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4 marksCentral Problem of Economics

CAPE Economics Unit 1 · 2021 · Paper 2 · Question 1(a)

Define the term 'production possibility frontier' and state how it illustrates the concept of scarcity.

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Other parts of this question

  1. 1(b)(i)Calculate the price elasticity of demand when the rental fee increases from 1250 to 1400.[5 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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