7iTT > CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: COURSEBOOK

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>Unit 2
End-of-unit questions
EXAM-STYLE QUESTIONS: DATA RESPONSE AND ESSAY

The volatile price of cocoa . . d b the global commodities mark t

• • · I d' cocoa 1s determine Y e.
The price of many commod111es. me u '.~g
I5
h
there can be volatility in the market. The volatility
Price is set by supply and demand . As f·1gure ows.
in price i~ for various reasons.

Figure 1: •~• :,~~".::_:_oc:_~_f"nce ,.ur 1ci,de, 2C,'6-?'1 1 ·1_,,,., US cio!iars__

p_e_r_to_ n_n_e_J _ _ _ _ __ _ _ _ _ _ __

;\rrica, particularly Cote d'Ivoire a11d Ghana, is b:, far the biggest producer of cocoa, supplying over 70"/oof
the world', product. Supply is never certain, changing for all sorts of reasons. For example, the Harmattan
winds blow in sand from the Sahara desert , which destroy young cocoa pods and remove the moisture from
the soil. This is a regular problem in Cot e d' Ivoi re a nd Ghana. In 2019, producers in Ghana suffered from an
outbreak of swollen shoot cocoa disease which affected an estimated 16% of the year's crop.
The global demand for chocolate is forecast to grow al around 3% per annum. In particular, consumers in
high-income countries have an increasing demand for dark chocolate on account of its positive health bene
With a higher cocoa content than cheaper chocolate, this has increased the demand for cocoa beans. Much of
increased demand for this chocolate is from the Asia-Pacific region.

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CONTINUED
a Describe how the world price of cocoa is determined. [1]
b Using the data in Figure I, consider whether the price of cocoa beans is volatile. [3]
C Explain whether the price elasticity of supply of cocoa beans is price elastic or price inelastic?
Justify your answer. [2]
d With the help of a diagram, explain how the Harmattan winds or the outbreak of swollen shoot
cocoa disease are likely to affect the world price of cocoa. [4]
e Explain one demand-side and one supply-side reason for the change in the world price of cocoa
from July 2016 to September 2017. [4]
f Discuss whether demand-side or supply-side factors are more important in determining change
in the world price of cocoa. [6]
Essay
2 a With the help of a diagram, explain what happens to consumer surplus when the price of a product
increases and consider how this might occur in a market of your choice. [8]
b Discuss what factors determine the change in consumer surplus and how these factors vary for
different types of goods and services. [12]
3 a Explain the difference between an inferior good and a necessity and consider whether this
difference is clear. [8]
b Discuss whether estimates of income elasticity of demand are likely to be more useful than estimates
of price elasticity of demand to the owner of a small garment manufacturing business. [12]

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