IB DP Economics: Elasticity of supply – 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.

These questions follow the IB Diploma Programme Economics guide (first assessment 2022, published February 2020), the course examined from the 2022 session onwards. They cover sub-topic 2.6 Elasticity of supply for SL and HL. Question 9 is HL only. All countries, firms and figures are fictional and illustrative. Read the study guide first, use the revision notes for recall, and see the IB DP Economics hub and the printable checklist. The mark points below are a revision aid; the IB papers use analytic markschemes and markbands.

Questions

1. Define price elasticity of supply. [2]

2. In the fictional town of Harlow Cove, a baker raises the price of a pastry from 25 to 30 vels. Quantity supplied rises from 400 to 448 a week.

(a) Calculate the PES. [3] (b) State whether supply is elastic or inelastic and give a reason. [1]

3. A fictional tile maker has a PES of 1.4. The price of tiles falls by 5%. It currently supplies 1,500 tiles a month. Calculate the new quantity supplied. [3]

4. A fictional tea farm has a PES of 0.5 and sells at 50 vels a kilogram. The farm wants to raise quantity supplied by 9%. Calculate the price needed. [3]

5. Sketch and label supply diagrams for (a) a perfectly inelastic supply curve, (b) a perfectly elastic supply curve and (c) unitary PES. Give the PES value for each. [4]

6. A fictional juice bottler has spare production lines and a cold store. Explain how each of these two determinants affects its PES. [4]

7. In a fictional market, price rises from 50 to 55 vels. Quantity supplied, starting from 1,000 units, changes as follows: 1,020 after one week, 1,090 after one year and 1,180 after five years.

(a) Work out the PES after one week, one year and five years. [3] (b) Explain why PES changes over time. [3]

8. In the fictional country of Nedrin, the price of both product X and product Y rises from 10 to 12 vels. Product X output rises from 300 to 312 units. Product Y output rises from 300 to 390 units.

(a) Calculate PES for each product. [2] (b) Product X is cut by hand from a rare stone. Product Y is moulded in a plant with idle machines. Explain how this accounts for the figures. [3]

9. (HL only) Explain why the PES of primary commodities is generally lower than the PES of manufactured products. [6]

10. The table shows the fictional market for notebooks in Valdora. Demand rises from D1 to D2. S1 is the supply curve of one set of producers; S2 is that of another set in a separate fictional market with the same starting equilibrium.

Price (vels)	Qd before (D1)	Qd after (D2)	Qs, S1	Qs, S2
10	300	420	300	300
11	280	400	320	310
12	260	380	340	320
13	240	360	360	330
14	220	340	380	340

(a) Identify the equilibrium price and quantity before the demand increase. [1] (b) Identify the new equilibrium price and quantity for S1 and for S2. [2] (c) Calculate PES between the old and new equilibrium for each. [3] (d) Explain why the price rises more for S2. [2]

11. A small furniture workshop in the fictional town of Ashgrove makes chairs by hand. Discuss how far its supply is likely to be elastic in the short run. [8]

Answers

1. PES shows how far output reacts to a price change [1]. It is the proportionate change in output divided by the proportionate change in price, both as percentages [1]. [2] Examiner insight: Show that you understand how output reacts to price; a bare formula with no meaning attached is a thinner answer.

2. (a) Price change = (30 − 25) / 25 × 100 = 20% [1]. Quantity change = (448 − 400) / 400 × 100 = 12% [1]. PES = 12 / 20 = 0.6 [1]. (b) PES is below 1, so supply is relatively inelastic [1]. [4] Examiner insight: When a question says “calculate”, show each percentage change; an unsupported answer is risky if you make a slip.

3. Percentage change in quantity = 1.4 × (−5%) = −7% [1]. Fall in quantity = 7% of 1,500 = 105 [1]. New quantity = 1,500 − 105 = 1,395 tiles [1]. [3] Examiner insight: Give the new quantity, not only the percentage change, because the question asks for the quantity.

4. Percentage change in price = 9 / 0.5 = 18% [1]. Price rise = 18% of 50 = 9 [1]. New price = 50 + 9 = 59 vels [1]. [3] Examiner insight: Show the rearranged formula so that your method is visible even if the arithmetic slips.

