OxfordAQA International AS and A-level Economics: Prices and linked markets (9640) – 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 cover sections 3.1.2.5 to 3.1.2.7 of the OxfordAQA International AS and A-level Economics (9640) specification, version 1.2 (International AS content). All figures are invented and illustrative. Read the study guide and revision notes first. The mark splits shown are only our guide to what a full answer contains.

Questions

1. In Country B the weekly market for cassava is Qd = 520 − 40P and Qs = −80 + 20P (P in currency units per kg, Q in thousand kg).

(a) Calculate the equilibrium price and quantity. [3] (b) State the size and type of disequilibrium at a price of 12. [2]

2. A drought removes 30 thousand kg of supply at every price in the market in question 1, so Qs = −110 + 20P.

(a) Work out the equilibrium price and quantity after the drought. [2] (b) Calculate the percentage change in price and in quantity. [2]

3. The market for a metal in Country B has Qd = 200 − 10P and Qs = −40 + 20P.

(a) Calculate the equilibrium price and quantity. [2] (b) Traders expect the price to rise and buy an extra 30 units at every price. Work out the price and quantity that result. [2] (c) Explain why the price rise may be self-fulfilling. [2]

4. In a market, Qd = 300 − 10P. Demand then rises by 40 at every price.

(a) Calculate the new price if supply is Qs = 10P, and if supply is fixed at 150. [2] (b) Explain why price rises more when supply is fixed. [2]

5. The price of new cars rises in Country C. Explain the likely effect on (a) the market for car tyres [2] and (b) the market for bus travel. [3]

6. In Country C, timber is used for furniture, Qd = 180 − 10P, and for building, Qd = 120 − 5P. Supply is Qs = −60 + 25P.

(a) Define composite demand. [1] (b) Calculate the equilibrium price and quantity. [2] (c) Building demand rises by 40 at every price. Calculate the new price and the quantity going to furniture. [2] (d) Explain the effect on furniture makers. [1]

7. Country C has 80 thousand cattle, each giving one hide, so hide supply is fixed at 80 thousand. Hide demand is Qd = 260 − 2P.

(a) Calculate the price of hides. [1] (b) Demand for beef rises and 10% more cattle are slaughtered. Calculate the new hide price. [2] (c) Explain why this is joint supply and why hide supply does not respond to the hide price. [2]

8. A factory fits 3 sensors to each machine. Orders are 12,000 machines.

(a) Calculate the demand for sensors. [1] (b) Orders fall by 25%. Calculate the new sensor demand and the percentage change. [2] (c) Explain why this is derived demand. [1]

9. A cold snap destroys part of the winter vegetable crop in Country D and the price rises. Using this scenario, show what each of rationing, incentive and signalling does. [6]

10. Assess the claim that allocating resources through prices is impersonal. [8]

11. A public clinic in Country D sells priority places in its waiting queue. Evaluate the case for extending the price mechanism in this way. [8]

Answers

1. (a) Set Qd = Qs: 520 − 40P = −80 + 20P [1]. 600 = 60P, so P = 10 [1]. Q = 520 − 400 = 120 thousand kg [1]. [3] (b) At 12, Qd = 520 − 480 = 40 and Qs = −80 + 240 = 160 [1]. Excess supply of 120 thousand kg [1]. [2] Examiner insight: Show both substitutions at the disequilibrium price; a bare “surplus” without the figures or the word supply tends to leave the answer incomplete.

2. (a) 520 − 40P = −110 + 20P, so 630 = 60P and P = 10.5 [1]; Q = 520 − 420 = 100 [1]. [2] (b) Price: 0.5 ÷ 10 = +5% [1]. Quantity: −20 ÷ 120 = −16.7% [1]. [2] Examiner insight: Divide each change by the starting value, and keep the sign: a fall in quantity is negative.

3. (a) 200 − 10P = −40 + 20P, so 240 = 30P [1], P = 8, Q = 120 [1]. [2] (b) Qd = 230 − 10P, so 270 = 30P and P = 9 [1], Q = 140 [1]. [2] (c) The higher price confirms the traders’ expectation [1], so more join in and buy, pushing price up further, which can build a bubble [1]. [2] Examiner insight: The explanation scores when it links the expectation to the extra demand and then to the higher price; repeating “speculation raises price” earns little.

