(a)
- Compare how petrol prices in the US and China differed between January 2008 and September 2009. [2]
- How does Fig. 1 show that the government sets the price of petrol in China rather than in the US? [2]
(b)[4]
Explain how petrol consumption creates externalities.
(c)
- Identify two points about the PED of petrol that the studies agree on. [2]
- Explain why the short-run and long-run PED values for petrol differ. [4]
(d)[6]
Discuss the possible consequences of the Chinese price-setting policy during January 2008 to September 2009.