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    2 In a free market price rations scarce goods.
    (a) Explain this statement and, with the help of a diagram, show how price rations scarcegoods when there is an increase in the costs of production. [8]

    The basis of a good answer must be an accurate diagram of market equilibrium showingshifts in the supply curve and changes in equilibrium price and quantity.•

    For knowledge and understanding of the way in which price rations scarce goods.Up to 4 marks.•

    For application using an appropriate diagram showing shifts in the supply curve and theresulting change in equilibrium price and quantity. Up to 4 marks.
 
 
 
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