TMJC 2023 H2 EC P2 Ans

TMJC JC2 H2 Economics 9570 2023 Prelim Exam Suggested Answers Essay Q1 The sharp increase in price of food in land-scarce Singapore could be attributed to the recent restrictions on export of food supply im posed by other countries and growing affluence. The Singapore government has implemented the ‘30 by 30’ plan which aims to produce 30 per cent of our nutritional needs by 2030. (a) Explain the reasons for the sharp increase in price of food in Singapore. [10] (b) Discuss whether the ‘30 by 30’ plan is likely t o be the most effective way the Singapore government can address the sharp increase in price of food. [15] Question Interpretation for part ‘a’: Command Word: “Explain”  Define, Illustrate, Elaborate with Economic concepts Cue Words/ Key Economic Concepts:  “sharp increase”  need to use PED or PES to explain  “increase in price of food”  link to DD and SS factors to explain why price of food increases  “Singapore”  context Requirement (1): DD reason to explain for an increase in price of food in SG Requirement (2): SS reason to explain for an increase in price of food in SG To score high L3  must use either PED or PES to explain for sharp increase in price of food Introduction Link to preamble:  The preamble states that there has been a recent b an or restrictions on export of food supply imposed by other countries and growing afflu ence which could contribute to the sharp increase in the price of food in Singapore. Definition of terms:  In this context, demand for food refers to the qua ntities of food that consumers are willing and able to purchase in a given period of time at various prices, ceteris paribus.  On the other hand, supply of food refers to the qu antities of food that suppliers are willing and able to sell in a given period of time at various prices, ceteris paribus. Answer the question:  Using demand and supply analysis, this essay seeks to explain the reasons for the sharp increase in price of food in Singapore.

TMJC JC2 H2 Economics 9570 2023 Prelim Exam Suggested Answers Body/ Development Using ISSUE framework as a tool of analysis: State initial equilibrium: Initially, the market for food is in equilibrium at the intersection of demand (D1) and supply (S1) at the equilibrium point E1. Explain one demand reason (Requirement 1): One possible reason for the increase in demand woul d be the growing affluence in Singapore. This suggests a rise in income levels an d hence purchasing power for an average Singaporean. Hence, demand for food increas es by less than proportionately, ceteris paribus, assuming food is a necessity and h ence YED value is positive and less than 1 (i.e., 0<YED<1). Demand curve will shift to the right from D1 to D2 by a smaller extent. This will lead to a rise in price of food. Explain one supply reason (Requirement 2): As mentioned in the preamble, there has been a rece nt restrictions on export of food supply imposed by other countries. As a resource-scarce country, Singapore relies a lot on imports including that of food, and so export re strictions imposed by food-exporting countries will impact Singapore significantly. For instance, India has recently enacted a ban on some overseas sales of non-basmati white rice in July 2023, while Malaysia has banned fresh chicken imports into Singapore in June 2022. These cause a rise in the unit cost of production of food, leading to a fall in po tential profits. Supply thus falls, ceteris paribus and supply curve shifts from S1 to S2, resulting in a rise in the price of food. Identify shortage/ surplus: At the original price level P1, the simultaneous rise in demand and fall in supply creates a shortage of QdQs as quantity demanded exceeds qua ntity supplied. This creates an upward pressure on price. As price rises, quantity demanded falls while quantity supplied rises. The shortage is gradually reduced as prices reach P2.

TMJC JC2 H2 Economics 9570 2023 Prelim Exam Suggested Answers State the new (final) equilibrium: Finally, the market is back in equilibrium at the intersection of the new supply curve and the new demand curve. The new equilibrium price is higher at P2 and equilibrium quantity is lower at Q2 as seen in Figure 1 above. Answer to the question on ‘sharp’ increase in the price of food: Students to elaborate on reinforcement effect + eit her PED/ PES to explain sharp increase in price Reinforcement effect: A rise in demand will result in a rise in price and quantity. A fall in supply will result in a rise in price and fall in quantity. Thus, a simulta neous rise in demand and fall in supply will reinforce each other to create a larger increa se in price of food, leading to a sharp increase in price. PED<1: The sharp increase in price is also due to the inelastic demand (i.e., PED<1). In this case, PED<1 because food is a necessity. As such, with a fall in supply and an inelastic demand, any rise in price will lead to a less than proportionate fall in quantity demanded for food, ceteris paribus, suggesting that the price of food needs to increase by a larger extent in order to clear the shortage. This can account for the sharp increase in the price of food. PES<1: Similarly, the sharp increase in price of food can also be due to the inelastic supply (i.e., PES<1). In this case, PES<1 because it takes time to grow the food crops. As such, with a rise in demand and an inelastic supply, any rise in price will only lead to a less than proportionate rise in quantity supplied of food, ce teris paribus, suggesting that the price of food needs to increase by a larger extent in ord er to clear the shortage. This can account for the sharp increase in the price of food. Note: There is no need to justify the extent of shi fts in demand and supply curves nor explain whether price or quantity is indeterminate as the question did not ask for impact on market i.e., on price and quantity, but on price alone, which in this case increases unambiguously. Conclusion As the sharp increase in price may cause inaccessibility to a necessity like food, it is thus imperative for the Singapore government to step in and intervene with appropriate policies.

TMJC JC2 H2 Economics 9570 2023 Prelim Exam Suggested Answers Mark Scheme Level Knowledge, Application, Understanding, Analysis Marks L3  Analytical explanation of reasons that cause an increase in price  A rigorous explanation of both demand and supply f actors must be evident.  To enter L3 candidates are expected to explain the sharp rise with reference to both the demand curve and the supply curve.  To score high L3, students will need to link PED/ PES concepts to address the portion on a sharp increase in price. 8-10 L2  Limited rigour in analysing reasons that cause an increase in price  An explanation of both demand and supply factors is evident but with gaps in analysis or some inaccuracies.  Unbalanced analysis e.g., only 1 requirement is explained 5-7 L1  Largely descriptive  Smattering of points that demonstrate some knowledge  Some knowledge of demand and supply factors 1-4

TMJC JC2 H2 Economics 9570 2023 Prelim Exam Suggested Answers (b) Discuss whether the ‘30 by 30’ plan is likely t o be the most effective way the Singapore government can address the sharp increase in price of food. [15] Question Interpretation for part ‘b’: Command Word: “Discuss”  Thesis-Antithesis-Synthesis/ 2-sided analysis Cue Words/ Key Economic Concepts:  ‘30 by 30 plan’  SS of food  ‘most effective…address the sharp increase in pric e of food’  work vs don’t work in addressing sharp price of food + bring in another policy for comparison Requirement (1): ‘30 by 30’ plan is the most effective way the Singapore government can address th