Worksheet 1

Linear Demand functions, schedules and graphs (1)

1) Define the term demand. [2 marks]

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2) Consider the following demand function for beef, where quantities are measured in kilograms (kg):
Qd = 120 – 2P.

Calculate the quantity demanded for the following price levels. One has been done for you. [2 marks]

Price ($) Quantity Demanded

0 120
10
20
30
40
50
60

3) Plot the data on the grid below. Make sure you label the axes. [2 marks]

4) Explain the significance of the number 120

in the demand function. Hint: what
happens when P = 0? [2 marks]

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5) Restate the demand function when you

add 20 units to the right demand function.
[1 mark]

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6) Plot the restated demand function in the diagram above. [1mark]

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7) Suggest two possible reasons why the demand curve changed the way it did. [2 marks]

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 Worksheet 1
Linear Demand functions, schedules and graphs (1)

(Answers)

1) Define the term demand. [2 marks]

Demand can be defined as the quantity which consumers are willing and able to buy (1) at a given price
level (1).

2) Consider the following demand function for beef, where quantities are measured in kilograms (kg):
Qd = 120 – 2P. [2 marks]

Price ($) Quantity Demanded

0 120
10 100 © Level7 This product Saigon South
International School, Vietnam
20 80
Redistribution of this e-product is strictly
30 60 prohibited.
40 40
50 20
60 0

3) Plot the data on the grid below. Make sure you label the axes. [2 marks]

4) Explain the significance of the number 120 in the demand function. Hint: what happens where P = 0?
[2 marks]

120 is the quantity demanded when P = 0. It is also where the demand curve intersects the horizontal
axis.

5) Restate the demand function when you add 20 units to the demand function. [1 mark]

Qd = 140 – 2P

6) Plot the restated demand function in the diagram above. [1mark]

See above diagram

7) Suggest two possible reasons why the demand curve changed the way it did. [2 marks]

Valid reasons could include:

Higher incomes, which led to more consumption of normal goods, such as beef
A growing preference (taste) for beef products
Successful advertising, which can lead to an increase in the demand for beef products
A fall in the price of complements, such as vegetables or wine, can lead to an increase in the demand
for beef products
Expectations of future price increases can lead to an increase in demand for beef.

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 Worksheet 2
Linear demand functions, schedules and graphs (2)

Consider the following demand functions for smartphones:

(1) Qd = 120 – 4P
(2) Qd = 120 – 2P

1) Explain how the two demand functions are different. [2 marks]

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2) Plot both demand functions in the grid below. [4 marks]

3) Describe how demand function (2)

looks different from demand function
(1). [2 marks]

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4) Explain whether the price elasticity of the demand changes when comparing demand function (2) to
demand function (1). [2 marks]

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5) Outline the difference between a change in “quantity demanded” and a change in the “level of demand”.
[4 marks]

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 Worksheet 2
Linear demand functions, schedules and graphs (2)

(Answers)

Consider the following demand functions for smartphones:

(1) Qd = 120 – 4P
(2) Qd = 120 – 2P

1) Explain how the two demand functions are different. [2 marks]

The gradient of demand function (1) is greater than that than demand function (2) as the coefficient of the
former is greater than the latter.

Top Tip: In economics, a greater gradient is not equivalent to a steeper slope! Refer to the answer in
Questions 2 and 3 for further guidance.

2) Plot both demand functions in the grid below. [4 marks]

3) Describe how demand function (2) looks different from demand function (1). [2 marks]

On the standard price-quantity axis, demand function (1) would appear to be flatter than demand function
(2). However, this does not equate to a steeper slope as found in a typical x-y graph.

Top Tip: Be mindful that the price-quantity axis used in economics is “flipped” from the x-y axis used in
mathematics, i.e. the independent variable (price) is placed on the vertical axis and the dependent
variable (quantity) on the horizontal axis. Therefore, even if the gradient (denoted by the independent
variable’s coefficient) of one function is greater than the other, it would appear to be as shallower, i.e. in
economics, a greater gradient does not equate to a steeper slope.

