CJC H1 Prelim 2024 Solutions

CSQ1SuggestedAnswers (a) (i) Using Figure 1, compare the prices of the selected primary productsfrom2017to2022. [3] Anythreeofthefollowing:Similarity:Pricesofallprimaryproductsgenerallyincreasedfrom2017to2022.[1]Difference:Priceofwheatincreaseatafasterraterelativetotherest.[1]Difference:PriceofriceisconsistentlyhigherthanCorn,Oatsandwheat.[1]Difference: Thepriceof oatswasconsistentlyincreasing, whereasrice,wheat and corn prices experienced a fall in 2021, 2019 and 2020respectively.[1] (ii) Using Figures 1 and 2, explain the relationship between the price offertilizerandthepricesofwheatfrom2017to2022. [2] Thereisadirect/positiverelationshipbetweenfertiliserpricesandwheatpricesfrom2017to2022.[1]Fertilisersareusedasfactorinputstoproducewheat, whenthepriceoffertilisersgoesup, thecost of productionof wheat increases, [1]andthesupplyofprimaryproductdecreasesandshiftstotheleft.Thisincreasestheequilibriumpriceofwheatprices.Alternativeanswer: Higherdemandforwheat higherpriceandoutput forwheat deriveddemandforfertilizersincreases,leadingtoahigherpriceoffertilizers.Note:Priceadjustmentprocessisnotrequired. (b) Explain one unintended consequence on the US producers due to itssanctionsonRussia. [2] AsaresultofthesanctionsonRussia,fromExtraact1,“Russia’sresponsetointernationalsactionshasbeentohaltexportsofmorethan200products”,Thisislikelytoreducetheglobal supplyof crudeoil,asRussiaisoneofthe largest exporters of crude oil fromExtract 1. [1] Thisreductioninsupplycancauseoilpricestoriseduetothedecreasedavailabilityofoilintheglobalmarket.

This results in an increase in the cost of production of goods andservices.Ceterisparibus(holdingtotalrevenueconstant),totalprofitsfalls.[1]Alternativeanswer:WiththesanctionsonRussiaexports,thereisafallintheexportrevenueofRussia, leading to a fall in ADand RNY of Russia. With the fall indisposableincomeof theaverageRussian,USproducerswillexperiencea fall in the demand for their goods and services (assume normalgoods)asUS’sexportstoRussiadecreasefallinequilibriumpriceandquantityandhencefallintotalrevenueandthusprofitsofUSproducers. (c) Using a diagram, explain howfertiliser subsidies given to farmers bytheIndiangovernmentislikelytoaffectconsumerexpenditureonrice. [5] Fertiliser subsidiesgivenbytheIndiagovernment lower the cost ofproductionof riceincreasesupplyandsupplyofriceshifttotherightfromSotoS1.[1] Increase in supply of rice increase Q and decrease in P TEindeterminateanddependsonPED. Attheoriginalprice,thereisasurplusandadownwardpressureinprices.[1] Demandforriceislikelytobe price inelasticduetothelackofavailablesubstitutes/highdegreeofnecessity.[1] ThedecreaseinpricefromP0toP1LTPincreaseinQdfromQ0toQ1.AsTE=PxQ, thiswill leadtoa decrease in TEfromArea0P0AQ0to0P1BQ1.[1] Well-labelledandreferenceddiagram[1] ©CatholicJuniorCollege 8843/01JC2PRELIMINARYEXAMINATION/2024

(d) Identify and explain two main characteristics of public goods andcomment on whether they are likely to be possessed by the watermonitoringsystem. [6] Definenon-rivalryandexplainitsimplicationNon-rivalryinconsumptionmeansthatconsumptionofthegoodbyonemorepersonwillnotleavelessforotherstoconsume.[1]Oncethegoodisproduced,thereisnoadditionalcostincurredinprovidingthegoodtoanadditionaluser.Hence,marginalcostiszero.SincePrice=MarginalCostforallocativeefficiency,thepriceofthegoodshouldbezero.Hence there is no supply due to no incentive for profit-maximisationproducers.[1]Definenon-excludabilityandexplainitsimplicationNon-excludabilityinconsumptionmeansthatonceprovided,noonecanbeexcludedfromconsumingthegood,eveniftheydonotpay.[1]Free rider problem arises because it is prohibitively costly to excludenon-payersfromtheconsumptionofthegood.Hence,thereisnoeffectivedemand.[1]CommentWhy water monitoringsystemisnon-excludable: [1]Awatermonitoringsystemislikelytopossessnon-excludability.Oncethedatafromthewatermonitoringsystemismadeavailable,non-payerssuchasthegeneralpubliccannotbeexcludedfromusingtheinformation. ©CatholicJuniorCollege 8843/01JC2PRELIMINARYEXAMINATION/2024

