prices 12, 10, 8: 240, 400, 480 [1]. Prices 6, 4: 480, 400 [1]. [2] (b) % change in price = -2/12 = -16.67% [1]. % change in quantity = +20/20 = +100% [1]. PED = 100 / -16.67 = -6.0 [1]. [3] (c) % change in price = +2/4 = +50% [1]. % change in quantity = -20/100 = -20% [1]. PED = -20 / 50 = -0.4 [1]. [3] (d) At high prices demand is elastic (6.0), so a price cut raises revenue (240 to 400) [1]. At low prices it is inelastic (0.4), so a price rise raises revenue (400 to 480) [1]. [2] Examiner insight: Use the starting point for each percentage. A move from 4 to 6 and a move from 6 to 4 give different figures, so state the direction you used.

7. (a) -0.25 x 12 = [1] = -3% [1]. [2] (b) 40,000 x 0.97 = 38,800 [1]. [1] (c) Demand is inelastic [1], so sales fall by little and the tax is collected on almost the same quantity at a higher price [1]. [2] (d) No [1], because a 12% price rise cuts quantity by only 3%, so the aim of reducing use is only slightly met [1]. [2] Examiner insight: Distinguish the two aims of an indirect tax. High revenue and low reduction in use come from the same inelastic demand.

8. (a) % change in price = 6/40 = +15% [1]. % change in quantity = 30/200 = +15% [1]. PES = 15 / 15 = 1.0 [1]. [3] (b) Unitary [1]. [1] (c) % change = 0.6 x 10 = 6% [1]. New output = 500 x 1.06 = 530 [1]. [2] Examiner insight: PES is positive, so a negative answer suggests a sign slip. Name the type of elasticity when the question asks.

9. A factory can hold stocks of finished goods [1], so it can release more when price rises [1]. A crop takes a whole growing season [1], so farmers cannot raise output within that time, whereas a manufacturer can use spare capacity or run extra shifts quickly [1]. [4] Examiner insight: Another valid pair is spare capacity and ease of switching factors. A comparison needs both goods to be mentioned.

10. (a) A vertical line [1]. [1] (b) A horizontal line [1]. [1] (c) A straight line through the origin [1]. [1] Examiner insight: The straight line must pass through the origin itself. A line that merely starts near the origin does not have PES of 1 at every point.

11. (a) Price change = -2/8 = -25% [1]. Quantity change = -0.4 x -25 = +10% [1]. [2] (b) Before: 8 x 1,000 = 8,000 [1]. After: 6 x 1,100 = 6,600 [1]. [2] (c) Demand is inelastic [1]. The fall in price (25%) is larger than the rise in quantity (10%), so revenue falls by 1,400 [1]. [2] (d) Revenue falls by 1,400 [1], and extra output may also cost more to harvest, so profit could fall further [1]. On the other hand, some farmers may be able to store the crop or sell it abroad at a better price [1]. Farmers as a group are probably worse off, although it depends on costs and storage [1]. [4] Examiner insight: Evaluation gains credit from a judgement supported by the figures. A bare “it depends” with no reason does not do this.

12. (a) 0.2 x 30 = 6% [1]. New quantity = 2,000 x 1.06 = 2,120 [1]. [2] (b) Building a flat takes a long time [1], so landlords cannot raise the number offered quickly when rents rise [1]. [2] (c) A subsidy lowers builders’ costs and shifts supply to the right [1]. In the short run supply is inelastic [1], so output rises little and rents fall little [1]. Over a longer period, supply becomes more elastic and the subsidy has more effect [1]. The subsidy costs taxpayers and has an opportunity cost [1]. Judgement: it is useful as a long-term measure, but it will not cut rents quickly [1]. [6] Examiner insight: Weigh the short run against the long run, and say what the subsidy costs. Description of the policy alone is rarely enough for an evaluation.

Where marks are usually lost

• Putting price on top in the formula.
• Taking the percentage from the new value.
• Giving a figure for PED and not stating elastic, inelastic or unitary.
• Applying the revenue rule the wrong way round.
• Listing a determinant with no application to the good in the question.
• Drawing a demand or supply curve with no labelled axes.
• Treating the steepness of a straight line as the same thing as elasticity at every point.
• Writing a one-sided answer to an evaluation question and not reaching a judgement.

Next steps

• Re-read the revision notes and the study guide.
• Visit the Cambridge IGCSE Economics hub and use the printable checklist to record progress.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge IGCSE Economics 0455 syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment: sections 2.7 Price elasticity of demand (PED) and 2.8 Price elasticity of supply (PES).