IB DP Economics: Demand – 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 – the IB holds copyright in its own papers. Use these alongside the official past papers available through your school or the IB store.

This set follows the IB Diploma Programme Economics guide (first assessment 2022, published February 2020), the course examined from the 2022 session onwards. The topic is sub-topic 2.1 Demand, at SL and HL. Questions about the income effect, the substitution effect and diminishing marginal utility are HL only and are labelled. Every market, person and figure here is made up. Prepare with the study guide or the revision notes. The course hub and the checklist list the rest of the course, and the free diagnostics help you choose what to practise.

Questions

1. State the law of demand, and name two non-price determinants of demand listed in the guide. [2]

2. (HL only) In the invented town of Quillon, a household has a weekly pasta budget of 40 om (ostmarks). The price of a pack falls from 5 om to 4 om. Explain the substitution effect and the income effect of the fall in price. Use the numbers. [4]

3. In the invented town of Marrow, monthly gym pass demand comes from two groups. Their quantities demanded at each price are below.

Price (om)	Students	Workers
10	40	20
20	30	15
30	20	10
40	10	5

(a) Work out market demand at each price. [2] (b) A third group, retirees, demands 10, 6, 2 and 0 passes at 10, 20, 30 and 40 om. State the new market demand at each price. [2]

4. Printers and ink cartridges are complements. Draw a demand diagram for printers in a made-up market and show the effect of a rise in the price of ink cartridges. Explain your diagram. [4]

5. In the invented market for lantern kits in Tessaly, demand in thousands per week is Qd = 90 − 6P, where P is in om. (a) Calculate Qd when P = 8. [1] (b) Calculate the price at which Qd is zero. [1] (c) Higher incomes raise demand to Qd = 114 − 6P. Calculate the new quantity demanded at P = 8, and the percentage change. [2] (d) State whether (c) is a movement along the curve or a shift, and why. [1] (e) Using the original curve, state the change in quantity demanded if the price falls from 8 to 6. [1]

6. (HL only) Dara values successive slices of pizza at lunch at 14, 11, 8, 5 and 2 om. (a) Explain what this shows about marginal utility. [2] (b) State how many slices she buys at prices of 12, 9, 6 and 3 om. [2] (c) Explain how your answer to (b) supports the law of demand. [1]

7. In the invented market for tea in Kelmoor, say for each event whether the demand curve is moved along or shifted, and give the direction. Assume tea is a normal good. (i) The price of tea falls. (ii) The price of coffee, a substitute, falls. (iii) Household incomes rise. (iv) The price of biscuits, a complement, rises. (v) Shoppers expect tea prices to rise next month. Give 1 mark for each correct part. [5]

8. Instant noodle packs in a made-up market are an inferior good. At a price of 3 om, buyers demand 100 packs a week. Incomes rise by 20% and the quantity demanded at 3 om falls to 85. Define an inferior good, explain the fall in demand and state the percentage change in quantity demanded at 3 om. [4]

9. In the invented city of Valdora, demand for e-scooter rides is Qd = 800 − 40P (rides per day, P in om). (a) Calculate the quantity demanded at P = 6. [1] (b) The bus fare, a substitute, rises. At every price, 120 more rides are demanded. Calculate the new quantity at P = 6 and the percentage increase. [3] (c) On the new demand curve, the operator cuts the price from 6 to 5. Calculate the new quantity demanded. [1] (d) Describe a diagram showing both effects. [3]

10. In the invented town of Pellmoor, 50 adults and 30 children buy museum tickets. Each adult demands 8 − P tickets a month (for P up to 8). Each child demands 5 − 0.5P (for P up to 10). (a) Work out market demand at P = 4 and at P = 9. [3] (b) Explain why the market demand curve changes slope at P = 8. [2] (c) 20 more adults move to Pellmoor. Calculate the new quantity at P = 4. [2] (d) State whether (c) is a movement or a shift, and name the determinant. [1] (e) (HL only) Explain the substitution effect and the income effect for an adult when the ticket price falls. [2]

11. A supermarket in a made-up country announces that the price of rice will rise by 10% next month. (a) Explain the effect on current demand. [3] (b) A new university campus opens nearby. Explain the effect on the market demand for rice. [2]

Answers

1. Law: when other things are unchanged, a lower price raises the quantity demanded (price and quantity demanded move in opposite directions). [1] Two determinants, for example income and tastes and preferences (also: future price expectations, prices of related goods, number of consumers). [1] [2] Examiner insight: A “state” question asks for a brief answer, so one clear sentence is usually enough and extra explanation adds little.

2. Substitution effect: at 4 om, pasta is cheaper relative to other foods, so the household switches towards pasta. [1] The switch is a response to relative price, not to extra money. [1] Income effect: 40 ÷ 5 = 8 packs possible before, 40 ÷ 4 = 10 after. [1] Purchasing power has risen by (10 − 8) ÷ 8 = 25%, so a normal good is bought in larger quantity. [1] [4] Examiner insight: Keep the two effects in separate sentences, because a single blended sentence makes it hard to see that you can tell them apart.

