IB Economics HL 2.5.4 PED along a straight-line demand curve Question Bank

Level

Marks

0

The work does not meet a standard described by the descriptors
below.

1

The written response is limited.

1-2

For a correctly labelled diagram showing both D and MR [1] and some correct reference to changing PED along the D curve [1]

OR one of the following explanations:

- When MR is positive, PED is greater than 1 , because TR is rising, and when MR is negative, PED is less than 1 , because TR is falling as the price falls

- As the price drops and the quantity increases, the percentage change in the price rises, while the percentage change in the quantity falls, so the elasticity (\%change in Q / \%change in P ) decreases

- Elasticity can be measured by $\left(\frac{\Delta Q}{\Delta P}\right) \times \frac{P}{Q}$

The first term is the slope, which is constant, while the second term falls as Q increases.

- At higher prices, spending on a good represents a greater proportion of income which results in demand becoming more price elastic (than when the price is low).

2

The written response is accurate.

3-4

For a correctly labelled diagram showing both D and MR [1] and some correct reference to changing PED along the D curve [1]

AND one of the following explanations:

- When MR is positive, PED is greater than 1 , because TR is rising, and when MR is negative, PED is less than 1, because TR is falling as the price falls

- As the price drops and the quantity increases, the percentage change in the price rises, while the percentage change in the quantity falls, so the elasticity (\%change in Q / \%change in P ) decreases

- Elasticity can be measured by $\left(\frac{\Delta Q}{\Delta P}\right) \times \frac{P}{Q}$

The first term is the slope, which is constant, while the second term falls as Q increases.

- At higher prices, spending on a good represents a greater proportion of income which results in demand becoming more price elastic (than when the price is low).

Candidates who incorrectly label diagrams may be awarded a maximum of [3]. The vertical axis may be labelled price or P, and the horizontal axis labelled quantity or Q. MR and D and some correct reference to changing PED (either as in the diagram above or by indicating a falling PED) are required to be part of the labelling. A title is not necessary.
(v) Using Figure 5, identify the per-unit subsidy for tickets.

15 or € 15