OCR A Level Economics: Elasticity of demand and supply (PED, YED, XED, PES) (H460) – 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 test the topic Elasticity in Component 1, Microeconomics, of the OCR A Level Economics (H460) specification, Version 3.0, dated June 2026 and first assessed in 2021. The teaching is in the study guide and the revision notes. Related pages: the hub for OCR A Level Economics, the checklist and the free diagnostics. Every setting and number here is made up.

Questions

1. A craft stall in Country A raises the price of a ceramic mug from £2.50 to £2.75. Weekly sales fall from 400 to 340.

(a) Calculate PED, showing your working. [3] (b) Classify demand as elastic or inelastic and calculate the change in the stall’s revenue. [2]

2. Describe the shape of the demand curve and give the value of PED for (a) a perfectly inelastic good and (b) a good with unit elasticity. [4]

3. Weekly demand for guided walks in Country B is Q = 800 - 40P, where P is in pounds.

(a) Calculate PED at P = 5, P = 10 and P = 15. [3] (b) Explain why PED differs along this straight-line curve. [2] (c) State the price that maximises total revenue and explain why. [2]

4. A firm sells 800 units a week at £10. Calculate the percentage change in total revenue when (a) PED = -0.4 and the firm raises its price by 5%, and (b) PED = -2.5 and it cuts its price by 4%. [4]

5. A pharmacy in Country C sells a branded pain-relief tablet. Evaluate the factors that determine the PED for the tablet. [8]

6. In a market in Country D, Qd = 2,000 - 250P and Qs = 250P.

(a) Find the equilibrium price and quantity. [2] (b) A tax of £1 per unit is imposed on sellers. Find the new price paid by buyers and the new quantity. [2] (c) Calculate the amount of tax paid by buyers and by sellers per unit, and the tax revenue. [2] (d) Use PED and PES to explain the split in (c). [2]

7. In a market in Country E, Qd = 1,800 - 100P and Qs = 200P. The government pays a subsidy of £1.50 per unit to sellers.

(a) Find the equilibrium before the subsidy. [1] (b) Find the price buyers pay and the quantity after the subsidy. [3] (c) Calculate the benefit per unit to buyers and to sellers, and the cost to the government. [2] (d) Explain why output rises by only 8.3%. [2]

8. Income in Country F rises by 8%. Quantity demanded of good X rises from 200 to 224, of good Y from 500 to 510, and of good Z falls from 80 to 76.

(a) Calculate YED for X, Y and Z. [3] (b) Classify each good. [3] (c) Income then falls by 6%. Predict the change in quantity demanded of each good. [3]

9. The price of brand A rises from £3.00 to £3.36. Over the same period the quantity demanded of brand B rises from 150 to 183, of a complementary item C falls from 500 to 455, and of an unrelated item D rises from 300 to 301.5.

(a) Calculate XED for B, C and D. [3] (b) Identify the relationship in each case. [3] (c) Explain how the manufacturer of brand B can use the XED you found. [2]

10. Supply of a good in Country G is Qs = 30P - 60.

(a) Calculate PES at P = £4 and at P = £6. [3] (b) Another good’s price rises from £10 to £11 and its quantity supplied from 500 to 515. Calculate PES. [2] (c) Explain two factors that could make that supply inelastic. [3]

11. Evaluate the usefulness of PED, YED, XED and PES to a government deciding whether to tax sugary snacks, and to a firm selling them. [12]

Answers

1. (a) Price change = 0.25 ÷ 2.50 × 100 = +10% [1]. Quantity change = (340 - 400) ÷ 400 × 100 = -15% [1]. PED = -15 ÷ 10 = -1.5 [1]. (b) Elastic, since the size is above 1 [1]. Revenue falls from £1,000 to £935 (2.75 × 340), a fall of £65 [1]. Examiner insight: Show both percentage changes from the starting values. A bare final figure leaves no working to credit if it is wrong.

2. (a) Vertical line [1]. PED = 0 [1]. (b) Rectangular hyperbola [1]. PED = -1 [1]. Examiner insight: Give the shape and the value as separate statements. A value alone does not describe the curve.

3. (a) At P = 5, Q = 600, PED = -40 × 5 ÷ 600 = -0.33 [1]. At P = 10, Q = 400, PED = -1.0 [1]. At P = 15, Q = 200, PED = -3.0 [1]. (b) The slope is constant, but PED = slope term × P ÷ Q [1]. As price falls and quantity rises, P ÷ Q falls, so the same absolute change is a smaller percentage [1]. (c) £10 [1], where PED = -1: above it a price cut raises revenue and below it a price cut lowers it [1]. Examiner insight: Link (c) to the elasticity value at that point, not only to revenue figures.

4. (a) Quantity falls 2% to 784, price £10.50, revenue = 10.50 × 784 = £8,232 [1], up from £8,000, so +2.9% [1]. (b) Quantity rises 10% to 880, price £9.60, revenue = 9.60 × 880 = £8,448 [1], so +5.6% [1]. Examiner insight: Multiply the factors, 1.05 × 0.98 for example, rather than adding +5% and -2%.

5. Substitutes: branded tablets compete with generic equivalents [1], so demand tends to be elastic where cheaper equivalents are known [1]. Necessity: pain relief feels essential at the moment of need [1], pushing demand towards inelastic for those in pain [1]. Share of income: a low-priced item takes a small share of spending, so buyers pay little attention to a rise [1]. Time: a regular buyer can switch brands over weeks, so long-run demand is more elastic [1]. Loyalty to a trusted brand reduces responsiveness [1]. Judgement: substitutes probably dominate, because generics are easy to find, so demand is likely elastic for the brand but inelastic for the whole category [1]. [8] Examiner insight: Strong answers rank the factors and apply them to the named product. A plain list of determinants gains little.