3. (a) 40 + 20 = 60 [1], 30 + 15 = 45, 20 + 10 = 30, 10 + 5 = 15 (all four correct). [1] (b) At 10 om: 60 + 10 = 70; at 20 om: 45 + 6 = 51; at 30 om: 30 + 2 = 32; at 40 om: 15 + 0 = 15. [1] for three or more correct, [1] for all four. Total [4] Examiner insight: A “calculate” answer needs the working shown, so write the sums rather than only the totals.

4. Axes: price of printers (vertical), quantity of printers per period (horizontal), curve D1 sloping down. [1] A rise in the price of ink cartridges makes printers less attractive. [1] D2 is drawn to the left of D1 and labelled. [1] At the original price, the quantity demanded falls, which is a decrease in demand and not a contraction. [1] [4] Examiner insight: A diagram without labelled axes or a labelled second curve is usually incomplete, so label D1, D2 and both quantities.

5. (a) 90 − 6 × 8 = 42. [1] (b) 90 − 6P = 0, so P = 15. [1] (c) 114 − 6 × 8 = 66. [1] Change: (66 − 42) ÷ 42 = 57.1%. [1] (d) A shift, because the cause is income, a non-price determinant, and the quantity at the same price changed. [1] (e) 90 − 36 = 54, so quantity rises by 12 (an extension of demand). [1] [6] Examiner insight: The percentage change is measured against the original value (42), so dividing by 66 is a common slip.

6. (a) Each extra slice is valued less than the one before (14, 11, 8, 5, 2). [1] This is diminishing marginal utility, so the satisfaction from each further slice falls. [1] (b) Slices valued at least the price: 12 om gives 1; 9 om gives 2; 6 om gives 3; 3 om gives 4. [1] for two or three correct, [1] for all four. (c) At lower prices more slices are worth buying, so the quantity she demands grows as the price drops. [1] [5] Examiner insight: Link each number back to the idea of utility, because quantities alone do not show you understand why the curve slopes down.

7. (i) Movement along the demand curve (extension). [1] (ii) Leftward shift. [1] (iii) Rightward shift. [1] (iv) Leftward shift. [1] (v) Shift right (current demand increases). [1] [5] Examiner insight: Naming a shift without giving its direction usually earns no credit, so always say left or right.

8. An inferior good is one whose demand falls as income rises. [1] Higher income lets buyers switch to better alternatives, so they buy fewer noodle packs at each price. [1] The quantity demanded at 3 om falls from 100 to 85, a change of (85 − 100) ÷ 100 = −15%. [1] The curve shifts left. [1] [4] Examiner insight: For an inferior good the sign is the opposite of a normal good, so state the direction and the reason together.

9. (a) 800 − 240 = 560. [1] (b) New demand: Qd = 920 − 40P, so at P = 6 it is 680. [1] Increase = 120. [1] Percentage = 120 ÷ 560 = 21.4%. [1] (c) 920 − 200 = 720. [1] (d) Axes: price vertical, rides per day horizontal. [1] D1 passes through 560 at P = 6 and D2 lies to the right through 680 at P = 6. [1] The move from 6 to 5 on D2, from 680 to 720, is a slide along the curve. [1] [8] Examiner insight: A strong answer says which part of the story is a shift and which is a movement, because that is the idea the diagram is meant to show.

10. (a) At P = 4: adults 50 × 4 = 200, children 30 × 3 = 90, total 290. [1] At P = 9: adults demand none (above 8), children 30 × 0.5 = 15 (5 − 4.5 = 0.5 each). [1] Total 15. [1] (b) Above P = 8 adults demand none. [1] Only children remain, so the curve is steeper above that price and is formed of one group. [1] (c) 70 adults × 4 = 280, plus children 90 = 370. [1] Increase of 80. [1] (d) A shift, because the number of consumers has changed. [1] (e) Substitution effect: tickets are cheaper compared with other leisure. [1] Income effect: the lower price raises purchasing power. [1] [10] Examiner insight: In (b), give the reason, saying that adults leave the market at 8, and do not just point to the kink.

11. (a) Shoppers expect the price to be higher next month. [1] They buy more now to avoid the higher price. [1] Current demand shifts right. [1] (b) The number of consumers increases. [1] Market demand shifts right at every price. [1] [5] Examiner insight: Name the determinant each time, because naming it shows that your reasoning rests on the guide’s list.

Where marks are usually lost

• Writing “demand falls” when the price rose, instead of a contraction.
• Leaving out axis labels, curve labels or the second curve on a shift diagram.
• Giving a direction of shift with no cause.
• Calculating a percentage change against the new value.
• Showing totals without the working in a “calculate” question.
• Blending the income effect and the substitution effect in HL answers.
• Treating a complement like a substitute.
• Forgetting that a consumer who is priced out contributes zero to market demand.

Next steps

• Review with the revision notes and the study guide.
• See the IB DP Economics hub and the printable checklist.
• Take the free diagnostics.
• Book a free trial class.

Official syllabus

IB Diploma Programme Economics guide, first assessment 2022, published by the International Baccalaureate Organization (February 2020). Sub-topic 2.1 Demand, including its HL-only content.