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Supply · Paper 2 — Free Economics HL Practice Questions
1MasteryLAQFactors affecting supply10 marksPaper 2~15 min
The global market for lithium-ion batteries expanded rapidly alongside the growth of electric vehicles (EVs). In 2021, the price of lithium carbonate — a key input in battery production — rose from USD 6,000 per tonne to USD 17,000 per tonne. In 2022, new extraction technology reduced lithium extraction costs by . Over the same period, the price of EVs fell by , stimulating further EV production.
(a)
Using a supply and demand , explain how the rise in lithium carbonate prices in 2021 affected the market for lithium-ion batteries. [3 marks]
(b)
Evaluate the impact of the new extraction technology introduced in 2022 on the market for lithium-ion batteries. In your answer, consider the derived demand relationship between EVs and batteries, and assess the likely net effect on equilibrium price and quantity. [7 marks]
Solutions
2MasteryLAQFactors affecting supply10 marksPaper 2~15 min
The following data refers to Vietnamese Robusta coffee production in 2023.
Vietnamese coffee farmers faced a significant rise in the price of urea fertilizer, from USD 300 per tonne to USD 450 per tonne. Over the same period, the global price of Robusta coffee rose by 25 percent due to drought conditions in Brazil. Vietnam is the world's second-largest coffee producer. Some Vietnamese farmers began considering switching to pepper cultivation, which offered stable prices.
(a)
Using a correctly labelled supply , explain how the rise in urea fertilizer prices would affect the supply of Vietnamese Robusta coffee. [4 marks]
(b)
Analyse the likely net effect on Vietnamese coffee farmers' output decisions in 2023, given both the rise in fertilizer prices and the rise in the global price of Robusta coffee. [3 marks]
(c)
Evaluate whether Vietnamese coffee farmers should increase or reduce coffee production in 2023, considering the relative profitability of coffee versus pepper cultivation. [3 marks]
Solutions
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