IB Economics HL 2.1.5 Non Price Determinants of Demand Topic Practice

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Study 2.1.5—Non-price determinants of demand conceptsOpen the corresponding Concept lesson for explanations, examples and exam connections.

Question 1

[Maximum number: 2]

Note that widgets and pidgets are imaginary products.

In the country of Burbia, the demand and supply of widgets are given by the functions

Qd=249−4PQs=150+14P\begin{aligned} & Q d=249-4 P \\ & Q s=150+14 P \end{aligned}

where Qd is the quantity demanded per month, Qs is the quantity supplied per month and P is the price per widget in dollars ($).

Widgets and Pidgets have negative cross price elasticity of demand (XED).

Explain how the demand function for Widgets, Qd=249-4 P, is likely to change as a result of an increase in the price of Pidgets.

The demand for widgets is considered to be unit elastic at the current price.

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