Consider Figure 1 below, which depicts the rubber market in
Malaysia. At the initial market equilibrium, the total quantity
produced is 500 kg per year and the average price is RM7 per
kg.
Figure 1: Market equilibrium in the Malaysian rubber market
Consider Figure 1 Below Which Depicts The Rubber Market In Malaysia At The Initial Market Equilibrium The Total Quant 1 (17.66 KiB) Viewed 17 times
(a) A sudden increase in demand for rubber causes the demand
schedule to shift from D to D*. Explain the adjustments in prices
and quantity that would take place after the increase in demand (10
marks)
(b) Calculate the price elasticity of supply for rubber, and
comment on the degree of elasticity (10 marks)
RM10 RM7 Average Price 500 1000 D S D* Quantity of rubber (kg)
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