Without specialised raw materials and high-purity rare earth elements (such as neodymium and dysprosium), modern low-carbon energy infrastructure could not exist. These elements act as a critical factor of production in industries producing high-efficiency permanent magnet generators for offshore wind turbines and electric vehicle drivetrains. The manufacturing of these generators relies on sophisticated metallurgical refining and precision engineering. Without a stable supply of high-grade neodymium, it would be impossible to scale up global renewable power capacity. The transition away from fossil-fuel-based power grids would also be severely delayed.
Currently, East Asian refining facilities process over 85% of the world's permanent-magnet-grade rare earths. This concentration of processing has led regional governments to closely monitor export quotas. In 2023, geopolitical tensions and supply-chain disruptions led to global shortages, demonstrating how supply-side inelasticity can amplify price fluctuations. Relying on centralised processing nodes gives specific firms and regions a powerful competitive advantage in high-technology green manufacturing.
Define the term ‘factor of production’ (Extract C, line 2).
123 exam-style questions on AQA A Level Economics 1.1 Economic methodology and the economic problem, covering 1.1.1 Economic methodology, 1.1.2 The nature and purpose of economic activity, 1.1.3 Economic resources, 1.1.4 Scarcity, choice and the allocation of resources, and 1.1.5 Production possibility diagrams. Each one has a worked solution and a mark scheme showing where the marks go.