Price elasticity of supply (PES) — practice question

It is forecast that electric driverless cars will be on the roads by 2030. They have already been trialled on roads in some cities, including Pittsburgh in the USA. It is believed that driverless cars will cut accidents, bring lower repair costs and produce less pollution. Initially, supply of driverless cars may be greater than demand, but they are expected to become popular quickly. As more driverless cars are used, demand for bus travel and petrol stations may fall, and some taxi drivers may become redundant. By contrast, driverless cars will give more people, including the elderly, access to transport, so demand for out of town restaurants and entertainment venues is likely to rise. It has been predicted that the technology being developed for driverless cars will make their supply elastic. It is forecast that an 8% rise in the price of driverless cars would lead to a 20% rise in quantity supplied. Technological progress and the substitution of workers by machines are forecast to eliminate 80 million jobs in the USA. Job losses are also expected in other countries, and trade unions are likely to be less able to resist because membership is falling and governments are reducing the power of trade unions. Jobs thought to be at risk include accountants, train drivers and financial advisers. Demand for workers in other occupations, including doctors and dentists, may rise, but there is a danger that unemployment could increase. The better educated workers are, the easier it is for them to move from one occupation to another. Table 1.1 shows education spending as a percentage (%) of GDP and the unemployment rate in selected countries. Jobs selling houses and flats may fall, but the demand for building workers is expected to increase. Some people welcome house building in their area, while others oppose it.