The car and tyre markets are closely linked. The five biggest tyre companies once produced 66% of all tyres. Since more than 250 Chinese firms entered, the combined global share of the top five has fallen to below 50%. This has also altered the price elasticity of demand (PED) for tyres sold by individual firms. Some of these businesses are state-owned enterprises and others belong to the private sector.
(a)[2]
Identify two types of business organisation that are part of the private sector.
(b)[4]
Explain what impact a larger number of firms making tyres would have on the PED of tyres sold by an individual firm.
(c)[6]
Analyse, using a demand and supply diagram, the effect of a rise in demand for cars on the market for tyres.
(d)[8]
Discuss whether a large firm will make more profit per unit sold than a small firm.
Worked solution & mark scheme
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