4) Explain whether the price elasticity of the demand changes when comparing demand function (2) to
demand function (1). [2 marks]

The demand curve has undergone a non-parallel shift to the left, so has become less price elastic. This
may be due to the fact that smartphones have become more specialized in their functionality and have a
lower degree of substitutability. Its ubiquitous need in modern societies has also made smartphones more
of a necessity rather than a luxurious item. Note that the maximum quantity that consumers are willing
and able to buy is 140 units as determined when P = 0.

5) Outline the difference between a change in “quantity demanded” and a change in the “level of demand”.
[4 marks]

A change in price will lead to a movement along the demand curve, ceteris paribus, which in turn will lead
to a change in quantity demanded. A change in non-price factors affecting demand, such as income, will
lead to a shift in the demand curve which in turn will cause a change in the level of demand.

Top Tip: many candidates get confused between the two concepts, so make sure both terms are used
correctly, rather than interchangeably.

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 Worksheet 3
Linear supply functions, schedules and graphs (1)

Consider the supply function for pork, where quantities are measured in kilograms (kg): Qs = -60 + 4P.

1) Calculate the quantity of pork supplied at the given price levels below. [4 marks]

Price ($) Quantity Supplied (kg)

0
10
20
30
40
50
60

2) Plot the data on the grid below. Make sure the axes are labeled appropriately. [2 marks]

3) Explain the significance of $15 being the

selling price per kilo of pork. [2 marks]

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4) Restate the supply function when a value

of 10 is added to the right side of the
supply function. [1 mark]

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5) Plot the restated supply function above and describe the change from its current position. [3 marks]

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6) Explain two possible reasons for the shift in the supply curve. [4 marks]

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 Worksheet 3
Linear supply functions, schedules and graphs (1)

(Answers)

Consider the supply function for pork, where quantities are measured in kilograms (kg): Q s = -60 + 4P.

1) Calculate the quantity of pork supplied at the given price levels below. [4 marks]

Price ($) Quantity Supplied (kg)

0 0
10 0 Top Tip: In economics, the quantity supplied
20 20 cannot be negative (even though the
30 60 mathematical calculations would reveal -60
40 100 and -20 at P = $0 and P = $10 respectively).
50 140
60 180

2) Plot the data on the grid below. Make sure the axes are labeled appropriately. [2 marks]

3) Explain the significance of $15 being the selling price

per kilo of pork. [2 marks]

The supply function shows that the supplier is not

willing or able to supply any pork below $15, i.e. the
market price of $15 is the lowest per unit price that
suppliers are willing and able to supply pork (at P =
$15, supply = 0).

4) Restate the supply function when a value of 10 is added to the right side of the supply function. [1 mark]
Qs = -60 + 4P + 10 = -50 + 4P

5) Plot the restated supply function above and describe the change from its current position. [3 marks]

The new supply function is positioned

to the right of the original supply curve,
intersecting the y-axis at P = $12.5.

6) Explain two possible reasons for the shift in the supply curve. [4 marks]

Possible reasons could include:

Natural conditions - Better weather conditions or natural environments can increase higher yields (of
pork), so lead to a higher level of supply.
Technical progress - Better use of farming technology will lead to an increase in productivity and a
higher level of supply of pork.
Changes in prices of the factors of production - A fall in the price of the factors of production (land,
labour, capital, and entrepreneurship) will reduce production costs and make production more
profitable for pig farmers. As a result of subsidies, for example, the level of supply will increase, ceteris
paribus.
Producer expectations - An expectation by producers that pork prices will fall in the future will tend to
lead to farmers offloading their supplies (so not to lose out if prices do subsequently fall), leading to an
increase in supply in the short term.
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 Worksheet 4
Linear supply functions, schedules and graphs (2)

Consider the following supply functions for model figures (toys).

(1) Qs = -60 + 4P
(2) Qs = -60 + 10P

1) Outline the difference between these supply functions. [2 marks]

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2) Plot both supply functions in the grid below. [4 marks]

3) Explain one reason why supply function (1) may have changed to supply function (2). [2 marks]

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4) With reference to supply function (1), state an example where the supply function i) undergoes a
rightward parallel shift, and ii) steepens. [2 marks]

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5) When the level of supply increases, explain why the supply curve is shown by a rightwards (rather than
upwards) shift. [2 marks]

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 Worksheet 4
Linear supply functions, schedules and graphs (2)

(Answers)
Consider the following supply functions for model figures (toys): (1) Qs = -60 + 4P and (2) Qs = -60 + 10P.

