Revision Questions for PED,YED and PES.

1.Explain why price elasticity of demand varies along the length of a straight-line demand curve.

2. Explain how the price elasticity of demand for a good might be affected by the number and
closeness of substitutes.

3. Explain why the price elasticity of supply (PES) for primary commodities tends to be
relatively low, while the PES for manufactured products tends to be relatively high.

4. Explain why the price elasticity of demand for primary commodities tends to be relatively low
while the price elasticity of demand for manufactured products tends to be relatively high.

5.Explain why the price elasticity of demand for primary commodities tends to be relatively low
while the price elasticity of demand for manufactured products tends to be relatively high.

6. Explain why an increase in incomes over time may lead to an increase in demand for some
goods but a decrease in demand for other goods.

7. Examine the significance of price elasticity of demand for the decision making of firms and
government.

8.The income elasticity of demand for primary commodities tends to be relatively low, while the
income elasticity of demand for manufactured goods and services tends to be higher. Examine
the likely effects of this for individual producers and forthe economy as a whole.

9. Discuss the significance of price elasticity of demand for firms that produce luxury cars and
firms that produce less expensive cars.

Sample answers to help you:

1. (a) Explain the importance of price elasticity of demand [10 marks]
Answers should include: a definition of PED a the link between PED, price changes and changes in
total revenue the importance of in terms of changes in price of substitutes and complements examples
of PED in real life (products with high/low elasticities; products related are complements or
substitutes).
Answers may include: an explanation that PED are extremely difficult to accurately measure in reality
use of diagrams to show the relationship between PED, price changes and changes in total revenue use
of diagrams to illustrate the complement/substitute relationship. Examiners should be aware that
candidates may take a different approach which if appropriate, should be rewarded .

CRITERIA LEVEL DESCRIPTORS FOR PAPER 1, PART (a) 10 MARKS

QUESTIONS AO1 : Knowledge & Understanding AO2 : Application & Analysis
Levels Mark band
L1 1-2
L2 3-4
L3 5-6
L4 7-8
L5 9-10