5. Axes labelled price and quantity supplied [1]. (a) A vertical line labelled S, PES = 0 [1]. (b) A horizontal line labelled S, PES = infinity [1]. (c) A straight upward line through the origin labelled S, PES = 1 [1]. [4] Examiner insight: Label both axes and every curve; an unlabelled sketch shows less.

6. Spare production lines mean output can rise without new investment [1], so quantity supplied rises sharply when price rises and PES is higher [1]. The cold store lets the firm hold stock and release it when price rises [1], which raises PES because supply can respond immediately [1]. [4] Examiner insight: “Explain” needs a reason and a direction for each determinant; naming them alone does not meet the command term.

7. (a) Price change = 5 / 50 × 100 = 10% [1]. Week: 2% / 10% = 0.2; year: 9% / 10% = 0.9 [1]. Five years: 18% / 10% = 1.8 [1]. (b) Over a short time, inputs and capacity are fixed, so output cannot respond much [1]. As time passes, firms can hire, train and invest [1], so quantity supplied responds by a larger percentage than price [1]. [6] Examiner insight: In part (b), say what can be adjusted as time passes; the word “time” on its own adds nothing.

8. (a) Price rise = 20% for both [1]. X: 12 / 300 = 4%, so PES = 0.2. Y: 90 / 300 = 30%, so PES = 1.5 [1]. (b) Product X depends on a rare stone and hand skill, so the factors are scarce and not mobile [1], and PES is low (0.2) [1]. Product Y has idle machines, so output can rise quickly [1], which gives PES above 1. [5] Examiner insight: Refer to both products and to the figures you calculated; a general statement about determinants does not use the data.

9. Three developed reasons, two marks each (identify, then explain). Growing seasons and the time to develop a mine mean output cannot rise quickly [1], so supply responds slowly to a price rise [1]. Land and deposits are fixed and hard to switch between uses [1], so factors are immobile and PES is lower than for a factory that can switch machines [1]. Perishable goods are hard to store [1], so stocks cannot be released when the price rises, unlike most manufactured goods [1]. [6] Examiner insight: Link each reason to a determinant from the guide and contrast it with manufactured goods; a list of facts about farms without comparison is incomplete.

10. (a) Price 10 and quantity 300 [1]. (b) S1: price 13, quantity 360 [1]. S2: price 14, quantity 340 [1]. (c) S1: price +30%, quantity +20%, PES = 20 / 30 = 0.67 [1]. S2: price +40%, quantity +13.3%, PES = 13.3 / 40 = 0.33 [1]. Both are below 1, so both are inelastic [1]. (d) S2 is less elastic, so producers add fewer units for each price rise [1]. A larger price rise is needed to bring supply into line with the higher demand [1]. [8] Examiner insight: State the equilibrium from the table as both a price and a quantity; giving only one is incomplete.

11. Credit any developed, balanced points, in a response with a judgement. A model plan follows. Short run means some inputs are fixed [1]. Handwork limits the speed at which output can rise because skilled labour is scarce and slow to train [1]. Tools and workspace may already be fully used, so there is little unused capacity [1]. Wood can be stored, so the workshop could build stock in advance, which raises PES a little [1]. Extra output may mean overtime and rising unit costs [1]. Materials might be easy to obtain, which helps [1]. A supported judgement, for example that supply is probably relatively inelastic in the short run but becomes more elastic over time, with a reason [2]. [8] Examiner insight: “Discuss” is an AO3 command term, so an answer that only lists determinants without weighing them is unlikely to show the judgement the term asks for.

Where marks are usually lost

• Reversing the formula so that price is on top.
• Using the absolute change instead of the percentage change.
• Losing the negative sign on a price fall and reporting a negative PES.
• Calculating a number but not stating whether supply is elastic, inelastic or unitary.
• Sketching a diagram without axis labels or curve labels.
• Naming a determinant without showing which way it moves PES.
• Ignoring the supplied numbers when a question asks you to account for them.
• Leaving out the judgement in a “discuss” answer.
• Mixing up a movement along a supply curve with a shift of the curve.

Next steps

• Revisit the revision notes for the gaps you found.
• Return to the study guide for the full explanations.
• Check your coverage on the printable checklist and the IB DP Economics hub.
• Try a short diagnostics test to see what has stuck.
• Book a free trial class if you want to talk through weak areas.

Official syllabus

IB Diploma Programme Economics guide, first assessment 2022, published by the International Baccalaureate Organization (February 2020). This page covers sub-topic 2.6 in Unit 2.