Economics 2281 · O Level · Price elasticity of supply (PES)
Price elasticity of supply (PES) — practice question
China is the world’s biggest producer of gold, whereas India is the world’s biggest buyer of gold. Gold mining in China is becoming more capital-intensive, which is causing the supply of gold to be less price inelastic. Wages for workers in the industry are rising, but other production costs are falling.
(a)[2]
How would you define an industry as being ‘capital-intensive’?
(b)[4]
Explain two reasons why a product’s supply may show price inelasticity.
(c)[6]
Analyse how an increase in output affects fixed, variable and average costs.
(d)[8]
Discuss whether higher wages in an industry will persuade more people to work there.
Worked solution & mark scheme
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