1) Outline the difference between these supply functions. [2 marks]

Supply function (1) would appear to be steeper than supply function (2) on a price-quantity axis.

2) Plot both supply functions in the grid below. [4 marks]

3) Explain one reason why supply function (1) may have changed to supply function (2). [2 marks]
Supply has increased at each and every price level which may be due to any of the following reasons:
Natural conditions - Better weather or natural environments can lead to a higher level of supply for
agricultural products, for example.
Technical progress - Better use of technology will lead to an increase in productivity and a higher level
of supply of electronic components, for example.
Changes in the prices of the factors of production - A fall in the price of the factors of production (land,
labour, capital, and entrepreneurship) will reduce production costs and make production more
profitable. As a result, the level of supply will tend to increase.
The PES has become relatively/more price elastic. The reason might be because the mobility of
factors of production has increased, thus allowing firms to react to price changes quicker.

4) With reference to supply function (1), state an example where the supply function i) undergoes a
rightward parallel shift, and ii) steepens. [2 marks]
i) Parallel shift – answers could include:
Qs = -30 + 4P (rightward shift)
Qs = -100 + 4P (leftward shift)
Basically, any answer that changes the “constant”, but does not change the P coefficient i.e. the
value before P.

ii) Steepens – answers could include:

Qs = -60 + 2P
Qs = -60 + 3P
Basically, any answer that changes the value of the P coefficient.
Top Tip: As the price-quantity axis is the reverse of a standard x-y axis (independent variable-dependent
variable), the P coefficient would have to be smaller to generate a steeper slope.

5) When the level of supply increases, explain why the supply curve is shown by a rightwards (rather than
upwards) shift. [2 marks]

Supply can be defined as the amount of goods and service which firms are willing and able to produce or
supply at different price levels. An increase in supply is therefore more accurately described as a
rightward shift, as it demonstrates an increase in the quantity supplied at each and every price level, i.e.
at a certain or given price level, the quantity supplied has increased.
Top Tip: Many students think that both terms are the same (rightwards shift and upwards shift). It is
useful to think of the scenario where the supply curve is perfectly inelastic. An increase in supply will lead
to a rightward shift whereas the implementation of a per-unit tax will lead to an upward shift.

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 Worksheet 5
Market Equilibrium (1)

Consider the following demand and supply functions: Qd = 120 – 2P and Qs = -60 + 4P.

1) Calculate the quantity demanded and supplied in the table below. [4 marks]

Price ($) Quantity Demanded Quantity Supplied

0
10
20
30
40
50
60

2) Use the data above to explain the market equilibrium position. [2 marks]

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3) Plot the data in the grid below. [3 marks]

4) Using the demand and supply functions, calculate the

market equilibrium price (Q) and quantity (Q).
[2 marks]

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5) With reference to the graph on the left, explain the

process by which the market will revert to the
equilibrium price and quantity (P* and Q*) should the
initial market price be set at:

i) Pf [2 marks]
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……………………….............................................................

……………………….............................................................

ii) Pc [2 marks]
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 Worksheet 5
Market Equilibrium (1)

(Answers)

Consider the following demand and supply functions: Qd = 120 – 2P and Qs = -60 + 4P.

1) Calculate the quantity demanded and supplied in the table below. [4 marks]

Price ($) Quantity Demanded Quantity Supplied

0 120 0
10 100 0
20 80 20
30 60 60
40 40 100
50 20 140
60 0 180

2) Use the data above to explain the market equilibrium position. [2 marks]

Market equilibrium is achieved when the selling price is $30. This can be observed in the table, where the
same value (60 units) for quantity demanded and quantity supplied occur at this price level.

3) Plot the data in the grid below. [3 marks]

4) Using the demand and supply functions, calculate the market equilibrium price (Q) and quantity (Q).
[2 marks]
Qd = 120 – 2P = Qs = -60 + 4P
120 – 2P = -60 +4P
2P = 60
Pe= $30
Qd = 120 – 2(30) = 60 units
Qs = -60 + 4(30) = 60 units
Hence, the market equilibrium price is $30 and the equilibrium quantity is 60 units.

