Answer Happy

RM17 Figure 2: Fall in supply due to weather conditions Average Price RM10 600 1000 S' S D* Quantity of rubber (kg) (c) There is a sudden and drastic change in weather conditions, causing supply of rubber to fall from S to S' (Figure 2 above). Compute the price elasticity of demand, and comment on the degree of elasticity (10 marks)

(d) Seeing that prices have increased to RM17, the government considers setting a price ceiling policy to stabilize prices. Explain the effects of this policy if the price is fixed at RM18 (5 marks) (e) Elaborate on the effects of price ceiling policy if price is fixed at RM10. Explain if your answer differs from part (d) (15 marks)