6. (a) 2,000 - 250P = 250P gives 500P = 2,000 [1], so P = £4, Q = 1,000 [1]. (b) Supply becomes 250(P - 1): 250P - 250 = 2,000 - 250P gives P = 4.50 [1]. Buyers pay £4.50 and Q = 875 [1]. (c) Buyers pay £0.50 and sellers £0.50 per unit [1]. Revenue = 1 × 875 = £875 [1]. (d) PED = -250 × 4 ÷ 1,000 = -1 and PES = 250 × 4 ÷ 1,000 = 1 [1]. Equal elasticities mean neither side can avoid the tax more easily, so the burden splits equally [1]. Examiner insight: Compare buyers’ and sellers’ responsiveness explicitly. Saying the burden is “equal” with no elasticities explains nothing.

7. (a) 200P = 1,800 - 100P gives P = £6, Q = 1,200 [1]. (b) Supply becomes 200(P + 1.50) [1]. 200P + 300 = 1,800 - 100P gives P = 5 [1]. Buyers pay £5 and Q = 1,300 [1]. (c) Buyers gain £1.00 and sellers £0.50 (they receive £6.50) [1]. Cost = 1.50 × 1,300 = £1,950 [1]. (d) Quantity rises by 100 on 1,200, which is 8.3% [1]. Demand is inelastic, since PED = -100 × 6 ÷ 1,200 = -0.5, so the 16.7% fall in price brings only an 8.3% rise in quantity [1]. Examiner insight: Quote the elasticity and tie it to both percentage changes to explain why the output response is small.

8. (a) X: +12% ÷ 8% = 1.5 [1]. Y: +2% ÷ 8% = 0.25 [1]. Z: -5% ÷ 8% = -0.625 [1]. (b) X is superior (above 1) [1]. Y is a normal good (between 0 and 1) [1]. Z is inferior (negative) [1]. (c) X falls 1.5 × 6 = 9% [1]. Y falls 0.25 × 6 = 1.5% [1]. Z rises 0.625 × 6 = 3.75% [1]. Examiner insight: Keep the sign through the prediction. Z has a negative YED, so a fall in income raises demand.

9. (a) Price change +12% [1]. B: +22% ÷ 12% = +1.83, C: -9% ÷ 12% = -0.75, D: +0.5% ÷ 12% = +0.04 [1]. Each change is from the starting value [1]. (b) B is a substitute [1]. C is a complement [1]. D is non-related, since the value is close to zero [1]. (c) XED above 1 means demand for B responds strongly to A’s price [1], so B’s maker gains sales if A’s price rises and must watch A’s pricing [1]. Examiner insight: Name the relationship from the sign and justify “non-related” from a value near zero, not from the small quantity change alone.

10. (a) At P = 4, Q = 60, PES = 30 × 4 ÷ 60 = 2 [1]. At P = 6, Q = 120, PES = 30 × 6 ÷ 120 = 1.5 [1]. Elastic at both, as the curve cuts the price axis [1]. (b) Price +10%, quantity +3% [1]. PES = 0.3 [1]. (c) Spare capacity: if firms are near full output they cannot raise supply quickly [1]. Time: in the short run plant and labour cannot be added [1]. A perishable product cannot be stored to release when price rises, so quantity responds little [1]. Examiner insight: Each factor needs a link to why quantity cannot rise quickly. Naming a factor alone is incomplete.

11. Government: PED shows how far a tax cuts snack sales [1]. If PED is inelastic, a tax raises revenue but cuts consumption little [1], and buyers bear most of it, which may hit low-income households [1]. If PED is elastic, consumption falls more but revenue is lower [1]. PES shows the burden split: elastic supply passes more of the tax to buyers [1]. YED shows whether rising incomes would raise snack demand and weaken the policy later [1]. XED shows whether buyers switch to healthier or equally sugary substitutes [1]. Firm: PED and total revenue guide the price response to the tax [1]. XED to rivals shows whether pushing a price rise onto customers risks losing sales [1]. YED helps forecast sales through the cycle [1]. Limits: estimates rest on past data, change over time and differ by price level [1]. Judgement: PED and PES matter most for a tax decision, with YED and XED more helpful as support. Elasticities are best used with other evidence, since estimates are uncertain [1]. [12] Examiner insight: Separate the two agents and judge which measure matters most for each. Defining all four measures first spends words without evaluating.

Where marks are usually lost

• Measuring percentage changes from the final value, not the starting value.
• Dropping the negative sign on YED or XED, so goods are misclassified.
• Saying PED is constant along a straight-line demand curve.
• Stating that revenue rises on a price rise without checking the size of PED.
• Giving a tax or subsidy answer with no figures for each side’s share.
• Adding percentage changes instead of multiplying the price and quantity factors for revenue.
• Listing determinants with no application to the named product and no ranking.

Next steps

• Re-read the study guide on any weak area.
• Use the revision notes for a final check.
• Visit the OCR Economics hub and the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Source document: OCR A Level Economics (H460) specification, Version 3.0, June 2026, first assessed in 2021. Content used: Component 1, How competitive markets work, topic Elasticity.