2023 ASRJC H2 Econs Prelim Paper 1 QP

1 © ASRJC Economics Department 9570/01/JC2 Prelim/2023 [Turn Over ECONOMICS 9570/01 Paper 1 29 August 2023 Additional Materials: Answer Booklet 2 hours 30 mins READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you ne ed additional answer booklets, ask the invigilator for a continuation booklet. Please start your answer to each question on a fresh page of the answer booklet. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages and 3 blank pages. ANDERSON SERANGOON JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATION Higher 2

2 © ASRJC Economics Department 9570/01/JC2 Prelim/2023 [Turn Over Answer all questions Question 1: Big Technology Firms and the COVID-19 Pandemic Figure 1: Amazon’s sales revenue vs profit Source: Vox.com, accessed 2 August 2023 Extract 1: How Big Technology* won the pandemic In the last year, the five Big Technology superpowers — Amazon, Apple, Google, Microsoft, and Facebook (now Meta) — had combined revenue of m ore than US$1.2 trillion. The pandemic has made the technology giants and their bosses unfathomably rich. Apple has so much extra cash that it is spending an additional US$90 billion to buy its own stock, nearly the equivalent of Kenya’s gross domestic product. Of th e 10 richest people in the world, eight made their fortunes from technology companies. The man at the top, Amazon’s Jeff Bezos, alone is worth more than one-and-a-half Goldman Sachs. How did this happen? The pandemic created an econom y that benefited some people and industries, including in technology, even as it battered others. In the last year of crisis, people and businesses had even greater demand for what the technology giants were selling. Americans’ love of home shopping became a safety ne cessity for some people. Families bought iPads and Macs as work and school went virtual. Any business that still had money to spend on marketing spent it on Google, Facebook, or Amazon. Companies might have cut back in other areas, but they bought software from Microsoft and Amazon. However, as with other industries, technology is also suffering from a supply chain crisis. This started with the pandemic causing the global shutdo wn in 2020, a fire that shut down the warehouse of Japan’s major producer of microchips, and an unusual and powerful snowstorm In Texas that shut down all Intel microchip production for days. These events started a domino effect that we see affecting the supply chain throughout almost all technology industries. Source: The New York Times, 12 October 2021 and IBM.com, 10 November 2021 *The Big Technology sector is comprised of businesses t hat sell goods and services in electronics, software, computers, artificial intelligence, and other industries related to information technology.

3 © ASRJC Economics Department 9570/01/JC2 Prelim/2023 [Turn Over Extract 2: Why Amazon will likely continue to gain e-commerce market share In the world of e-commerce, there is one undisputed leader: Amazon. As consumers changed their buying behaviour in 2020, the retail giant’s financial results revealed a 38% increase in net sales. And those habits are unlikely to change. A study by Salesforce, an American cloud- based software company, found that nearly 60% of consumers believe that they will do even more online shopping after the pandemic than they d id before. It is unsurprising then that Amazon is expected to seize 50% of the entire e-commerce retail market this year. So, what is Amazon doing so well that it is in a “prime” position to gain an even bigger slice of this pie? 1. Amazon still leads in logistics Today, Amazon has just about perfected the art of delivering goods in two days or less. With its own fleet of delivery vehicles, massive numbers of warehouses opening close to end customers for the fastest delivery times, and a wor kforce that increased by 50% in the past year, it would be difficult, if not impossible, to beat Amazon when it comes to logistics. 2. Amazon is not just convenient; it is the default shopping channel for many With so many competitively priced products, a powerful recommendation engine, a one-click “Buy Now” option and free delivery on Prime goods, Amazon has removed many elements of friction from the buying experience. Now compare this with other digital shopping experi ences. Say you are in the market for a new pair of tennis shoes. If you have a specific br and in mind, you may have to go to its website, search for the product and even compare across websites. When you are ready to buy, you may be required to create an account that you will likely use only once, input your credit card details, and then sit back and wait. You might have no idea when your goods will ship or arrive. With Amazon, you know when you will likely receive a product even before you place an order. Source: Forbes, 31 March 2021 Extract 3: Surviving the pandemic - A business perspective As the global COVID-19 pandemic shows signs of impr ovement in some countries, most businesses have slowly started to return to normal operations as consumers are coming back since lockdowns are beginning to be a thing of the past. However, this is not true for all firms as the crisis induced by the pandemic resulted in p ermanent closures of some businesses across the globe. A recent World Bank working paper assessed the effect of the COVID-19 on business closures. Commonalities among the survi vors exist. Firms that survived the COVID-19 crisis are older with greater brand loyalty and more productive. Beyond productivity, certain business characteristi cs improve the likelihood of businesses surviving. The introduction of new products on the market points to the importance of businesses' ability to adapt to rapidly changing market conditions to increase firms’ resilience in a time of crisis. Similarly, the use of technolo gy, which has become particularly relevant during the COVID-19 crisis to offset the physical remoteness imposed by the social distancing requirements, is critical for survival. Two policy implications can be drawn from this anal ysis. Firstly, the results confirm the importance of supporting innovation and digitalisation in the private sector for small firms. Next, agile regulations and good governance are beneficial to firm survival. Adapted from blogs.worldbank.org, 18 June 2021

4 © ASRJC Economics Department 9570/01/JC2 Prelim/2023 [Turn Over Extract 4: Big Technology: how can we promote competition in digital platform markets? As our use of information and communications technologies has increased, a few large digital platforms – ‘Big Technology’ – have expanded and come to dominate their respective markets. In February 2021, Google accounted for nearly 87% of the global search market, compared with Bing, which took under 7%. Similarly, with over 1.4 billion users, Facebook controls much of our social media, while Apple and Google dominat e the market for mobile phones and associated apps stores; and with 1.87 billion monthly users, Amazon has become the giant of e-commerce. The dominance of these companies and their expansio n into new markets – creating major digital ecosystems – have led to ever louder calls for regulation to promote more competition. New regulatory regimes are being developed in a var iety of jurisdictions, with detailed proposals now on the table in the UK, the European Union (EU) and the United States (US). These will set out a framework of basic rules by wh ic