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IGCSEEconomicsCambridge (CIE)Exam Questions2. The Allocation of Resources2.5 Price Determination

Price Determination (Cambridge (CIE) IGCSE Economics): Exam Questions

Exam code: 0455 & 0987

59 mins26 questions

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2.5 Price Determination

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11 mark

What is meant by the equilibrium price in the market for a good?

  • the average price paid by consumers

  • the price at which maximum profit is made

  • the price at which the producer breaks even

  • the price at which the supply and demand curves intersect

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21 mark

What is meant by equilibrium in a market?

  • where products offered for sale equal consumer demand

  • where profit is at the expected level

  • where the quantity of inputs equals the quantity of output

  • where total costs equal total revenue

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31 mark

What effect does an indirect tax have on the equilibrium price and quantity in a market?

  • Price increases, quantity increases

  • Price increases, quantity decreases

  • Price decreases, quantity increases

  • Price decreases, quantity remains unchanged

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41 mark

What happens in the market when there is excess demand?

  • Prices decrease to eliminate the excess demand

  • Prices increase to eliminate the excess demand

  • Prices remain unchanged as buyers and sellers negotiate

  • Both buyers and sellers exit the market

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51 mark

What does a surplus or excess supply indicate in the market?

  • Prices are too high

  • Prices are too low

  • Prices are at equilibrium

  • Prices are irrelevant

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11 mark

A newspaper reported that ‘The world market for coffee has returned to equilibrium’.

Which situation supports this statement?

  • A sequence of poor harvests resulted in shortages.

  • Decreased transport costs led to a surplus of supply.

  • Farmers matched demand by planting more coffee bushes.

  • The price of coffee was fixed between producers.

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21 mark

When demand exceeds supply for a product, what does the price mechanism usually lead to?

  • An increase in government intervention to control prices

  • A decrease in demand as consumers find substitutes

  • An increase in the price of the product

  • A surplus of the product in the market

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31 mark

What does it mean when a market is in disequilibrium?

  • Supply and demand are balanced

  • Excess supply or demand exists

  • The market is not functional

  • Prices are fixed by the government

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41 mark

In a market characterised by excess supply, what is likely to happen in the absence of intervention?

  • Producers will reduce prices to eliminate the excess supply

  • Producers will increase prices to match the excess supply

  • Consumers will increase demand to match the excess supply

  • Consumers will decrease demand to match the excess supply

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51 mark

How do market forces typically respond to a shortage?

  • Prices decrease to eliminate the shortage

  • Prices increase to eliminate the shortage

  • Prices remain unchanged despite the shortage

  • Producers reduce supply to address the shortage

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11 mark

What happens to the equilibrium price and quantity when both demand and supply increase simultaneously, with a larger increase in demand?

  • Price increases, quantity is indeterminate

  • Price decreases, quantity increases

  • Price increases, quantity increases

  • Price remains unchanged, quantity increases

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21 mark

If the price in a market is above the equilibrium price, what is likely to occur?

  • Excess demand and shortage

  • Excess supply and surplus

  • Equilibrium price and quantity

  • No impact on market dynamics

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31 mark

In a competitive market, if the government imposes a price floor above the equilibrium price, what is the likely result?

  • A surplus or excess supply

  • A shortage or excess demand

  • No change in market dynamics

  • An equilibrium price and quantity is reached

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41 mark

What does a decrease in both demand and supply lead to in terms of equilibrium price and quantity?

  • Equilibrium price falls, quantity is indeterminate

  • Equilibrium price rises, quantity falls

  • Equilibrium price falls, quantity falls

  • Equilibrium price is indeterminate, quantity falls

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51 mark

In an agricultural market, if the equilibrium price of wheat decreases and the equilibrium quantity increases, what is the most likely cause?

  • An increase in supply and decrease in demand

  • A decrease in supply and increase in demand

  • An increase in both supply and quantity demanded

  • A decrease in both supply and demand

Choose your answer