Competitive Market Equilibrium (DP IB Economics: HL)

Text B, Paragraph 2

The housing market in the UK has seen rapid changes in recent years. Housing supply has been unable to keep pace with increasing demand, creating shortages and pushing prices upward.

Outline one possible cause of excess demand in the housing market (Text B, Paragraph 2).

Text C, Paragraph 1

In Brazil, fluctuations in the coffee industry have led to periods of surplus as supply outpaces demand. This surplus has affected the income of farmers and placed pressure on an industry that is already struggling to survive

Draw a diagram to show the effect of excess supply in the coffee market in Brazil.

Text F, Paragraph 2

In response to drought conditions in California, the price of water has risen sharply, acting as a rationing mechanism. The effect has been more dramatically felt in lower income households.

Define the term rationing as indicated in bold in (Text F, Paragraph 2).

Text A, Paragraph 2

In the UK, the price of electric vehicles has risen due to growing demand. This price increase is causing producers to allocate more resources to electric vehicle production.

Draw a diagram showing how the price mechanism allocates resources in response to increased demand for electric vehicles.

Text C, Paragraph 3

In Vietnam, increased improvements to technology in rice production have led to a higher producer surplus for the farmers. This has led to an improvement in their quality of life.

Define the concept of producer surplus indicated in bold in the Vietnamese rice market (Text C, Paragraph 3).

Text E, Paragraph 3

In Australia, the introduction of a subsidy for electric car producers has increased the supply, reducing prices and increasing the consumer and producer surplus.

Question: Draw a diagram showing the impact of the subsidy on consumer and producer surplus.

Text B, Paragraph 3

Cambodia and China plan to create the "Fish and Rice Corridor" in northwestern Cambodia, near the Tonle Sap Lake. This area is the largest freshwater lake in Southeast Asia. The corridor aims to develop modern and eco-friendly farming practices, supporting the modernisation of Cambodia’s fishing and rice industries, lowering costs for rice farmers, and boosting long-term exports.

Using a supply and demand diagram, illustrate the likely effect on the market for rice in Cambodia from the lowering costs for rice farmers (Text B, Paragraph 3).