4. (a) Responsive supply: 340 − 10P = 10P, so P = 17 [1]. Fixed supply: 340 − 10P = 150, so P = 19 [1]. [2] (b) Producers cannot extend output when supply is fixed [1], so the whole excess demand must be removed by a higher price shrinking quantity demanded [1]. [2] Examiner insight: Say which curve is steeper and what that stops producers doing; a bare “supply is inelastic” does not explain the mechanism.

5. (a) Higher car prices cause a contraction in quantity of cars demanded [1], so demand for tyres, in joint demand with cars, shifts left and tyre price and quantity fall [1]. [2] (b) Cars and bus travel are substitutes (competitive demand) [1]. Some buyers switch, so the demand curve for bus travel shifts right [1] and price and quantity rise, by an amount limited by how close the substitutes are [1]. [3] Examiner insight: Name the link and the direction of the shift in the second market; saying “buses do better” without a shifting curve usually loses the chain.

6. (a) Demand for one good that has several uses [1]. [1] (b) Total Qd = 300 − 15P. 300 − 15P = −60 + 25P, so 360 = 40P and P = 9 [1], Q = 165 [1]. [2] (c) Qd = 340 − 15P, so 400 = 40P and P = 10 [1]. Furniture takes 180 − 100 = 80 [1]. [2] (d) Furniture makers face a higher input price and get less timber (80 against 90), so their costs rise [1]. [1] Examiner insight: Add the two demands at each price before equating with supply, and use the new price to find each use’s share.

7. (a) 260 − 2P = 80, so P = 90 [1]. [1] (b) Hides = 80 × 1.1 = 88 [1]. 260 − 2P = 88, so P = 86 [1]. [2] (c) Hides and beef come from the same animals, so a change in beef output changes hide supply [1]. Cattle are raised for beef, so the hide price does not alter the number slaughtered [1]. [2] Examiner insight: A good joint supply answer shows the direction: more of one product means more of the other, and the price of the by-product falls.

8. (a) 12,000 × 3 = 36,000 [1]. [1] (b) Orders = 9,000, so sensors = 27,000 [1], a fall of 25% [1]. [2] (c) Sensors are wanted only to make machines, so their demand depends on machine demand [1]. [1] Examiner insight: Show the fixed ratio, then link the two percentage falls; the percentage fall is the same only because the ratio is fixed.

9. Rationing: less supply is available, so the higher price allocates vegetables to those willing and able to pay [1] and reduces quantity demanded to match the smaller supply [1]. Incentive: higher prices raise profit for growers who still have crops [1], encouraging growers elsewhere and importers to supply more [1]. Signalling: the price tells buyers vegetables are scarcer, so they economise or switch [1], and tells producers where more resources are wanted [1]. [6] Examiner insight: Apply each function to vegetables rather than defining it; two sentences per function, linked to the scenario, tend to earn more than three bare definitions.

10. Meaning: prices apply the same rule to every buyer and seller [1]. For: no planner or official decides, so favouritism cannot decide who gets what [1]; millions of choices are coordinated through responses to price [1]. Against: what a person can buy depends on income, so the result reflects the distribution of income [1]; people without income send no signal [1]; firms with market power can set prices to suit themselves [1]. Judgement: impersonal does not mean neutral [1], and the view is stronger where competition is strong and incomes are fairly distributed [1]. [8] Examiner insight: A judgement that names the condition it depends on usually reads better than one that restates “it depends”.

11. For: a price rationing priority places gives a quick way to allocate them [1]; the income funds care for others [1]; the price signals how much people value early treatment [1]. Against: access depends on income, not need [1]; those who pay jump ahead of sicker patients [1]; the nature of the service changes, as care becomes something bought [1]. Judgement: it is more defensible for minor, non-urgent treatment than for serious cases [1], provided funds go to the wider service [1]. [8] Examiner insight: Evaluation tends to gain from weighing efficiency against equity and the nature of the activity, with a clear final judgement and condition.

Where marks are usually lost

• Not showing the equation step, so one slip loses the whole calculation.
• Dividing by the final value instead of the starting value in percentage changes.
• Stating a price without saying which side has the excess.
• Describing speculation without the link from expectation to price.
• Stopping at “substitutes” or “complements” without a curve shifting.
• Mixing up joint demand and joint supply.
• Defining the price mechanism functions without applying them.
• Writing an evaluation with no judgement or no condition.

Next steps

• Revisit the revision notes and the study guide.
• Go to the OxfordAQA A-level Economics hub and the checklist.
• Take all the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OxfordAQA International AS and A-level Economics (9640), specification version 1.2, first teaching September 2020, first AS exams May/June 2021, first A-level exams May/June 2022. Published by OxfordAQA.