Coffee demand in Darsana

Read the extracts and answer the questions that follow.

Text A — Household coffee purchases

1. Average household income in Darsana has risen. Café coffee is regarded as a normal good, while some low-income consumers regard basic powdered coffee as an inferior good.

2. Tea and coffee are substitutes. A poor tea harvest increased tea prices and coffee retailers reported stronger demand.

Text B — Expanding the market

1. Immigration has increased the number of consumers. Advertising emphasizing locally grown coffee has also improved consumer preferences.

2. Retailers are considering whether to cut coffee prices or spend more on advertising.

Table 1: Individual monthly demand for café coffee

Monthly café-coffee demand by household at two prices in Darsana.

Table 2: Price and monthly purchases of café coffee

Average café-coffee price and monthly purchases in Darsana.

Instant meals in Estara

Read the extracts and answer the questions that follow.

Text A — Income and food choices

1. Following an economic recovery, average incomes increased. Many households regard basic instant meals as an inferior good and freshly prepared meals as a substitute.

2. Consumers expected instant-meal prices to fall after a new supermarket opened, so some postponed purchases.

Text B — Marketing instant meals

1. Producers introduced healthier recipes to improve tastes and preferences. They also reduced current prices.

2. Sauce is a complementary good for many instant meals. A shortage has increased sauce prices.

Table 1: Individual weekly demand for instant meals

Weekly demand for instant meals by two consumers at different prices.

Table 2: Price and weekly instant-meal purchases

Table 2: Ceteris paribus comparison of instant-meal price and weekly purchases; the healthier-recipe change is held constant.

Bicycle demand in Falora

Read the extracts and answer the questions that follow.

Text A — Urban cycling

1. Bicycle ownership has increased as incomes have grown; bicycles are a normal good for most Faloran households. Rising public-transport fares have also encouraged cycling.

2. New protected cycle lanes and publicity about health benefits have improved preferences for bicycles.

Text B — Market expansion

1. Several universities will open new campuses, increasing the number of young consumers. Retailers expect bicycle prices to rise next year because of higher import costs.

2. Retailers disagree about whether current discounts or the non-price changes will have the larger effect on market demand.

Table 1: Individual annual demand for bicycles

Individual annual demand for bicycles at two prices.

Table 2: Average price and annual bicycle purchases

Average bicycle prices and annual purchases in Falora.

Solar-lamp demand in Galenia

Read the extracts and answer the questions that follow.

Text A — Household lighting

1. Solar lamps and kerosene lamps are substitutes. A tax increased kerosene prices, while rural household incomes also rose.

2. Solar lamps are a normal good for most households. Public information about indoor air pollution improved preferences for solar lighting.

Text B — Future purchases

1. Consumers expect solar-lamp prices to fall when a new factory opens. Some have therefore delayed purchases.

2. The number of rural households connected to retail markets is increasing. Sellers must distinguish a change in demand from a change in quantity demanded.

Table 1: Individual annual demand for solar lamps

Annual demand for solar lamps by two households at different prices.

Table 2: Price and annual solar-lamp purchases

Price and annual solar-lamp purchases in Galenia at two prices.

Bus travel in Bellara

The city of Bellara wishes to reduce traffic congestion by increasing the use of public buses. Two groups use the bus network: commuters and students. Table 1 shows the number of monthly bus journeys demanded by one member of each group at different fares. Bellara has 8000 commuters and 5000 students who regularly consider using buses.

Table 1

Monthly bus journeys demanded per person at different fares in Bellara. Bellara has 8,000 commuters and 5,000 students.

The city government is considering reducing the fare from 4 bellars to 3 bellars. A recent increase in petrol prices may also affect demand for bus travel because private car travel and bus travel are substitutes.

Household food choices in Maliba

A survey in Maliba follows the same 6000 low-income households in both periods to study demand for basic instant meals. Table 1 compares average household quantity demanded before and after an increase in average monthly household income. Assume ceteris paribus: all other determinants of demand remain unchanged. The price of an instant meal remained constant at 2 malins per meal.

