2023 DHS Prelims Paper 2 Answers

1 Question 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 affecting 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] Question 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 (substitute) Introduction • Consumer expenditure refers to the amount spent on a particular good or service. It is calculated by price multiplied by quantity of a good. Define key term of question 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 other pigs in the farms. This would lead to a ↓supply of pork. • The post-economic recovery refers to Thailand enjoying economic growth after a period of recession or slowdown. There would be a rise in national income leading to greater purchasing power. Pork is likely to be considered a normal good with a positive 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, utility-maximising consumers, constrained by their budget, reduce quantity demanded, and the units of output that can only be produced at higher marginal cost now become profitable at higher prices, incentivising firms to increase quantity supplied to capture the positive marginal profits. Explain the change in supply and demand for pork. State and explain assumptions e.g., normal good Provide a detailed market adjustment process

2 • The process will continue until the price eventually reaches P1 where quantity demanded exactly balances quantity supplied and the shortage is removed, removing further pressure on the market to adjust. The new equilibrium quantity rises to Q1. • As pork is a staple food in Thailand, the demand is likely to be price inelastic (PED<1) based on its high degree of necessity (or due to its low substitutability with other meats). A rise in price of pork would result in a less than proportionate fall in quantity deman