IB Economics
Welker
Unit 1.2 Elasticities - PED
Quiz - 16 marks
HL and SL Questions (these should take 8 minutes each):
1. Using appropriate diagram(s), explain why the price elasticity of demand for people
with high incomes will differ from those with low incomes.. (4 marks)
2. Explain why a knowledge of the price elasticity of demand for their products would
enable businesses to make informed decisions about the prices they charge. (4
marks)
HL Question (This should take 16 minutes):
3. Assume the following equations represent the demand (in thousands) for energy
drinks and the demand for Red Bull® during one week in Zurich:
○ Energy drinks: Qd = 32 - 4P
○ Red Bull® energy drink: Qd = 24 - 6P
a. Calculate the PED for energy drinks and the PED for Monster energy
drinks between the prices of 3 CHF and 3.50 CHF. Show all your work. (4
marks)
b. Provide a valid explanation for the difference in PED between energy
drinks and Red Bull® energy drink. (2 marks)
c. If you were the manager of Red Bull® Zurich and the corporate office told
you to do anything possible to maximize sales revenues, how would you
change the price, and why? (2 marks)
SL Question (This should take 16 minutes):
4. “Demand for coffee is always inelastic, no matter what the price is, because
coffee is addictive and has very few substitutes.” Use an appropriate diagram to
illustrate your argument for or against this statement. (8 marks)