The question, however, is whether this is affordable and whether the Australian government should instead focus all of this spending in other areas and so allow Indonesia to make full use of its comparative advantage.

Source: adapted from; Melanie Burton, Australia lists nickel as ‘critical mineral’ to unlock billions in support, reuters.com, 16 February 2024

1(a)Price Elasticity DemandMedium2 marks

Table 1.1 shows that, between 2022 and the forecast for 2024, the quantity of nickel demanded is expected to change by 17.2% and the price of nickel is expected to change by 8.2%.

Using the data in Table 1.1, calculate the price elasticity of demand (PED) for nickel between 2022 and the forecast for 2024.

PED value

1(b)Price Elasticity DemandMedium2 marks

State what this estimate suggests about the PED for nickel and why this estimate might be considered ‘highly unusual’.

Answer

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1(c)Indirect Taxes SubsidiesHard4 marks

With the help of a demand and supply diagram, explain the effect of a subsidy on the production of nickel in Australia and consider whether the impact will always be as expected.

Answer

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1(d)Fiscal PolicyHard6 marks

‘The Australian government plans a large increase in its spending.’

Assess the possible effects of a large increase in government spending by the government on the Australian economy.

Answer

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1(e)Comparative Advantage TradeHard6 marks

Assess whether the principle of comparative advantage should be the only factor to consider when the Australian government decides whether to support the production of nickel.

Answer

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