Cut-flower supply in Bellara

Read the extracts and answer the questions that follow.

Text A — Seasonal flower production

1. Bellara’s flower growers sell freshly cut roses. Roses are perishable and cannot be stored for long. When prices rise unexpectedly, growers can increase cutting and packaging but cannot immediately produce new mature flowers.

2. Greenhouse space and suitable workers are limited during the festival season. The observed supply response was price inelastic.

Text B — New production methods

1. Growers are considering climate-controlled greenhouses, worker training and refrigerated storage. Refrigeration extends the selling period but does not shorten the biological growth cycle.

2. The growers’ cooperative expects supply to become price elastic outside the peak season, when greenhouses have unused capacity. Environmental groups are concerned about the energy used by refrigeration and climate control.

Table 1 — Festival rose supply

Festival rose supply in Bellara

Table 2 — Off-season supply projection

Off-season rose supply projection

Vaccine production in Mendora

Read the extracts and answer the questions that follow.

Text A — Emergency demand

1. An outbreak increased demand for a vaccine produced in Mendora. In the first three months, firms could not rapidly expand sterile production lines, so supply had a low price elasticity of supply.

2. Vaccine doses can be stored only under controlled temperatures. Limited cold-storage capacity restricted the quantity available for immediate sale.

Text B — Expanding capacity

1. The government financed modular production lines and training for laboratory technicians. Modular equipment can be reassigned between similar vaccines, increasing factor mobility.

2. Critics argue that public funds may create excess capacity after the outbreak and that safety testing cannot be accelerated without increasing risks.

Table 1 — Initial vaccine response

Initial monthly vaccine supply response to a price change in Mendora.

Table 2 — Projected modular-line response

Projected modular-line response for vaccine supply in Mendora.

Hotel-room supply in Solena

Read the extracts and answer the questions that follow.

Text A — A festival weekend

1. Solena hosts an annual music festival. Once all licensed hotel rooms are available, the number of room-nights cannot be increased immediately. Weekend hotel supply is therefore close to perfectly price inelastic.

2. Hotels cannot store unsold room-nights for future sale. A room left empty tonight cannot be sold twice tomorrow.

Text B — Increasing accommodation

1. In the medium term, hotels can renovate unused floors and train additional staff. In the longer term, firms can build new hotels if planning permission is granted.

2. The city is considering faster permits and grants for converting vacant offices. Officials expect these policies to increase unused capacity available to accommodation providers, but residents fear congestion during future festivals.

Table 1 — Festival hotel supply

Festival hotel-room supply at two average room prices.

Table 2 — Supply after office conversion

Projected supply assumptions after office conversion

Renewable electricity in Ventara

Read the extracts and answer the questions that follow.

Text A — Electricity during peak demand

1. Ventara relies increasingly on wind generation. When electricity prices rose during a period of high demand, wind farms could increase supply only slightly because wind conditions and installed turbine capacity were fixed. Supply was price inelastic.

2. Electricity is difficult to store without batteries. Some wind output is currently wasted during low-demand periods because the grid cannot absorb it.

Text B — Storage and grid investment

1. The government proposes battery facilities and stronger transmission links. Batteries would allow electricity generated earlier to be released when prices rise, increasing the ability to store electricity.

2. Opponents cite high public costs, battery disposal problems and the possibility that transmission construction will take several years.

Table 1 — Peak-period wind supply

Peak-period wind electricity supply in Ventara

Table 2 — Projected response with storage

Projected peak-period wind supply response with storage.

Brick production in Carmina

Read the extracts and answer the questions that follow.

Text A — Construction demand

1. A house-building programme increased the demand and price for bricks. Several brickworks had idle kilns and could increase shifts, producing a relatively large supply response. Brick supply was price elastic during the first year.

2. As production expanded, suitable clay and trained kiln operators became harder to obtain. Transport and energy costs also increased.

Text B — Industry proposals

1. Brick producers propose worker training and shared rail terminals. The government is also considering grants for efficient kilns.

2. Economists warn that firms may eventually reach full capacity, after which output can increase only if new kilns are constructed. Environmental groups oppose increased clay extraction and fuel use.

Table 1 — First-year brick supply

First-year supply of bricks in Carmina.

Table 2 — Projected response at higher capacity use

Projected brick supply response at higher capacity use.

Cloud-computing capacity in Digoria

Read the extracts and answer the questions that follow.

Text A — Server capacity

1. Digorian firms rent cloud-computing capacity. Providers initially had idle servers and could activate them rapidly after rental prices increased. Supply was therefore highly price elastic.

