Demand: three questions to try now
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Question 1
The diagram shows the demand for and supply of plastic bags. The original equilibrium price is P.
How would the introduction of a unit tax on plastic bags be shown?
Answer: C.
The correct answer is C: supply would shift to S2.
A unit tax is charged on each plastic bag sold, so it adds a fixed amount to the cost of supplying every bag. Producers therefore require a higher price to offer any given quantity, and the supply curve shifts upwards and to the left. On this diagram that is the move from S1 to S2. The result is a higher price for consumers and a smaller quantity traded, which is exactly the intention of a tax on plastic bags.
Why the other options are wrong:
A unit tax is charged on each plastic bag sold, so it adds a fixed amount to the cost of supplying every bag. Producers therefore require a higher price to offer any given quantity, and the supply curve shifts upwards and to the left. On this diagram that is the move from S1 to S2. The result is a higher price for consumers and a smaller quantity traded, which is exactly the intention of a tax on plastic bags.
Why the other options are wrong:
- A, demand shifting to D2, moves the demand curve to the right, showing consumers wanting more bags at each price. A tax does not increase demand.
- B, demand shifting to D3, moves demand left. A unit tax is levied on the seller and enters the analysis as a cost of production, so it acts on supply. The fall in the quantity bought comes from the higher price, not from a shift of the demand curve.
- D, supply shifting to S3, moves supply right, which lowers the price. That is what a subsidy does, and it is the opposite of a tax.
Question 2
The diagram shows the market for beef in the US with the original equilibrium at X. What will be the new equilibrium position if incomes in the US rise?
Answer: C.
The correct answer is C.
Beef is a normal good, so when incomes in the US rise consumers wish to buy more of it at every price and the demand curve shifts to the right, from D1 to D2. Nothing in the stem affects the cost or the ease of producing beef, so supply stays on S1. The new equilibrium is where S1 crosses D2, which is point C: both the price and the quantity traded are higher than at X.
Why the other options are wrong:
Beef is a normal good, so when incomes in the US rise consumers wish to buy more of it at every price and the demand curve shifts to the right, from D1 to D2. Nothing in the stem affects the cost or the ease of producing beef, so supply stays on S1. The new equilibrium is where S1 crosses D2, which is point C: both the price and the quantity traded are higher than at X.
Why the other options are wrong:
- A lies where S1 crosses D3, the demand curve furthest to the left. That is a fall in demand, which is what would follow a fall in incomes, not a rise.
- B lies where D1 crosses S3, the supply curve furthest to the left. Supply has fallen with demand unchanged, which would follow higher production costs rather than higher incomes.
- D lies where D1 crosses S2, the supply curve furthest to the right. Supply has risen with demand unchanged, again a change on the producers' side of the market.
Question 3
The diagram shows the demand for and supply of labour in an industry. The original equilibrium
is X.
A trade union then negotiates a wage rate of W.
R S T
What identifies the change in employment?
Answer: C.
The correct answer is C: RS.
Before the union acts, the market clears at X with employment of OS. The negotiated wage W lies above that equilibrium, and at W firms only wish to hire OR workers while OT workers want jobs. Employment is always decided by the shorter side of the market, which here is demand, so the number employed falls from OS to OR. The change in employment is therefore the distance RS.
Why the other options are wrong:
Before the union acts, the market clears at X with employment of OS. The negotiated wage W lies above that equilibrium, and at W firms only wish to hire OR workers while OT workers want jobs. Employment is always decided by the shorter side of the market, which here is demand, so the number employed falls from OS to OR. The change in employment is therefore the distance RS.
Why the other options are wrong:
- A, OR, is the new level of employment rather than the change in it. The question asks by how much employment altered, not what it became.
- B, OT, is the quantity of labour supplied at the wage W. Those extra workers want jobs at that wage but no firm is willing to employ them, so OT is not employment at all.
- D, RT, is the gap between the quantity of labour supplied and the quantity demanded at W. That is the unemployment the higher wage creates, which is a genuine and important magnitude, but it is not the fall in the number of people working.
What this practice covers
These questions are drawn from past Cambridge IGCSE papers and filtered to demand. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on demand, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Saying a price change "increases demand", it changes quantity demanded.
- Shifting the curve when the good's own price changed.
- Confusing substitutes with complements.
- Confusing an inferior good with a cheap or poor-quality good. An inferior good is defined by what happens when income rises.
- Forgetting to label the axes as price and quantity.
- Not labelling the curves D1 and D2 when showing a shift.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Demand revision notes.