(1(a) Two Pairs of Substitutes:

1. Driverless cars and bus travel

2. Driverless cars and taxi travel

(1(b) Market Equilibrium for Driverless Cars in 2030: The market for driverless cars is not expected to
be in equilibrium in 2030. The extract indicates that initially, the supply of driverless cars may exceed
demand. The text states, "At first, the supply of driverless cars may exceed the demand." This suggests
an initial imbalance in the market.

(1(c) Price Elasticity of Supply (PES) of Driverless Cars: The calculated PES for driverless cars is 2.5. This
means that a predicted 8% rise in the price of driverless cars would cause a 20% rise in the quantity
supplied. The formula used is ���=% change in quantity supplied% change in pricePES=
% change in price% change in quantity supplied.

(1(d) Two External Costs Reduced by Driverless Cars:

1. Accidents: Driverless cars can reduce accidents, resulting in fewer injuries and deaths. This helps
to lower costs associated with healthcare, insurance claims, and vehicle repairs. Additionally,
fewer accidents can alleviate traffic congestion and reduce the overall societal cost of repairs.

2. Pollution: Driverless cars, often powered by electricity, are more environmentally friendly than
traditional vehicles. By reducing emissions and pollution, they contribute to public health
improvements, lower healthcare costs related to pollution-related illnesses, and lessen the
environmental cleanup burden.

(1(e) Relationship Between Educational Spending and Unemployment Rate: There is an expected
inverse relationship between educational spending and the unemployment rate. Countries allocating a
higher proportion of GDP to education are likely to have a lower unemployment rate. This is because a
more educated and skilled workforce tends to be more productive. Evidence supporting this includes
examples like New Zealand and the USA, where higher spending correlates with lower unemployment
rates. However, there are exceptions, like Argentina and South Africa, suggesting that other factors also
influence the unemployment rate.

(1(f) Benefits of Increase in House Building: Why it might:

1. Job Creation: House building creates jobs, leading to lower unemployment, increased income,
and improved living standards.

2. Affordability: Increased housing supply can lower prices, making homes more affordable,
reducing homelessness.

3. Economic Growth: More housing may attract businesses, providing more services and
contributing to economic growth.

4. Reduced Commute: Housing near workplaces saves travel time, reducing pollution and
congestion.
Why it might not:

1. External Costs: House building may impose external costs like environmental impact or strain on
public services.

2. Property Devaluation: Increased housing supply may reduce the value of existing homes,
impacting residents' wealth.

3. Opportunity Cost: The land used for housing could be used for other purposes like schools.

4. Temporary Jobs: Jobs generated may be temporary or seasonal, leading to unstable

employment.