QUESTION 73 (5 marks)
A freight upgrade reduces a producer’s annual delivery costs from $12 million to $9 million while output is unchanged. Calculate the percentage saving. Explain a possible SRAS effect and one factor affecting whether consumers benefit.
Practice marking scheme
Answer
Delivery costs fall 25%; lower unit costs can shift SRAS right/down.
Working
(12 − 9)/12 × 100 = 25%. With unchanged output, lower logistics costs reduce costs per unit and can expand profitable supply at each price level. Price benefits depend on competition and pass-through: firms could retain some saving as profit. Maintenance costs, financing and congestion elsewhere may offset part of the apparent saving.
Marking criteria
- Calculates the 25% cost reduction. [1 mark]
- Explains the cost-to-SRAS mechanism. [2 marks]
- Evaluates price pass-through or another relevant qualification. [2 marks]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
View the QCAA syllabusCompare your working with the guide above.