DHS 2023 H2EC Prelims Paper 2 Answers (for sharing)

1 Ques5gN4-on 1 Consumers in Thailand are snapping up crocodile meat due to a significant increase in the price of pork which is a staple in the Thais’ diet. This was due to African swine flu affecMgD2↓ng pigs in the country and a post-pandemic economic recovery. (a) With reference to the above events, explain the likely changes in the consumer expenditure on pork and crocodile meat in Thailand. [10] QuesMgD2↓on analysis Command Word Explain (consumer expenditure) Give economic reasoning Content Required Changes in consumer expenditure (P x Q), non -price demand and supply factors Context Market for pork and crocodile meat in Thailand Approach 1. Explain the change in consumer expenditure on pork due to disease and economic recovery; and 2. Explain the change in consumer expenditure on crocodile meat due to changes in the price of pork (subsMgD2↓tute) Introduc5gN4-on  Consumer expenditure refers to the amount spent on a parMgD2↓cular good or service. It is calculated by price mulMgD2↓plied by quanMgD2↓ty of a good. De fine key term of quesMgD2↓on Requirement 1: Market for Pork  The market for pork has been affected by the African swine flu and the post-pandemic economic recovery.  The emergence of African swine flu has affected the ability of pork producers to supply pork. Pigs affected by the disease would not be suited for sale and as the disease can be contagious, this can easily affect ot her pigs in the farms. This would lead to a ↓supply of pork.  The post-economic recovery refers to Thailand enjoying economic growth aMgqqIer a period of recession or slowdown. There would be a rise in naMgD2↓onal income leading to greater purchasing power. Pork is likely to be considered a normal good with a posiMgD2↓ve value YED as it is considered a staple. This means as income increases, the demand for pork would increase as well.  A fall in supply of pork would lead to a shortage of pork. This would cause upward pressure on prices. As the price rises, uMgD2↓lity-maximising consumers, constrained by their budget, reduce quanMgD2↓ty demanded, and the units of output that can only be produced at higher marginal cost now become profitable at higher prices , incenMgD2↓vising firms to increase quanMgD2↓ty supplied to capture the posiMgD2↓ve marginal profits. Explain the change in supply and demand for pork. State and explain assumpMgD2↓ons e.g., normal good Provide a detailed market adjustment process

2  The process will conMgD2↓nue unMgD2↓l the price eventually reaches P1 where quanMgD2↓ty demanded exactly balances quanMgD2↓ty supplied and the shortage is removed, removing further pressure on the market to adjust. The new equilibrium quanMgD2↓ty rises to Q1.  As pork is a staple food in Thailand, the demand is likely to be price inelasMgD2↓c (PED<1) based on its high degree of necessity (or due to its low subsMgD2↓tutability with other meats). A rise in