ACJC H1 Prelim 2024 CSQ1 Solutions

2024ACJCH1EconomicsPrelimCase1 Question1: FoodSecurityandChallenges Table1: Global FoodCommodityPrices The Food and Agriculture Organisation Food Price Index (FFPI) is a measure of themonthlychangeininternational pricesof abasket of foodcommodities. Thetablebelowshowsthefivecommodity groups – food, meat, dairy, cereal, vegetable oil and sugar. Their respectivepriceindexistheaveragepriceindicesover2017to2022. FoodPriceIndex MeatPriceIndex DairyPriceIndex CerealPriceIndex VegetableOilPriceIndex SugarPriceIndex2017 98.0 97.7 108.0 91.0 101.9 99.12018 95.9 94.9 107.3 100.8 87.8 77.42019 95.1 100.0 102.8 96.6 83.2 78.62020 98.1 95.5 101.8 103.1 99.4 79.52021 125.8 107.9 119.6 131.2 164.9 109.32022 144.7 118.8 149.5 154.7 187.8 114.5 Source:FoodandAgricultureOrganizationoftheUnitedNations Extract 1: Whyareglobal foodpricesnear anall-timehigh? Higher global food prices are contributing to a wider trend of increased cost-of-living in bothadvancedandemergingeconomies. Theannual rateof inflationworldwideis9.2%,drivenbyasurgeinenergyaswell asfoodprices. Prior totheRussia-Ukrainewar, droughtsandCovid-19restrictionshavedrivenupglobal foodprices. The price hike worsens after the war, as the combined supply fromboth Russia andUkraineisaround30%ofglobal wheatexportsandaroundafifthoftheworld’smaizesupply.Tomake matters worse, farming activities, including irrigation and transportation of agriculturalmachinery, rely heavilyonenergysourceslikediesel andnatural gas. Therefore, risingenergyprices directly translate to higher production costs, ultimately reflected in food prices. At thesametime, duetolonger lifespan, theworld’spopulationhasgrownexponentiallyover thelastfewdecades. The increased chaos in global food markets has led to a new problem: food protectionism.Some governments haveclampeddownonexportsof staplesincludinggrainsandcookingoilto safeguard supplies for domestic consumption. Apart fromexport quotas, threat of domesticsocial unrest has led to other forms of export restrictions such as taxes and outright bans.These policies have a severeimpact onthedevelopingcountriesthat dependoninternationalmarketsforfoodimports. Source:WorldEconomicForum,12May2022 ©ACJC2024PreliminaryExam8843/01 1

Extract 2: Asustainablefoodsystemfor Singaporeandbeyond Singapore is vulnerabletosupplyshocksanddisruptionsasthecountryimportsmorethan90percentofitsfood.Forgreaterresilience,thegovernmenthasseta“30by30”goal –tobeabletoproduce30percentofthecountry’snutritional needsby2030. Withclimatechangeposingchallengestofoodproduction, Singapore’sagri-foodindustryseesthe need to devote more resources to local food production despite Singapore’s limited landspace. As the country journeys towards her “30 by 30” goal, carving out land spaces andinnovationtechnologywill bekeyenablers. To boost local food production, the government has expanded the Agri-food ClusterTransformation (ACT) Fund to cover more types of food and technology. To encourageinnovation through Research and Development (R&D) projects in areas like improving thedisease resistance and nutritional quality of crops and fish, the Singapore Food Story R&Dprogrammewaslaunchedin2019.Sincethen,40projectshavebeengivenfunding. Source:SingaporeFoodAgency,11November2022 Extract 3: What istheproblemwithmeat productionandconsumption? Despitetherecent popularityof plant-baseddiets, theworldisontracktoconsumemoremeat,largely due to population growth andconsumersregardingmeat consumptionasanimportantpart of their diet. To meet the rising demand, farmers are rearing more livestock. However,rearing livestock accounts for more than one-third of global greenhouse gas emissions.Greenhouse gas emissions can be harmful as it contributes to climate change and globalwarming. Fresh water is also necessary for the rearing of livestockandasof now, morethan70% of the world’s fresh water has been used up. Sources of fresh water include meltedicebergs, natural precipitationsuchasrainfall andgroundwater foundinriversandlakes.Whilerainfall precipitation may top up the earth’s supply of freshwater, scientistsareworriedabouttheimpactoftheworseningglobal warmingonthefuturesupplyoffreshwater. The trajectory of meat consumption has left both environmentalists and economists veryconcerned. Rearing of livestock can take years and is subjected to weather elements, whichmeans production may not always meet demand. This has an impact on cost-of-living,especiallyforcountrieswheremeatisastaplepartoftheirdiet. Source:Various Extract 4: Ismeat taxtheonlyway? In several countries, vocal and opinionated environmentalists are proposing a meat tax.However, while there is a general acknowledgement of theneedtoreducemeat consumptionandproductionforenvironmental reasons,thevalidityofataxonmeatisfarlessclear. ©ACJC2024PreliminaryExam8843/01 2

