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5 marksTheory of Consumer Demand

CAPE Economics Unit 1 · 2021 · Paper 2 · Question 1(b)(i)

A car rental company, APB Motors, provides data showing rental fees and corresponding numbers of cars rented.

Calculate the price elasticity of demand when the rental fee increases from 1250 to 1400.

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Other parts of this question

  1. 1(a)Define the term 'production possibility frontier' and state how it illustrates the concept of scarcity.[4 marks]
  2. 1(b)(ii)Based on the calculated price elasticity of demand, suggest with reasons whether the owners of APB Motors should increase or decrease their rental fees.[4 marks]
  3. 1(c)With the aid of a fully labelled diagram, analyse the impact of a price floor of $700 on this market. Include a definition of the term 'price floor'.[12 marks]

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