Economics 0455 · IGCSE · Price elasticity of supply (PES)
Price elasticity of supply (PES) — practice question
In 2014, the World Trade Organisation required China to remove its export quotas on rare earth metals, which are used in smartphones, laptops, tablets and other electronic equipment. China provides 90% of the world’s rare earth metals and is also the world’s biggest user. The supply of these metals is inelastic, so any change in their price alters the cost of producing a range of products.
(a)[2]
Define the term ‘export quota’.
(b)[4]
Explain how inelastic supply is different from perfectly elastic supply.
(c)[6]
Using a demand and supply diagram, analyse how a rise in the cost of producing smartphones will affect the smartphone market.
(d)[8]
Discuss whether a country that exports its raw materials always benefits its economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A restriction on the quantity/value of exports” …