The diagram shows the demand for and supply of a foreign-made mobile (cell) phone where the initial position in the domestic market is X. Importers increased the supply of the phone and there was an increase in demand for the phone. The government considered whether to protect domestic manufacturers with a limit on imports which would keep the supply at the initial quantity. How would the price change between the new equilibrium without a limit on imports and the equilibrium with a limit on imports?

Q: What topic does this question test?

This question tests International Trade in A-Level Economics (syllabus code 9708). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Economics Oct/Nov 2014 examination, Paper 1 Variant 2 (9708_w14_qp_12.pdf).

Question

The diagram shows the demand for and supply of a foreign-made mobile (cell) phone where the initial position in the domestic market is X. Importers increased the supply of the phone and there was an increase in demand for the phone. The government considered whether to protect domestic manufacturers with a limit on imports which would keep the supply at the initial quantity. How would the price change between the new equilibrium without a limit on imports and the equilibrium with a limit on imports?

Oracle Prep · Accepted Answer

The correct answer is C: movement from G to E.

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