Economics 9708 · syllabus 2
Cambridge A Level Economics 9708 — The price system and the microeconomy (AS Level) topical past papers
How demand and supply set prices: shifts and movements, the elasticities of demand and supply, equilibrium, linked markets, and consumer and producer surplus.
- Questions
- 959
- Years
- 2002–2026
- With mark scheme
- 99%
- Questions 2022–2026
- 307
Anyone can browse these pages. Opening the questions and their mark schemes takes a free Momentum account.
What The price system and the microeconomy (AS Level) covers
Demand is the quantity of a good that buyers are willing and able to buy at each price over a period of time; supply is the quantity sellers are willing and able to offer. A change in the good's own price causes a movement along a curve, a change in the quantity demanded or supplied. A change in any other condition shifts the whole curve: for demand, income, the prices of substitutes and complements, tastes and population; for supply, costs of production, technology, indirect taxes and subsidies, and the number of firms. Markets are also linked: goods can be in joint, competitive or derived demand, or in joint supply.
Elasticities measure how strongly quantity responds. Price elasticity of demand (PED) compares the percentage change in quantity demanded with the percentage change in price, and it decides what a price change does to total revenue: a rise in price increases revenue when demand is price inelastic and reduces it when demand is price elastic. Income elasticity (YED) separates normal goods from inferior ones, cross elasticity (XED) separates substitutes from complements, and price elasticity of supply (PES) depends mainly on spare capacity, stocks and the time producers have to respond.
The market is in equilibrium where the quantity demanded equals the quantity supplied. An increase in demand shifts the demand curve to the right and creates excess demand at the old price, so the price is bid up; as it rises, quantity supplied extends along the supply curve and quantity demanded contracts along the new demand curve, until the market clears at a higher price and quantity. An increase in supply shifts the supply curve to the right, lowering the price and raising the quantity. Through these movements the price mechanism rations goods, signals shortages and surpluses and gives producers an incentive to respond. Consumer surplus is the area below the demand curve and above the price; producer surplus is the area above the supply curve and below the price. This is AS content, examined on Papers 1 and 2.
In the syllabus
The headings this topic has in the Cambridge International 2026–2028 syllabus, as the board prints them.
- 2 The price system and the microeconomy (AS Level)
- 2.1 Demand and supply curves
- 2.2 Price elasticity, income elasticity and cross elasticity of demand
- 2.3 Price elasticity of supply
- 2.4 The interaction of demand and supply
- 2.5 Consumer and producer surplus
What you should be able to do
- Distinguish a movement along a demand or supply curve from a shift, and give the causes of each
- Calculate PED, YED, XED and PES, and interpret their signs and sizes
- Explain how PED determines the effect of a price change on total revenue
- Analyse how shifts in demand and supply change equilibrium price and quantity, including in linked markets
- Explain the rationing, signalling and incentive functions of the price mechanism
- Show consumer and producer surplus on a diagram and explain how they change when the price changes
Key ideas
- PED = % change in quantity demanded ÷ % change in price; demand is price elastic if the absolute value exceeds 1 and price inelastic if it is below 1
- YED = % change in quantity demanded ÷ % change in income: positive for normal goods, negative for inferior goods
- XED = % change in quantity demanded of good A ÷ % change in the price of good B: positive for substitutes, negative for complements
- PES = % change in quantity supplied ÷ % change in price; supply is more elastic with spare capacity, stocks and more time
- Total revenue = price × quantity sold
- Consumer surplus: what consumers are willing to pay minus what they actually pay; producer surplus: the price producers receive minus the lowest price at which they would supply
How The price system and the microeconomy (AS Level) has been examined
From 2022 to 2026, The price system and the microeconomy (AS Level) was on Paper 2 · AS Level Data Response and Essays in 13 of 14 exam series, worth about 25% of that paper’s marks.
| Paper | Questions | Share of marks | Series |
|---|---|---|---|
| Paper 1 · AS Level Multiple Choice | 265 | 24% | 14 of 14 |
| Paper 2 · AS Level Data Response and Essays | 42 | 25% | 13 of 14 |
Momentum’s own count, over the questions in its bank for these years: a series is one exam session, every zone included, and a question filed under two chapters counts in both. Median marks per question: 1. The bank files this topic together with neighbouring ones, so these figures count every question in its chapters, including some on those topics.
Filed in Momentum under: The Price System and the Micro Economy.
A worked example
A café raises the price of a sandwich from $4.00 to $5.00, and its weekly sales fall from 500 to 450. Calculate the price elasticity of demand and the change in the café's weekly revenue from sandwiches.
- Percentage change in price: (5.00 − 4.00) ÷ 4.00 × 100 = +25%
- Percentage change in quantity demanded: (450 − 500) ÷ 500 × 100 = −10%
- PED = −10% ÷ +25% = −0.4, so demand is price inelastic
- Revenue before: $4.00 × 500 = $2000; revenue after: $5.00 × 450 = $2250
- Revenue rises by $250, as an inelastic PED predicts: the 25% rise in price outweighs the 10% fall in sales
Answer: PED = −0.4, so demand is price inelastic, and weekly revenue rises by $250, from $2000 to $2250
Written by Momentum for this page, with its own numbers; it is not taken from a past paper.
Mistakes that cost marks
- Writing that a rise in price shifts the demand curve to the left — a change in the good's own price moves the market along the demand curve; only a change in another condition of demand shifts it
- Turning the elasticity formula upside down — the percentage change in quantity always goes on top, and an inverted answer of 2.5 instead of 0.4 reverses the conclusion about revenue
- Calling a good with a YED of +0.4 inferior because the figure is below 1 — any positive income elasticity means a normal good; an inferior good's YED is negative
- Assuming a price cut always raises revenue — it does only when demand is price elastic; with inelastic demand the fall in price outweighs the rise in sales
- Judging elasticity from the slope of the curve alone — along a straight-line demand curve the slope is constant, but PED falls from elastic at high prices to inelastic at low prices
Exam technique
- In Paper 1, sketch the market before reading the options: decide which curve shifts and in which direction, and read off the new price and quantity; when both curves shift, the change in either price or quantity is uncertain unless the sizes of the shifts are known
- In data-response calculations, write the formula, substitute the percentage changes and keep the sign: −0.4 tells the examiner both that demand is price inelastic and that quantity moved against price
- When asked to explain an elasticity, use its determinants in the context — the number of close substitutes, the share of income spent, whether the good is a necessity, the time period
- In essays, evaluate the usefulness of elasticity estimates: they hold only over the price range measured, assume other conditions are unchanged and alter over time
Practising in Momentum
- Every question in a chapter as one list, from every paper and year in the bank, newest first or shuffled.
- Each question turns over to its own part of the mark scheme, where the board published one.
- Narrow by paper, year, session, zone and marks, and star the questions worth keeping.
- Pick chapters, a number of questions and a time, and the exam builder draws a mock to sit and mark.
Past-paper questions and mark schemes are the copyright of Cambridge International. Momentum shows them to signed-in learners for revision and does not publish them on these pages.