Source A
GreenTech Solar, a renewable energy company based in the UK, specialises in manufacturing solar panels. The company operates in a competitive market with several other solar panel producers. Recently, GreenTech Solar has experienced changes in its production capacity due to various factors. The cost of raw materials, such as silicon, has fluctuated, affecting the company's production costs. Additionally, advancements in technology have enabled the company to produce solar panels more efficiently. Government policies promoting renewable energy have also impacted the market supply. GreenTech Solar's supply of solar panels is influenced by these factors, demonstrating the dynamics of individual and market supply in the renewable energy sector.
Source B
| Quarter | Price per Unit (£) | Quantity Supplied |
|---|---|---|
| Q1 | ||
| Q2 | ||
| Q3 | ||
| Q4 |
(a) Define the term 'market supply'. [2 marks]
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Market supply refers to the total quantity of a good or service that all producers in a market are willing and able to offer for sale at various prices over a given period. (2 marks)
(b) Using Source B, calculate the price elasticity of supply between Q2 and Q3. Show your working. [4 marks]
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Price Elasticity of Supply (PES) = % Change in Quantity Supplied / % Change in Price PES = [(8000 - 6500) / 6500] / [(300 - 250) / 250] PES = (1500 / 6500) / (50 / 250) PES = 0.2308 / 0.2 PES = 1.154 (4 marks)
(c) Explain how a movement along the supply curve is different from a shift of the supply curve. [4 marks]
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A movement along the supply curve occurs when the quantity supplied changes in response to a change in the price of the good, assuming all other factors remain constant. This is represented by moving up or down the existing supply curve. In contrast, a shift of the supply curve occurs when there is a change in the quantity supplied at every price level due to factors other than the price of the good, such as changes in production costs, technology, or government policies. This results in a new supply curve being created either to the left (decrease in supply) or to the right (increase in supply). (4 marks)
(d) Analyse the factors that could cause a shift in the supply curve for GreenTech Solar's solar panels. Use Source A to support your answer. [6 marks]
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Factors that could cause a shift in the supply curve for GreenTech Solar's solar panels include: 1. Changes in the cost of raw materials: An increase in the cost of silicon would shift the supply curve to the left, reducing the quantity supplied at each price level. Conversely, a decrease in the cost of silicon would shift the supply curve to the right, increasing the quantity supplied. (2 marks) 2. Technological advancements: Improvements in production technology can lead to more efficient manufacturing processes, lowering production costs and shifting the supply curve to the right. (2 marks) 3. Government policies: Policies promoting renewable energy, such as subsidies or tax incentives, can encourage increased production and shift the supply curve to the right. Conversely, policies that discourage renewable energy can shift the supply curve to the left. (2 marks)
(e) Evaluate the likely impact of a significant increase in the price of silicon on GreenTech Solar's supply of solar panels. Use Sources A and B to support your answer. [4 marks]
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A significant increase in the price of silicon would likely lead to a leftward shift in the supply curve for GreenTech Solar's solar panels. This is because the higher cost of raw materials would increase production costs, making it less profitable for the company to produce the same quantity of solar panels. As a result, the quantity supplied at each price level would decrease. (2 marks) Using Source B, we can see that the quantity supplied is positively correlated with the price of solar panels. If the supply curve shifts to the left, the new supply curve would intersect the demand curve at a lower quantity and potentially a higher price, depending on the elasticity of demand. (2 marks) Level of Response: Level 3 (4 marks): A detailed and well-supported evaluation that uses both sources to explain the impact of the increase in the price of silicon on GreenTech Solar's supply of solar panels. The response demonstrates a clear understanding of the factors affecting supply and the relationship between supply and demand. Level 2 (2-3 marks): A partially developed evaluation that uses one or both sources to explain the impact of the increase in the price of silicon on GreenTech Solar's supply of solar panels. The response demonstrates a basic understanding of the factors affecting supply but may lack detail or clarity in explaining the relationship between supply and demand. Level 1 (1 mark): A minimal response that provides a brief explanation of the impact of the increase in the price of silicon on GreenTech Solar's supply of solar panels but does not use the sources or demonstrate a clear understanding of the factors affecting supply or the relationship between supply and demand.