2019 May (World Price, Consumer Surplus) Paper 3 HL

2019 May (World Price, Consumer Surplus) Paper 3 HL

Due to increased awareness of the possible health benefits of vitamin C, the demand for oranges in Country Z increases by 60,000 per month at each price.

 

(d) Calculate the change in expenditure on imported oranges as a result of the increase in demand.

Old Imported Amount = 40,000

New Imported Amount after Change in Demand = 100,000 at $2 price

Change in Demand = 60,000

 

Change in expenditure = 60,000 x 2 = $120,000

(e) (i) Calculate the change in consumer surplus in Country Z as a result of the increase in the demand for oranges.

(ii) Calculate the change in social (community) surplus as a result of the increase in the demand for oranges.

Change on Producer Surplus = 0

Change in Consumer Surplus = 78,000

Change in Community Surplus = Change in CS + Change in PS = 78,000

 

(f) State one administrative barrier that Country Z could use is order to restrict imports.

 

·Requirements for packaging/labeling

·Health/safety inspection procedures

·Changes in permitted specifications for a product

·Increased bureaucracy

2017 (World Price/ Tariffs) Paper 3 HL

2017 (World Price/ Tariffs) Paper 3 HL

(c) Using the diagram on page 10, calculate the import expenditure on rice.

 

$3 x (11,000 – 2,000) = $27,000

 

Local domestic producers produce 2,000kg of rice when the price of rice is $3 but the quantity demanded by domestic citizens is 11,000.

 

9,000kg of rice are bought at $3 a kg therefore $27,000 was spent on imported rice.

(e) Alpha’s government decides to impose a $2 tariff on each kilogram of imported rice. Using the diagram on page 10, calculate the government revenue that results from the imposition of the tariff.

 

The Tariff is $2 and it’s only charged on goods that are imported.

 

The $2 tariff raises the price of rice to $5 per kg and our domestic producers will produce 6,000kg of rice and 9,000 kg of rice will be demanded.

 

That means that 3,000kg will be imported at $2 per kg =

$2 x 3,000 = 6,000 = Gov’t Revenue