EJC 2023 JC2 H2 Econs Prelim P2 Suggested Answers_for sharing

1 © Eunoia Junior College Economics Department 2023 2023 EJC JC2 H2 Economics Preliminary Examination Paper 2 Suggested Answers, Mark Schemes and Markers’ Report Essay Question 1 In 2022, the tablet market remains dominated by Apple, with Samsung coming in second. Apple engages in various marketing strategies and Apple E ducation Pricing. The promotional Apple Education Pricing is available to students but not to the public. (a) Explain what needs to be considered when a rational firm like Apple makes decisions on pricing and non-pricing strategies. [10] (b) Discuss the extent to which consumers as well as ot her firms are negatively affected by Apple’s dominance in the tablet market. [15] Part (a) – Question Analysis Question Analysis Framework Details Approach Command word Explain what: Make clear the factors Start point Objectives of a rational firm End point Decision making on pricing and non -pricing strategies Content & Context Content (Scope of coverage) Decision-making framework Marginalist principle: MC = MR Revenue and cost analysis Context Rational firm like Apple ; Tablet market Introduction While firms could pursue various objectives, the traditional objective of a rational firm like Apple is to maximise profits at Marginal Revenue (MR) = Marginal Cost (MC). To maximise profits, Apple can either raise total revenue (TR) or lower total cost (TC) by engaging in pricing and non-pricing strategies. In making decisions on pricing and non-pricing strategies to engage in, a rational firm like Apple will need to consider its benefits, costs and constraints. Body Point 1: Benefits of pricing and non-pricing s trategies   raise TR or lower TC   Profits rise Pricing strategies:  The tablet market can be characterised as an oligo poly with high barriers to entry and few dominant firms such as Apple and Samsung. As oligopolistic firms are mutually interdependent, one firm’s behaviour greatly affects its rivals. Apple would likely avoid price competition since prices tend to be rigid or sticky but may engage in 3 rd degree price discrimination like the Apple Education Pricing.  For instance, with no cost difference, Apple charg es a lower price for students since tablets like iPad take up a larger proportion of their income. The lower price charged in the price elastic market will result in a more than proportionate ris e in quantity demanded, therefore total revenue rises.  On the other hand, the public (other than students ) will be charged a higher price since the price of iPad is likely to take up a relatively sma ller proportion of their income. A rise in price

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