Text A, Paragraph 1
In response to a price increase for public transport in Brazil, the quantity of commuters using buses has decreased slightly, indicating that the service has a relatively low price elasticity of demand.
Define the term price elasticity of demand as indicated in bold (Text A, Paragraph 1).
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Text B, Paragraph 2
The pharmaceutical industry in Germany often deals with products that are price inelastic because consumers continue to buy necessary medications even when prices rise.
State two factors that could explain the inelastic price elasticity of demand in the pharmaceutical industry, as indicated in bold (Text B, Paragraph 2).
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Text C, Paragraph 3
In Japan, the price of train tickets increased from ¥400 to ¥500, leading to a reduction in the number of daily passengers from 10,000 to 9,000.
Calculate the price elasticity of demand (PED) for train tickets in Japan using the data provided in (Text C, Paragraph 3).
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Text A, Paragraph 3
A luxury car manufacturer in Italy has cut prices to boost sales, taking advantage of the elastic price elasticity of demand for their vehicles.
Outline why cutting prices can increase total revenue when demand is elastic, as indicated in bold (Text A, Paragraph 3).
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2 marksExtract A, paragraph 3
Egypt is currently experiencing one of its worst economic crises. Consumer prices have been steadily rising, severely burdening Egyptian households. The information in Table 1 below refers to Egypt’s economy.
Table 1
2021 | 2022 | 2023 | 2024 | |
Consumer Price Index (CPI) | 110.20 | 118.20 | 148.70 | 193 |
Inflation rate (%) | 4.36% | 7.26% |
The Russian invasion of Ukraine was a major catalyst for Egypt's economic crisis.
Egypt depends on Russia and Ukraine for 80% of its wheat imports, and disruptions in the global grain market led to wheat prices surging. Additionally, the energy crisis caused by the invasion severely impacted Egypt, as the country imports around 100 million barrels of crude oil annually, leading to increased production and manufacturing costs.
The exchange rate between the Egyptian pound and the US dollar is given by: 1 USD = 48.35 EGP
In 2022, the price of wheat per tonne was equal to 10,500 Egyptian pounds. By the end of 2023, the price of wheat increased by 31% and the volume of imported wheat decreased from 6.8 million tonnes in 2022 to 5.3 million tonnes in 2023.
Using the information provided above, calculate the price elasticity of demand (PED) for imported wheat.
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Extract A, paragraph 1
Egypt is currently experiencing one of its worst economic crises. Consumer prices have been steadily rising, severely burdening Egyptian households. The information in Table 1 below refers to Egypt’s economy.
Table 1
2021 | 2022 | 2023 | 2024 | |
Consumer Price Index (CPI) | 110.20 | 118.20 | 148.70 | 193 |
Inflation rate (%) | 4.36% | 7.26% |
The Russian invasion of Ukraine was a major catalyst for Egypt's economic crisis.
Egypt depends on Russia and Ukraine for 80% of its wheat imports, and disruptions in the global grain market led to wheat prices surging. Additionally, the energy crisis caused by the invasion severely impacted Egypt, as the country imports around 100 million barrels of crude oil annually, leading to increased production and manufacturing costs.
The exchange rate between the Egyptian pound and the US dollar is given by: 1 USD = 48.35 EGP.
In 2022, the price of wheat per tonne was equal to 10,500 Egyptian pounds. By the end of 2023, the price of wheat increased by 31% and the volume of imported wheat decreased from 6.8 million tonnes in 2022 to 5.3 million tonnes in 2023.
Using your answer in question 5, outline how Egypt’s annual expenditure on wheat will change if wheat prices continue to surge.
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Text A, Paragraph 1
In South Africa, demand for luxury holidays has increased significantly as household incomes have risen, demonstrating a high income elasticity of demand.
Define the term income elasticity of demand as indicated in bold (Text A, Paragraph 1).
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Text D, Paragraph 2
In Singapore, a family’s income rose from $4,000 to $5,000 per month, and their consumption of high-end electronics increased from 4 to 6 units per month.
Calculate the income elasticity of demand (YED) for high-end electronics in Singapore using the data from (Text D, Paragraph 2).
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Text C, Paragraph 2
In Malaysia, rising incomes have led to a change in demand for low-cost clothing, a typical inferior good.
Outline how an inferior good reacts to changes in income, as indicated in bold (Text C, Paragraph 2).
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Text C, Paragraph 1
As part of a pricing strategy, a luxury clothing brand in France has decided to decrease prices to attract more customers. Since luxury goods often have high price elasticity, the brand anticipates a significant response in demand. Analysts are observing how this pricing strategy impacts total revenue and the company’s market share.
Using a demand and supply diagram, explain how price elasticity of demand might impact the total revenue for a luxury clothing brand in France when prices decrease.
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Text D, Paragraph 2
In an attempt to address negative externalities, the Greek government recently increased taxes on alcohol. This measure is expected to affect government revenue and alcohol consumption. Economists are monitoring the policy’s effectiveness and its impact on alcohol sales.
Using a demand and supply diagram, explain how price elasticity of demand might affect government revenue when taxes on alcohol are increased in Greece.
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Text E, Paragraph 3
As China’s middle class expands, purchases of luxury goods such as designer handbags have been increasing significantly. Many of these goods are income elastic in demand. Retailers are capitalising on this trend by introducing new high-end products aimed at affluent consumers.
Using a demand and supply diagram, explain how a rise in income might affect the market for luxury goods in China.
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Text A, Paragraph 2
Global price fluctuations have affected many countries that rely on exporting primary commodities, such as coffee and copper. Economists note that the demand for these commodities often responds differently to price changes compared to manufactured goods like electronics.
Explain why the price elasticity of demand for primary commodities is often different from that for manufactured products.
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