Price elasticity of supply (PES) — practice question

Study the source material closely before you answer Question 1. Denmark is a North European, high-income country. Danish people enjoy high living standards and relatively long leisure time. They use this time in many different ways, such as cycling, jogging and playing golf. Danish workers are employed across a variety of industries. Denmark was once a major shipbuilding nation, but that industry is now shrinking. Ships have substitutes in other forms of transport. In addition, it may be possible to delay buying ships, they take a long time to build and they are costly to keep in storage. By contrast with shipbuilding, the Danish toy industry has expanded in recent years. Denmark’s shipbuilding and toy industries belong to the private sector. Changes in the public sector also affect Denmark’s economic performance. Table 1.1 shows Danish government spending and GDP between 2015 to 2021. Denmark is strongly involved in international trade. It usually records a surplus on the current account of its balance of payments. International trade influences the availability of goods in the country and its foreign exchange rate. It also affects the country’s GDP and employment level. As in most countries, the way people work in Denmark has altered in recent years. More people now spend at least part of their working hours working from home. This change is expected to influence productivity and help firms retain their workers. Households may be encouraged to move away from cities and purchase larger homes. There may also be changes in demand for transport, demand for food sold in city centres and firms’ need for office space.