Economics 0455 · IGCSE · Price elasticity of demand (PED)
Price elasticity of demand (PED) — practice question
For sugar in most countries, the price elasticity of demand (PED) is below 1. In 2017, sugar prices declined. Even so, specialised, higher-quality sugar grown in countries such as Mauritius saw a smaller fall than the average world price. Efficient producers, including some farmers in Brazil with low fixed production costs, were also less exposed to the price drop.
(a)[2]
State the equation for calculating PED.
(b)[4]
Explain two factors that could make the price of sugar fall.
(c)[6]
Analyse the possible reasons a producer’s fixed cost could rise.
(d)[8]
Discuss whether a country would benefit from specialising in an agricultural product such as sugar.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The percentage change in quantity demanded divided by the percentage change in price.” …