5) With reference to the graph, explain the process by which the

market will revert to the equilibrium price and quantity (P* and Q*)
should the initial market price be set at: i) Pf and ii) Pc.

i) If the price is above the equilibrium at Pf, there is excess supply

of Qs – Qd. To clear the excess supply, producers will reduce the
price until P*. The quantity demanded will rise (as the price falls)
until it reaches Q*, where equilibrium is restored. [2 marks]

ii) If the price is below the equilibrium at Pc, there is excess demand
of Qd – Qs. Seeing that more profit can be earned by raising the
price, producers will do so until the price reaches P*. The quantity
demanded will contract due to the higher price, thereby reducing
excess demand, until the quantity reaches Q*, where market
equilibrium is restored. [2 marks]

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 Worksheet 6
Market Equilibrium (2)

Calculate the equilibrium price and quantity for each of the following demand and supply functions. Express
the quantity in terms of units and prices in dollars ($). Show your workings.

1) Qd = 90 – 2P and Qs = -10 + 2P [4 marks]

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2) Qd = 90 – 6P and Qs = 10 + 4P [4 marks]

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3) Qd = 50 – 8P and Qs = 20 + 2P [4 marks]

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4) Qd = 60 – 2P and Qs = -50 + 3P [4 marks]

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5) Qd = 50 – 4P and Qs = 20 + 2P [4 marks]

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6) Qd = 100 – 1.5P and Qs = -50 + 6P [4 marks]

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 Worksheet 6
Market Equilibrium (2)

(Answers)

Calculate the equilibrium price and quantity for each of the following demand and supply functions. Express
the quantity in terms of units and prices in dollars ($). Show your workings.

1) Qd = 90 – 2P and Qs = -10 + 2P
At the equilibrium Qd = Qs
90 – 2P = -10 + 2P
4P = 100
P = 100 / 4
Pe = $25
Substitute P = 25 in Qd or Qs. Using Qd in this example:
Qd = 90 – 2(25)
Qe = 40 units

2) Qd = 90 – 6P Qs = 10 + 4P
At the equilibrium Qd = Qs
90 – 6P = 10 + 4P
80 = 10P
Pe = $8
Qd = 90 – 6(8)
Qe = 42 units

3) Qd = 50 – 8P Qs = 20 + 2P
At the equilibrium Qd = Qs
50 – 8P = 20 + 2P
30= 10P
Pe = $3
Qd = 50 – 8(3)
Qe = 26 units

4) Qd = 60 – 2P Qs = -50 + 3P
At the equilibrium Qd = Qs
60 – 2P = -50 + 3P
110 = 5P
Pe = $22
Qd = 60 – 2(22)
Qe = 16 units

5) Qd = 50 – 4P, Qs = 20 + 2P
At the equilibrium Qd = Qs
50 – 4P = 20 + 2P
6P = 30
Pe = $5
Qd = 50 – 4(5)
Qe = 30 units

6) Qd = 100 – 1.5P, Qs = -50 + 6P

At the equilibrium Qd = Qs
100 – 1.5P = -50 + 6P
150 = 7.5P
Pe = $20
Qd = 100 – 1.5(20)
Qe = 70 units

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 Worksheet 7
Market Equilibrium (3)

1) A manufacturer of strawberry flavoured donuts experiences higher levels of demand due to a very
successful advertising campaign. Use a supply and demand diagram to explain this scenario. [4 marks]

Price ($)

Quantity (donuts)

2) As a result of a small plague, some strawberry crops are destroyed, hence affecting the supply of
strawberry flavoured donuts. Illustrate this in the diagram above. [1 mark]

3) Solve the linear function of the demand curve from the diagram below. [2 marks]

50
Price ($)

600 Quantity
0
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4) Calculate the equilibrium price and quantity traded if the demand function is Qd = 600 – 12P and the
supply function is Qs = -100 + 8P. [3 marks]

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5) Using the same demand and supply functions in Q4, calculate the excess demand or supply if price is
$20. [2 marks]

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6) Using the same demand and supply functions in Q4, calculate the excess demand or supply if price is
$40. [2 marks]

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