VJC_H1 ECONS_ans

Suggested Answers for H1 CSQ 1 (a) Compare the trends in domestic and industrial electricity consumption in the UK from 2010 to 2014. [2] Both domestic and industrial electricity consumption in the UK decreased overall from 2010 to 2014. [1] However, domestic electricity consumption saw an increase from 2011 to 2012, but industrial electricity consumption decreased throughout the period. [1] (b) (i) Using Tables 1 and 2, what can you infer about UK households’ price elasticity of demand for electricity? [4] Price elasticity of demand measures the responsiveness of quantity demanded of a good to a change in its price, ceteris paribus. [1] From Tables 1 and 2, it can be seen that households’ expenditure on electricity increased although the quantity consumed decreased. [1] This implies that the price of electricity had risen across the period. Since households’ expenditure on electricity increased with higher prices and reduced consumption quantity, it suggests that households’ demand fo r electricity is price inelastic. [1] The increase in expenditure from higher prices outweighs the fall in expenditure from less electricity consumed. [1] (ii) Comment on the likely price elasticity of supply for electricity. [2] Any justified stand on the likely Es value is accepted, such as: The supply of electricity is likely to be price inelastic [1], as it is difficult to obtain more inputs for electricity production such as due to a limit on how much coal can be mined. [1] OR The supply of electricity is likely to be price elastic [1], as power plants are likely to have spare output capacity and inputs such as coal are readily available as they can be stockpiled. [1] (c) Using demand and supply analysis, explain one supply-side reason that accounts for the rise in the use of renewable energy sources for electricity production in the UK. [3] Any ONE of the following reasons: Increase in supply [1]

Lower marginal cost of production due to renewable energy subsidies from the UK government [1] Evidence: “The Government has encouraged the shift to green energy through subsidies for renewable generation” (Ext. 1) [1] OR Increase in supply [1] Lower marginal cost of production due to cheaper imported solar panels from China for renewable energy generation [1] Evidence: “One decision had a significant part to play in the drop in solar costs: a few years ago, China’s government opted to subsidise its manufacturing sector to produce cheap solar panels” (Ext. 3) [1] (d) Extract 4 highlights protectionist measures that the European Commission adopted in the solar panel industry. Comment on the arguments for and against such protectionism. [6] For Protectionism [3m] Protectionism can help to protect jobs in the solar panel in dustry in the EU. Given that China has been accused of ‘dumping’ solar panels into the EU by subsidising their manufact