Loading subjects
36 exam-style questions with model answers, plus 42 quick multi-choice questions — every question on the site for this standard, grouped by the 12 pages of notes they come from.
Write a full answer before you reveal the model one — that comparison is where the marks come from. Every block links back to the notes that teach it.
Explain the difference between demand and quantity demanded.
In an illustrative market for building materials, the equilibrium price is $40 per unit. A regulation temporarily holds the price at $55. At $55, quantity demanded is 12,000 units and quantity supplied is 20,000 units.
Explain in detail how market forces would restore equilibrium once the regulation is removed.
A commentator writes: "Shortages happen because there isn't enough of the good. The only real fix is to produce more."
Discuss this statement, comparing and contrasting the roles of the demand side and the supply side in clearing a shortage. Refer to a supply and demand model in your answer.
Define consumer surplus and state where it is found on a supply and demand model.
In an illustrative market, demand meets the price axis at $60, supply meets the price axis at $20, equilibrium price is $40 and equilibrium quantity is 800 units.
Calculate consumer surplus and producer surplus, and explain in detail why total surplus is maximised at this equilibrium.
Two illustrative markets have the same equilibrium price ($30) and the same equilibrium quantity (1,000 units). In Market A, demand is steep (inelastic). In Market B, demand is shallow (elastic). Supply is identical in both.
Compare and contrast consumer surplus and producer surplus in the two markets, and discuss what this means for how the gains from the market are shared. Refer to a supply and demand model in your answer.
Explain what a deadweight loss shows about a market.
An illustrative market has equilibrium at Pe = $12 and Qe = 2,000 units. A maximum price of $8 is imposed, at which quantity supplied is only 1,200 units and the demand curve is at a height of $16.
Calculate the deadweight loss and explain in detail why the market is now allocatively inefficient.
"A subsidy makes consumers better off and producers better off, so it must improve allocative efficiency."
Discuss this statement. Compare and contrast the impact of a subsidy on consumers, producers and the government, and refer to a supply and demand model in your answer.
A 10% rise in the price of a good causes quantity demanded to fall by 25%.
Calculate the price elasticity of demand and state whether demand is elastic or inelastic.
An indirect tax of $3 per unit is placed on an illustrative good with inelastic demand.
Explain in detail why consumers bear most of the burden of this tax, and what this means for the size of the government's tax revenue.
A government wants to place an indirect tax on one good. It has two objectives: to generate revenue and to discourage consumption.
Explain whether the government should place the tax on an elastic or an inelastic good. Compare and contrast the impacts on consumers, producers and the government in each case, and refer to supply and demand models in your answer.
Explain what happens to the supply curve when an indirect tax of $2 per unit is imposed, and why.
An illustrative market has Pe = $8 and Qe = 5,000 units. A tax of $3 per unit raises the consumer price to Pc = $10 and reduces quantity to Q1 = 3,800 units.
Calculate the government's tax revenue and the deadweight loss, and explain in detail the impact of the tax on producers.
An indirect tax is placed on a good. Compare and contrast the impact of the tax on consumers, producers and the government, and explain what the tax does to allocative efficiency. Refer to a supply and demand model in your answer.
A subsidy of $5 per unit is introduced. Explain what happens to the supply curve and to the quantity traded.
An illustrative market has Pe = $20 and Qe = 8,000 units. A subsidy of $6 per unit lowers the consumer price to Pc = $16 and raises quantity to Q1 = 11,000 units.
Calculate the price producers receive and the total cost to the government, and explain in detail why a deadweight loss occurs even though both consumers and producers are better off.
A government subsidises a good. Compare and contrast the impacts of the subsidy on consumers, producers and the government, and discuss whether the government can justify continuing to fund the subsidy despite the efficiency cost. Refer to a supply and demand model in your answer.
A maximum price is set below the equilibrium price. Explain what happens to quantity demanded, quantity supplied and the quantity actually traded.
An illustrative market for a food staple has Pe = $9 and Qe = 30,000 units. A minimum price of $12 is imposed. At $12, quantity supplied is 38,000 units and quantity demanded is 22,000 units.
Explain in detail the impact of the minimum price on producers and on allocative efficiency.
A government is choosing between a maximum price control and an indirect tax as ways of intervening in a market. Compare and contrast the impacts of the two policies on consumers, producers and the government, and refer to supply and demand models in your answer.
A quota limits the quantity of a good that may be sold to below the equilibrium quantity. Explain how the new price is determined.
An illustrative market has Pe = $40 and Qe = 6,000 units. A quota limits sales to 4,000 units, at which the demand curve is at $55 and the supply curve is at $32.
Explain in detail the impact of the quota on producers, and calculate the deadweight loss.
A government could reduce the quantity of a good traded either by imposing an indirect tax or by imposing a quota. Assume both are set so that exactly the same quantity is traded.
Compare and contrast the impacts of the two policies on consumers, producers and the government. Refer to supply and demand models in your answer.
Explain why the world supply curve is drawn as a horizontal line in the New Zealand price-taker model.
An illustrative New Zealand market has a domestic equilibrium of Pe = $30 and Qe = 20,000 units. The world price is $18. At $18, domestic quantity demanded is 32,000 units and domestic quantity supplied is 9,000 units.
Explain in detail what happens in this market when it opens to trade, and identify the impact on New Zealand producers.
New Zealand opens an import market to free trade at a world price below the domestic equilibrium price.
Compare and contrast the impacts on New Zealand consumers and New Zealand producers, and explain what happens to allocative efficiency. Refer to a supply and demand model in your answer.
The world price of a good New Zealand exports rises. Explain what happens to the world supply line and to New Zealand's domestic supply and demand curves.
The world price of an illustrative New Zealand import falls from $40 to $25. At $40, domestic quantity demanded was 50,000 units and domestic quantity supplied was 30,000 units. At $25, domestic quantity demanded is 68,000 units and domestic quantity supplied is 14,000 units.
Explain in detail the impact of this fall on imports and on New Zealand producers.
The world price of a major New Zealand export rises sharply.
Compare and contrast the impacts on New Zealand producers and New Zealand consumers of that good, and discuss whether New Zealand as a whole is better off. Refer to a price-taker model in your answer.
Explain what happens to imports when a tariff is imposed on an imported good, and why.
An illustrative market imports at a world price of $15. A tariff of $5 is imposed. Domestic quantity supplied rises from 10,000 to 25,000 units and domestic quantity demanded falls from 60,000 to 48,000 units.
Calculate the government's tariff revenue and both deadweight losses, and explain in detail why each deadweight loss occurs.
A tariff is imposed on an imported good to protect a New Zealand industry.
Compare and contrast the impact of the tariff on New Zealand consumers, New Zealand producers of the good, importers of the good, and the Government. Explain the impact on allocative efficiency. Refer to a price-taker model in your answer.
State the four things you must cover when a question asks about the impact of a government intervention on a market.
Explain in detail what the Assessment Reports mean by 'integrating the graph into your explanation', and give two examples of the difference it makes.
A student writes: "Any government intervention in a market makes it less efficient, so governments should stay out of markets."
Discuss this statement, comparing and contrasting what the efficiency model does and does not tell us. Refer to supply and demand models in your answer.