2. Once data centres approached capacity, new output required additional servers, electricity connections and specialist technicians. These constraints reduced responsiveness.

Text B — Flexible resources

1. Standardized servers can be reassigned between business customers, while technicians trained only for one proprietary system are less mobile. Providers are investing in cross-training and modular data centres.

2. The government proposes faster grid connections and training grants. Supporters expect higher mobility of factors of production, while critics cite electricity use and the opportunity cost of subsidies.

Table 1 — Initial cloud-capacity response

Initial response of cloud-computing capacity to a rental-price increase.

Table 2 — Response near data-centre capacity

Cloud-computing capacity response near data-centre capacity

Recycled-paper supply in Ecoria

Read the extracts and answer the questions that follow.

Text A — Expanding recycled output

1. Ecoria’s packaging firms are replacing new paper with recycled paper. When recycled-paper prices increased, mills raised output, but collection systems could not immediately provide enough waste paper. Supply remained price inelastic.

2. Finished paper can be stored, but unprocessed waste paper requires sorting space and may be damaged by moisture.

Text B — Collection and processing

1. Municipalities propose separate household collection, covered sorting centres and grants for additional pulping lines. These policies may increase inventories and unused processing capacity.

2. Producers expect supply to become more responsive if collection workers and machinery can be moved between districts. This would increase factor mobility, although the programme would require taxation and additional transport.

Table 1 — Current recycled-paper supply

Current recycled-paper supply in Ecoria.

Table 2 — Projected supply after reforms

Projected recycled-paper supply after reforms in Ecoria.

Cocoa-price volatility in Korala

Korala is a developing economy that depends heavily on cocoa exports. Following an increase in global demand, the price of cocoa rose sharply. Chocolate manufacturers were able to respond more strongly to a rise in the price of their product because they held inventories and had unused factory capacity.

Table 1: Cocoa and chocolate supply data

Table 1: Producer prices and quantities supplied for cocoa and manufactured chocolate before and after the price increase.

The government of Korala is considering a buffer-stock scheme, an export-revenue stabilization fund and policies to diversify production away from cocoa.

Housing supply in Belland

Belland has experienced a rapid increase in demand for housing. In the short run, construction firms face shortages of skilled workers and approved building land. Over a longer period, firms can train workers, purchase machinery and obtain planning permission.

Table 1: Response of new housing supply to a price increase

Housing prices and annual new-house supply in Belland before and after a price increase.

The government is considering planning reform, construction-training subsidies and subsidies for modular-home factories.

Fish supply and quotas in Maruva

To protect fish stocks, Maruva imposes a fixed annual wild-fish catch quota. A fall in the regional fish catch raises the market price, but Maruvan fishers are already catching the quota and cannot increase output beyond it. The government later increases the quota after scientific evidence indicates that the fish population has recovered. It is also considering investment in sustainable aquaculture.

Table 1: Wild-fish market data

Wild-fish prices and annual quantities supplied in three situations in Maruva.

Domestic solar-panel production in Arandia

Arandia is encouraging the installation of solar panels. Domestic manufacturers initially have unused machinery and inventories of components. After expanding output, however, they approach full capacity and experience shortages of specialized workers.

Table 1: Responses of domestic solar-panel supply

Producer prices and annual quantities supplied at successive stages of domestic solar-panel production.

The government pays manufacturers a production subsidy of 20 arans for each panel produced during the first response.

Lithium exports from Darsana

Darsana is a major exporter of lithium ore. Rapid growth in electric-vehicle production has increased demand for lithium, but opening new mines requires geological surveys, environmental approval and transport infrastructure. Battery manufacturers use lithium as an input and are concerned about volatile prices.

For all calculations, assume the quoted price applies directly to the usable lithium input and ignore processing and ore-grade differences.

Table 1: Darsana's lithium supply

Darsana's annual lithium supply at two different prices.

Each electric-vehicle battery uses 8 kilograms of lithium. The government is considering support for lithium recycling and domestic battery manufacturing.

Coffee storage in Espera

Coffee is Espera's main export. A rise in world demand increases the price received by coffee producers. Current harvest output responds only slightly because coffee trees take several years to mature. However, exporters can release coffee beans held in warehouses.

Table 1: Coffee production and market supply

Coffee price, current production and total market supply before and after the demand increase.

The government is considering a national buffer-stock scheme under which an agency would buy coffee during periods of low prices and sell stored coffee during periods of high prices.