Imposing a meat tax would mean further reducing the affordability of meat for low-incomehouseholds who may already struggle to purchase meat. The environmental impact of meatproduction also varies considerably across farming practices – not all farming practices arenecessarily bad for the environment, especially sustainable farming. As such, opponentsof ameattaxhaveproposedseveral alternativepolicies: 1. SubsidisinghealthierfoodchoiceTodrivedownconsumptionof meat, consumersshouldbeabletoaccesscheaperalternatives.Agoodwaytochangeconsumer’sbehaviour andhence,theproductionofmeatistosubsidisetheproductionofhealthierfoodsuchasfruits,vegetables,legumesandnuts. 2. SubsidisesustainablelivestockfarmingpracticesIf sustainable livestock farming practices can be made cheaper, through subsidies, farmerscould have greater incentives to adopt these practices. The sustainable livestock farmingpracticesincludetheuseof organicfeedandfertilisers, animal supplementsandvaccinesthatcancut themethaneemissionsduringtheanimals’ digestionprocess.Thiscouldevenlowerthepressureonmeatprices. 3. Empowerconsumersatall incomelevelstomakemoresustainablepurchasingdecisionsThis means investing in education to consumers on ways to achieve healthier diets. It couldmean clearer food labelling and display of nutrition information, as well as campaigns topromotethebenefitsofeatingplant-baseddietinstead. Source:WorldEconomicForum,21May2022 ©ACJC2024PreliminaryExam8843/01 3

QuestionsandSuggestedAnswers (a) Table 1 shows various global food commodity prices. Compare the key changes inglobal foodpricesandglobal meatpricesbetween2017and2022.[3]● Bothglobal foodpricesandglobal meatpricesgenerallyincreased.● Theoverall percentageincreaseinglobal foodpriceswaslarger thantheincreaseinglobal meatprices.● From 2017 to 2018, both global food prices and global meat prices decreased. /From 2018 to 2019, global food prices decreased while global meat pricesincreased. / From 2019 to 2020, global food prices increased while global meatpricedecreased. Markingscheme:1meach. Answersthat say‘global foodpricesarealwaysgreaterthanglobalmeatprices’arenotacceptedasthequestionisaskingaboutchanges. (b) (i) WithreferencetoExtract 1, explain one demandandonesupplyfactorthathavecausedtheglobal foodpricestorise.[4] Identifyandexplaindemandfactor:● Extract 1: Exponential growth intheworld’spopulationsizecoupledwithlongerlifespan.● Increase in global demand resulted in a shortage of food at the originalmarket equilibrium price, exerting upward pressure on price hencecausingglobal foodpricestorise. Identifyandexplainsupplyfactor:● Extract1:Risingenergypricesledtoanincreaseinfoodproductioncosts,asenergyisafactor input for theproductionof food. Russia-Ukrainewarcausing decrease in wheat and mazie exports. Droughts and Covid-19restrictionshavealsoaffectedfoodproductionanddistribution.● Global supply decreases, leading to a shortage of food at the originalmarket equilibrium price, exerting upward pressure on price hencecausingglobal foodpricestorise. Markingscheme:2mforidentificationandexplanationofeachfactor. (ii) InExtract 1, it wasmentionedthat foodprotectionismhasseverelyimpacteddevelopingcountriesthatrelyoninter