Practise using PES to judge how quickly firms can change output after market shocks and evaluating capacity, inventories, production lags and policies that improve responsiveness.
Semi-conductors are widely used in the production of many types of electronic goods such as smartphones. It has been estimated that the price elasticity of supply for semi-conductors is 0.2 in the short run and 0.8 in the long run.
Explain what these estimates mean for producers of smartphones that use semi-conductors and consider the significance of the long-run estimate.
Semi-conductors are widely used in the production of many types of electronic goods such as smartphones. It has been estimated that the price elasticity of supply for semi-conductors is 0.2 in the short run and 0.8 in the long run.
Explain what these estimates mean for producers of smartphones that use semi-conductors and consider the significance of the long run estimate.
Follow the point-based marking guidance at the top of this mark scheme and award:
up to 3 marks for AO1 Knowledge and understanding up to 3 marks for AO2 Analysis up to 2 marks for AO3 Evaluation.
AO1 Knowledge and Understanding (max 3 marks)
Meaning of price elasticity of supply (1) an accurate formula (1) an explanation of what is meant by price inelastic supply based on an increase in price leading to a proportionately smaller increase in quantity supplied. (1).
AO2 Analysis (max 3 marks)
Analysis of why the values may differ due to e.g., the time period, level of stock, changes in the production process etc. Up to 2 marks for each reason explained. Maximum of 3 marks overall.
AO3 Evaluation (max 2 marks)
An assessment of the significance of the long run estimate - e.g. possible shortages in the production of goods that require semi-conductors (1); investment into improving supply chains (1); investment into expanding capacity (1).
AO1 Knowledge and understanding
AO2 Analysis
AO3 Evaluation