Table 1

Household income and instant-meal quantity demanded before and after the income increase, with price and the same 6000 households held constant.

Freshly prepared nutritious meals are viewed by many households as an alternative to instant meals. However, nutritious ingredients are more expensive and some households have limited information about preparing them. The government wishes to improve food security and diet quality.

Museum attendance in Oranta

The National History Museum of Oranta charges an admission price of 15 orins. Its visitors consist mainly of local residents and international tourists. Table 1 gives information about the annual quantity demanded per consumer at an admission price of 15 orins and the number of consumers in each group.

Table 1

Consumer numbers and annual visits demanded per consumer at an admission price of 15 orins.

A new international airline route is expected to increase the number of tourists visiting Oranta. The museum is also considering an advertising campaign designed to make its exhibitions more attractive to local residents.

Rail travel in Hespera

Practice format: This is a non-standard 40-mark practice exercise, not an official Paper 2 allocation.

Read the extracts and answer the questions that follow.

Text A — Intercity journeys

1. Rail and coach journeys are substitutes. Coach fares have risen, while growing tourism has increased the number of rail passengers.

2. The rail operator lowered fares. It described the resulting increase in journeys as an increase in demand, although economists argued it was initially an extension of quantity demanded.

Text B — Passenger expectations

1. Travellers expect fares to rise during a major festival and are booking early. A publicity campaign also emphasizes comfort and lower emissions.

2. The operator is deciding whether to maintain low fares or invest in service quality.

Table 1: Individual monthly demand for rail journeys

Individual monthly demand for rail journeys.

Table 2: Fare and monthly rail journeys

Table 2: Fare and monthly rail journeys.

Plant-based milk in Ilyria

Read the extracts and answer the questions that follow.

Text A — Changing diets

1. Dairy milk and plant-based milk are substitutes for many consumers. An increase in dairy prices and concerns about animal welfare have increased plant-based milk purchases.

2. Plant-based milk is a normal good for many urban households, whose incomes have recently risen.

Text B — Retail strategy

1. Retailers reduced plant-based milk prices. They also expect new health research to influence preferences.

2. Population growth in urban areas is increasing the number of potential consumers, but some consumers expect future prices to fall as production expands.

Table 1: Individual weekly demand for plant-based milk

Individual weekly demand for plant-based milk at two prices.

Table 2: Price and weekly purchases

Price and quantity demanded of plant-based milk in Ilyria.

Smartphone demand in Jorvik

Suggested time: 1 hour 45 minutes.

Read the extracts and answer the questions that follow.

Text A — Consumer electronics

1. Smartphones are a normal good for many households. Compatible applications and smartphones are complements, while refurbished and new phones are substitutes.

2. Rising incomes increased demand for new smartphones, but consumers expect next year's models to be cheaper and some are delaying purchases.

Text B — Product launch

1. A manufacturer reduced the price of its current model and used advertising to improve consumer preferences. The two measures were introduced together, so their separate effects cannot be isolated from Table 2.

2. Expansion of mobile coverage has increased the number of potential consumers. Managers are studying the distinction between individual and market demand.

Table 1: Individual annual demand for smartphones

Individual annual demand for smartphones at two prices.

Table 2: Price and annual purchases of the current model

Price and annual purchases of the current smartphone model.

Museum visits in Kintara

Read the extracts and answer the questions that follow.

Text A — Cultural tourism

1. Museums and guided city tours are substitutes for some tourists. International arrivals have increased, adding more consumers to the museum market.

2. A popular exhibition improved tastes and preferences. After the exhibition, and with other determinants of demand held constant, the museum lowered its admission price, causing an extension of quantity demanded.

Text B — Visitor spending

1. Museum visits and audio-guide rentals are complements. The rental price has increased.

2. The museum expects admission prices to rise next season because of renovation costs. Some tourists are buying advance tickets.

