Economics 0455 · IGCSE · Price elasticity of demand (PED)
Price elasticity of demand (PED) — practice question
Drought conditions in the Pacific Coast region of the US, together with rules that cap how much salmon may be taken from the wild, have cut the supply of wild salmon. These restrictions were introduced to prevent market failure in the salmon market. Even so, the effect of this on salmon producers’ revenue is unclear. Also, producers of farmed salmon in the US states of Washington and Alaska have been given subsidies by the US government.
(a)[2]
Define supply in economics.
(b)[4]
Explain one market failure that could arise in the salmon market.
(c)[6]
Analyse how price elasticity of demand calculations can be used to infer changes in a firm’s revenue.
(d)[8]
Discuss whether government subsidies are beneficial for producers or not.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The quantity of products firms are willing to sell” …