Price, income and cross elasticities of demand

Case study · Digital markets

With reference to the information provided, discuss whether the price elasticity of demand for video games is elastic or inelastic.

Case study · The market for meat and the growth of vegetarianism

With reference to Extract B, explain why the change to meat-substitute products may result in an increase in the revenue of food companies. Refer to the concept of price elasticity of demand in your answer.

Case study · The energy market

With reference to Figure 1 and Extract A, explain what is meant by ‘price inelastic demand’ (line 8).

Case study · The market for plastic in the UK

With reference to Extract A, explain the likely numerical value for the income elasticity of demand for reusable cleaning products.

Case study · The UK online streaming services market

With reference to the information provided, examine the likely numerical value of the cross elasticity of demand between UK online streaming services.

Case study · The market for television content

With reference to Figure 1 and Extract A, explain the relationship between price elasticity of demand and total revenue.

Case study · The market for television content

Using examples from the information provided, explain what is meant by both ‘substitutes’ and ‘complementary goods’.

Case study · UK branded coffee shop chains market

With reference to Figure 2 and your understanding of price elasticity, examine two factors that may cause significant changes in the international price of coffee beans.

Case study · The food delivery industry

With reference to Extract B, examine whether the demand for delivered food is price inelastic and income elastic.

Case study · The market for fish

With reference to the information provided, calculate the new quantity demanded of bags of chips from fish and chip shops, following a 2% increase in the price of fish. You are advised to show your working.

Case study · The travel and tourism industry

With reference to the information provided, discuss the decision by Jet2 to increase its package holiday prices.

Case study · Hand car wash (HCW) firms in the UK

Examine two reasons why the demand for HCWs increases during a period when consumer ‘incomes fail to keep up with inflation’ (Extract A line 8).

Case study · The market for higher education in the UK

Explain why ‘the price elasticity of demand for higher education is about –0.5’ may be of relevance to English universities. Refer to Extract A in your answer.

Case study · The market for higher education in the UK

With reference to Figure 1 and Extract A, discuss the benefits of allowing universities to charge higher tuition fees for some degree courses.

Case study · The UK energy market

With reference to Extract A and your own knowledge, examine two possible reasons for the change in price elasticity of demand for electricity over time.

Case study · The market for cigarettes

Explain how changes in the price of tobacco cigarettes may affect the demand for e-cigarettes over time.

Case study · The market for cigarettes

With reference to Extract A, lines 11–13, calculate the price elasticity of demand for tobacco cigarettes in high-income countries and in low-middle-income countries. You are advised to show your working.

Case study · The market for cigarettes

With reference to Figure 1, assess the likely reasons for the difference in price elasticity of demand for tobacco cigarettes and e-cigarettes.

In 2021, a bakery sold 2.5 million sausage rolls per week at the price of £1.00 each. In 2022 the price increased to £1.20. The price elasticity of demand was estimated to be −0.2. Calculate the new quantity of sausage rolls sold per week in 2022 after the price increased, ceteris paribus.

Explain one likely reason for the difference in the price elasticity of demand for the 18+ student bus ticket and the adult bus ticket.

In June 2023, Tesla further reduced the price of its Model 3 vehicle by £4 200 from £42 990. It has been forecast that the price cut will lead to a 15% increase in demand. Ceteris paribus, calculate the price elasticity of demand for the Model 3. You are advised to show your working.

The price of sweetened drinks increases by 5%. Ceteris paribus, calculate the percentage change in the quantity demanded for sweetened drinks. You are advised to show your working.

The price of sweetened drinks increases by 5%. Ceteris paribus, calculate the percentage change in the quantity demanded for bottled water. You are advised to show your working.

Explain why a firm might try to reduce the price elasticity of demand for its products.

Calculate the new total revenue if prices were raised by 3% in 2017 to £7.63, if everything else remained unchanged. You are advised to show your working.

Explain one reason why the income elasticity of demand is significant to the producer of Freddos.

Explain the likely impact of the price increase of national lottery tickets on the demand for using gaming machines.

Ceteris paribus, calculate the price elasticity of demand for the Daily Mail newspaper over this period. You are advised to show your working.

Using the data provided, explain whether bus travel is a normal good or an inferior good.

Assume that the change in the quantity of tea purchased was only caused by the change in the price of tea. Calculate the price elasticity of demand for tea in response to the rise in its price. You are advised to show your working.

Calculate the change in total sales revenue for UK tea retailers between 2010 and 2015. You are advised to show your working.

The price elasticity of demand for petrol is –0.2. Explain the change to the total revenue of petrol stations as a result of cutting their prices.

The cross elasticity of demand for petrol cars with respect to the price of diesel cars is estimated to be +0.64. Which one of the following is the most likely impact if the price of diesel cars falls by 10%?

Which one of the following is the most appropriate description of the price elasticity of demand of −0.2?

In 2021, the adult 7-day bus ticket was £21.90. Bus ticket prices in London in 2022 increased by 4.8%. Ceteris paribus, which one of the following is the percentage decrease in the 7-day bus ticket demand by adults?

Which one of the following is most likely to be a determinant of price elasticity of demand for the Model 3 electric vehicle?

The likely income elasticity of demand for a luxury good is:

The table below shows estimates of the price elasticity of supply and price elasticity of demand for gas. Natural Gas Price elasticity of supply +0.14 Price elasticity of demand −0.10 Which one of the following can be inferred from the table?

Which one of the following is the most likely cross price elasticity of demand for close substitutes?

Using the data on page 4, which one of the following is most likely?

The income elasticity of demand for bus travel is estimated to be –1.5. This implies that:

The most likely cross price elasticity of demand for close substitutes is:

Calculate the percentage change in quantity demanded for Freddos between 2015 and 2017, ceteris paribus:

Which one of the following is most likely to be a determinant of price elasticity of demand for the Daily Mail newspaper?

Which one of the following is the most accurate explanation of the term ‘median household income’?

Research conducted in New Zealand in 2014 estimated the cross elasticity of demand for e-cigarettes to be 0.16 in response to changes in the price of tobacco. This implies that a 5% increase in the price of tobacco will cause the percentage change in demand for e-cigarettes to be:

Estimates for the demand for black tea in the UK suggest that it is an inferior good. This implies it has a negative:

What is the expected percentage change in the quantity of petrol demanded if the price elasticity of demand is –0.2?