Edexcel International A Level Economics
Edexcel International A Level Economics Consumer Behaviour and Demand Exam Questions
Free Edexcel International A Level Economics exam questions for Consumer Behaviour and Demand, with a mark scheme for every pack. Covers rational decision making, the demand curve, shifts in demand, price, income and cross elasticities of demand and behavioural economics.
Consumer Behaviour and Demand exam questions
1 question pack of real past exam questions, each with its mark scheme. Do not stop after a few: answer as many as you can without notes, then mark every answer with the mark scheme. The more questions you do, the more quickly you will spot how examiners ask about each idea.
About Edexcel International A Level Economics Consumer Behaviour and Demand
Consumer behaviour and demand is a core part of Unit 1 of Edexcel International A Level Economics. You learn why consumers buy what they do, how the demand curve is derived, what causes demand to shift, and how responsive demand is to changes in price, income and the prices of related goods. The topic also introduces behavioural economics, which questions the assumption that consumers are always rational. It feeds directly into price determination and market failure, and elasticity is used again in Units 3 and 4. Examiners regularly test elasticity calculations, the link between PED and total revenue, and diagrams showing shifts in demand.
What you need to know
- Rational decision making Traditional theory assumes consumers aim to maximise utility and firms aim to maximise profit. Diminishing marginal utility helps explain why the demand curve slopes downwards.
- Demand curves Demand is the quantity consumers are willing and able to buy at each price. A change in price causes a movement along the curve; changes in income, tastes, the price of substitutes and complements, advertising and population shift the curve.
- Price elasticity of demand PED = % change in quantity demanded / % change in price. Know the determinants (substitutes, proportion of income, necessity, time, addictiveness) and the link with total revenue.
- Income and cross elasticity YED = % change in quantity demanded / % change in income: positive for normal goods, above 1 for luxuries, negative for inferior goods. XED = % change in quantity demanded of good A / % change in price of good B: positive for substitutes, negative for complements.
- Behavioural economics Consumers may not act rationally due to bounded rationality, bounded self-control, biases such as rules of thumb, anchoring and availability, social norms and concern for fairness.
Common mistakes in Consumer Behaviour and Demand
- Writing PED as % change in price over % change in quantity. The formula is % change in quantity demanded divided by % change in price.
- Calling an increase in the good's own price a fall in demand. It causes a contraction in quantity demanded, a movement along the curve, not a shift.
- Forgetting the sign in XED and YED. The sign is what tells you whether goods are substitutes or complements, or normal or inferior.
- Assuming elastic demand means a large price change. Elasticity is about the responsiveness of quantity compared with price, not the size of either change.
- Listing behavioural biases without examples. Give a clear example, such as anchoring on a recommended retail price, to show understanding.
Try three Consumer Behaviour and Demand exam-style questions
1. When average incomes rise by 5%, the quantity demanded of bus travel falls by 2%. Calculate the income elasticity of demand and identify the type of good. (3 marks)
Show the mark scheme answer
YED = -2 / 5 = -0.4; negative YED; bus travel is an inferior good.
2. Explain two factors that would make the demand for a product price inelastic. (4 marks)
Show the mark scheme answer
Few close substitutes, so consumers cannot easily switch; the good is a necessity or habit forming; it takes a small proportion of income; short time period to respond; two factors each explained.
3. With the help of a diagram, explain the likely effect on the market for coffee of a fall in the price of tea. (6 marks)
Show the mark scheme answer
Tea and coffee are substitutes with positive XED; a fall in the price of tea causes some consumers to switch to tea; demand for coffee shifts left; equilibrium price and quantity of coffee fall; diagram with correctly labelled axes, D1 to D2 shift left and new equilibrium shown.
Consumer Behaviour and Demand FAQs
What does Edexcel IAL Economics Consumer behaviour and demand cover?
It covers rational decision making, demand curves and their shifts, price, income and cross elasticities of demand, and the ideas of behavioural economics.
Which unit is Consumer behaviour and demand examined in?
It is part of Unit 1, Markets in action, the first IAS unit.
What elasticity values should I remember?
PED between 0 and -1 is inelastic and beyond -1 is elastic; YED is positive for normal goods and negative for inferior goods; XED is positive for substitutes and negative for complements.