Table 1: Individual weekly demand for museum admission

Individual weekly demand for museum admission by price.

Table 2: Admission price and weekly visits

Individual weekly demand for museum admission.

Printed textbooks in Lydora

Read the extracts and answer the questions that follow.

Text A — Education market

1. Printed textbooks and electronic books are substitutes. The price of electronic books has fallen, while university enrolment has increased.

2. Printed textbooks are a normal good for some students, but used textbooks are an inferior good for students who switch to new editions when income rises.

Text B — Purchasing decisions

1. Publishers reduced printed-textbook prices and introduced interactive content to improve preferences.

2. Students expect new editions to be released at lower prices next semester, reducing current demand for existing editions.

Table 1: Individual semester demand for printed textbooks

Individual semester demand for printed textbooks at two prices.

Table 2: Price and semester purchases

Average printed-textbook price and semester purchases in Lydora.

Bottled-water demand in Meridia

Paper 2, Section A data-response question (20 marks)

Read the extracts and answer the questions that follow.

Text A — Drinking-water choices

1. Bottled water and filtered tap water are substitutes. A fall in home-filter prices has affected bottled-water demand.

2. Hotter weather and a large sporting event increased consumer numbers and preferences for convenient drinks. Environmental concerns, however, reduced some consumers' willingness to buy plastic bottles.

Text B — Retail response

1. Retailers lowered bottled-water prices. They expect a deposit scheme to raise future bottled-water prices, causing some households to purchase supplies early.

2. Retailers must distinguish a movement along a demand curve from a shift of demand when interpreting sales data.

Table 1: Individual weekly demand for bottled water

Individual weekly demand for bottled water at two prices.

Table 2: Price and weekly bottled-water purchases

Price and weekly purchases of bottled water in Meridia.

When interpreting the two observations in Table 2 in parts (c) and (g), assume that other determinants of demand are unchanged and that weekly market purchases equal quantity demanded.

Energy-drink consumption in Danori

The government of Danori is concerned about high energy-drink consumption among teenagers. An economic study estimates the total utility, measured in monetary-benefit units, that a representative teenager obtains from bottles consumed during one week.

The study's data are shown in the following table.

Table 1: Total utility from weekly energy-drink consumption.

Treat one monetary-benefit unit as equivalent to one danor. Assume that total utility is zero when no bottles are consumed. The current market price is 9 danors per bottle. The government is considering an information campaign explaining the health risks associated with excessive consumption.

Electric vehicles in Caruba

Caruba imports most of its petrol and wishes to increase the adoption of electric vehicles (EVs). An annual household survey reports the following individual annual demand data for EVs, measured in EVs per household per year:

• At an EV price of 45 000 carubs, urban household demand is 0.04 EVs and rural household demand is 0.02 EVs.
• At an EV price of 40 000 carubs, urban household demand is 0.08 EVs and rural household demand is 0.04 EVs.
• At an EV price of 35 000 carubs, urban household demand is 0.12 EVs and rural household demand is 0.07 EVs.

There are 1000 urban households and 500 rural households in the surveyed market.

The government has announced that its existing EV purchase rebate will end next year. A follow-up survey estimates demand after this announcement. The resulting market-demand data are shown in Table 2.

Petrol-powered cars and EVs are substitutes. Public charging services and EVs are complements.

Household water demand in Seluru

Seluru is experiencing a severe drought. Economists divide each household's monthly water use into essential use and discretionary use, such as garden watering and private swimming pools. Table 1 shows quantities demanded at two water prices.

Table 1

Monthly household water use at two prices in Seluru. The city has 20,000 households.

The government is considering raising the price from 1 sol to 1.50 sols per cubic metre. It is also considering a water-conservation information campaign. A pilot campaign found that, at a price of 1.50 sols, essential use remained at 11 cubic metres per household while discretionary use fell from 5 to 3 cubic metres.