Cambridge International AS and A Level Economics

Worksheet – Chapter 2
True or false?
Decide whether the following statements are true or false.

1 Demand curves always slope downwards and supply curves always slope upwards.

2 The demand for a product is price elastic when its price elasticity of demand is greater than O.

3 Cross elasticity of demand for a product is negative in the case of substitutes and positive in the case

complements.

4 A movement along the demand curve occurs when there is a change in the price of the product and for

no other reason.

5 A fall in the price of a product more often than not will increase consumer surplus.

Tables
Complete the following table by inserting a few words to explain what each of these elasticity estimates mean.
(For price elasticity, assume the estimates for the first two columns are –5 and –1.)

Value of estimate 5 1 0 –2

Price elasticity of demand x

Income elasticity of demand

Cross elasticity of demand

© Cambridge University Press 2015 Cambridge International AS and A Level Economics Worksheet – Chapter 2 1
Cambridge International AS and A Level Economics

Missing words
Add the missing words to complete the sentences; the number of words, in each case, is indicated in brackets.
(12)
1 The equilibrium price in the market is where . A shift to the right of the demand curve, other things being
(2) (3) (1)
equal, will lead to a price and the quantity .
(7)
2 The revenue earned from the sale of a product is calculated by . For a price elastic product, revenue
(1) (1)
will as price increases and will as price decreases. This implies that a business should
(2) (4)
not   when faced with .
(15)
3 Price elasticity of supply is defined as . The factors affecting elasticity of supply
(11) (9)
include . Where supply is inelastic, this can be used to explain .

Diagrams
On a demand and supply diagram (remember to label the axes correctly), sketch:
■ an inelastic supply curve
■ an elastic demand curve.

On the diagram, show what happens when there is

1 an increase in supply

2 an increase in demand

3 an increase in supply and demand at the same time.

Write a few notes in each case to explain what happens to the market positions.

© Cambridge University Press 2015 Cambridge International AS and A Level Economics Worksheet – Chapter 2 2