2023 ACJC H2 Price Mechanism Tutorial Answers

1 ©Property of ACJC Economics Dept/2022/Price Mechanism ANGLO-CHINESE JUNIOR COLLEGE JC1 Economics H2 PRICE MECHANISM & ITS APPLICATION Tutorial Worksheet 2 Question 1: Market for bubble tea in Singapore a) With the aid of a diagram, explain the effects of the following events on the market for bubble tea in Singapore: Note • When going through the question approach, do use t he CCC framework to get the students to identify concepts, command word, and context. Concepts include “market”, which indicates the use of demand and supply concepts; skills needed come from the Command word “explain” and “aid of diagram” and Context is the “bubble tea in Singapore”. • Do remind students to draw and label their diagrams in a complete and correct manner. They should also refer to the diagram drawn as they are writing their explanation. a) Increase in workers’ productivity after attending training courses Section A: Discussion Questions SS0 SS1 Price of Bubble tea drinks Qty of bubble tea drinks DD0 P0 P1 Q1 Qo’ Q0 0

2 ©Property of ACJC Economics Dept/2022/Price Mechanism • Factor: An increase in workers’ productivity (measured by output per man -hour) would mean that more bubble tea can be produced by each worker, with no change in the number of hours worked. What this means to the producer is that at each price level, the firm is now able to produce more output; for example, at price level Po, the quan tity supplied has increased from Qo to Qo’. This shows that the supply of bubble tea in Singapore has increased, and it is illustrated by a rightward shift of the supply curve from SS 0 to SS1, as shown above. • Interaction: With the rise in supply, and deman d remaining unchanged, there will be a surplus of QoQo’ at the original price P 0 and this exerts a downward pressure on price, as firms are willing and able to produce a higher quantity of bubble tea drinks, and consumers require a lower price in order to be willing and able to increase their consumption. As price increases, quantity demanded rises and quantity supplied falls, hence reducing the surplus. • Effect: This eventually leads to a decrease in the equilibrium price of bubble tea drink from Po to P1 and a rise in equilibrium quantity from Q0 to Q1. Note • The framework of “Factors, Interaction, Effect” is how to explain the given issues with economic analysis (demand supply framework, in this case). Without economic analysis, answers will score poorly, even if it is logical. • There are different economic frameworks for different topics. • With reference to the skills package, the paragraph writing skill of TEEL (topic sentence, explanation, examples, link), “explanation” in economics usually involves an economic framework or model. For demand supply, that fram ework is “Factors, Interaction, Effect”. The answer provided above does not have a “topic sentence, examples or a link” because these are