Connect demand and supply decisions to equilibrium prices, elasticity, market outcomes and government intervention by interpreting diagrams, schedules and real product contexts.
The diagram shows the demand curve for a good.
What can be concluded about a single downward-sloping demand curve?
consumers increase demand when their incomes rise
consumers plan to buy less when prices rise
firms produce less as prices rise
firms sell more when prices rise
Davos is a ski resort in Switzerland famous for hosting a world economic conference for leaders from both private and public sectors. Topics discussed usually relate to global economic development. Hospitality firms in Davos depend on seasonal migrant labour, especially when they want to increase the supply of goods and services quickly.
Define supply.
Missions to outer space face the same basic economic problem as that experienced on Earth. The African Space Agency was created to improve science and technology on the African continent. This agency also aims to coordinate trade between African countries to help technological development. This may improve how markets work. In 2021, total government spending on this agency was more than $ 500 million.
Explain how a market allocates resources.
Read the source material carefully before answering Question 1.
Source material: Will Germany continue to be a strong economy?
Germany is a country with a trade surplus and a high GDP per head. It also has a budget surplus (government tax revenue greater than expenditure), a high HDI and a low inflation rate.
In recent years, German firms have exported a higher value of goods and services. This has contributed to the growth of world trade, caused partly by a fall in transport costs. A relatively large number of German firms produce both in Germany and in other countries, helped by better communications.
Germany is a major producer and exporter of luxury cars. Demand for luxury cars was influenced in 2018 by increases in incomes in Germany and abroad, a rise in the price of US luxury cars and, in some countries, a fall in the price of petrol.
Improvements in the quality of education and information on job vacancies have made it easier for workers to change jobs in Germany. This greater ability to change jobs has helped to reduce unemployment and to increase the country's output.
Fewer workers in the German car industry are now members of a trade union. As shown in Table 1.1, trade union membership in Germany has declined in recent years.
Table 1.1 selected data on the German labour market 2013-2016
A challenge facing Germany is its ageing population. The effect of an older labour force is uncertain. It may mean firms become reluctant to invest in new technology, but a shortage of young workers may encourage firms to buy more capital goods.
Germany's population may fall and there will soon be fewer Germans aged under 30 than over 60 unless immigration continues at a relatively high rate. Immigration might increase both the country's labour force and its government's spending on education.
Analyse why the price of German luxury cars may have increased in 2018.