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Cobalt is a key metal used in the batteries of electric cars - Edexcel - A-Level Economics A - Question 2 - 2021 - Paper 1
Question 2
Cobalt is a key metal used in the batteries of electric cars. China is the world’s largest producer of electric cars but has recently cut subsidies to its manufactur... show full transcript
Worked Solution & Example Answer:Cobalt is a key metal used in the batteries of electric cars - Edexcel - A-Level Economics A - Question 2 - 2021 - Paper 1
Step 1
Draw a supply and demand diagram
Answer
To begin with, you should draw the supply and demand curves for cobalt. Label the initial demand curve as D and the initial supply curve as S, intersecting at equilibrium point E. As new mines opened in 2018, there has been an increase in supply, which can be represented by a rightward shift of the supply curve to S1. Additionally, the reduction in Chinese subsidies may have reduced the demand for cobalt, shown by a leftward shift in the demand curve to D1.
Next, label the new equilibrium point as E1, which will illustrate that the price of cobalt has decreased due to the increased supply and decreased demand. Mark the new price level as P1, indicating the lower price of cobalt around the time period indicated in the graph.
Step 2
Answer (b) Between June 2018 and June 2019 the price of cobalt fell by:
Answer
To calculate the percentage decrease, you can use the following formula:
ext{Percentage Decrease} = rac{ ext{Original Price} - ext{New Price}}{ ext{Original Price}} imes 100
Assuming the original price was around 15:
ext{Percentage Decrease} = rac{40 - 15}{40} imes 100 = rac{25}{40} imes 100 = 62.5\%
Therefore, the correct answer is C: 62.5%.