Why water monitoring system is non-rivalrous: [1] The informationprovided by a water monitoring system is non-rivalrous. One personaccessingthedatadoesnotdiminishtheamountofdatamadeavailabletoothers.Hence,watermonitoringsystemcanbeconsideredapublicgoodbecauseitisnon-excludableandnon-rivalrous.Alternativeanswerifstudentarguesthatisitnotapublicgood:canacceptthefollowing:Watermonitoringsystemisaprivategoodasitdoesnotsatisfythetwomaincharacteristics.Excludable:However,thedatacanbemadeexcludableifaccessingthedatarequirespayment,suchassubscriptionfees.However, it is alwaysnon-rivalrousastheusageof informationbyonepersondoesnotdiminishtheamountmadeavailabletoothers. (e) Discuss the factors the Singapore government is likely to considerwhen promoting the use of technology to achieve food security andaffordabilityinSingapore. [8] Introduction: Food security (increasing equilibrium quantity to beself-sufficient)andfoodaffordability(ensuringstableequilibriumprices).Theaimofgovernmentpoliciesofusingtechnologycaninfluencethesupplyoflocal production of foodtoachievethegoalsof foodsecurityandfoodaffordability. Factor1:BenefitUsingtechnologyinredevelopingtheLimChuKangareaandtransformingit into a ‘’vibrant, high-tech agri-food cluster to boost domestic foodproduction’’helpstoimproveproductivityinfoodproductionandreducetheunitcostofproducingfoodinSingapore.Thiswillincreasethelocalsupplyoffoodsupplyshiftstotheright. Giventhatthepriceelasticityofdemandforfoodisgenerallypriceinelasticduetoalackofsubstitutes,thiswillhelptobringdowntheequilibriumpriceoffoodtoalargeextentandincreasefoodoutput(thusattainingbothfoodsecurityandaffordability).Thedecreaseinpriceincreasetheaffordabilityofthesenecessity,allowingthelowerincomefamilytogaingreateraccesstobasicnecessity,improvingequity. E1:ExtentofbenefitThe“30by30”visionisastrategicgoaltheSingaporeFoodAgency(SFA)settobolsterSingapore’sfoodsecurity.Theaimistoproduce30%ofthenation’s nutritional needs locally by 2030. This initiative increases food ©CatholicJuniorCollege 8843/01JC2PRELIMINARYEXAMINATION/2024

securitybyaddressingthevulnerabilityof Singapore’sfoodsupplychain,which relies heavily on imports for over 90% of its food. It reducedSingapore’sdependenceonimports: Byincreasinglocal foodproduction,Singaporecanmitigatethe risks associated with global supply chaindisruptions.Additionally,thereisgreaterresilienceagainstglobalCrises:In events such as pandemics, climate change, or geopolitical tensions,havingarobustlocalfoodsupplycanensurecontinuousaccesstoessentialnutrients.ThisresultedinSingaporeachievingfoodsecurityandaffordabilityinthelongrun. Factor2:CostandConsequencesWhen deciding on resource allocation to achieve food security andaffordability,thegovernmentmustconsiderthepolicies’cost.Thiswillrequiresignificant financial resourcesasexplicit monetarycost.RedevelopingtheLimChuKangareaandtransformingitintoa‘’vibrant,high-techagri-foodclusterrequiresahighfinancialcost. Furthermore, there are opportunity costs to such spending. Should thegovernment adopt thepolicies, resourcesallocatedtofoodsecurityandaffordabilitymaybedivertedfromothercritical areassuchashealthcare,education,orinfrastructuredevelopment.Landusedforurbanfarmingmighthave alternative uses that generate higher economic returns. Intensivefarming practices, even those using advanced technologies, may haveunintended environmental consequences, such as increased energyconsumptionandwastegeneration. E2:ExtentofthecostThe extent of the cost could be limited in the long run. Singapore isleveragingcutting-edgetechnologieslikeverticalfarming,hydroponics,andaquaponics,whichmaximizeyieldperunitareaandreduceresourceinputssuchaswaterandfertilizers. Whilehavinghighinitial setupcosts, thesetechnologies can become cost-effective over time due to increasedproductivityandreducedoperationalcosts.Additionally,investmentinR&Dcanleadtoinnovationsthatfurtherdrivedowncostsandimproveefficienciesinfoodproduction. SummativeEvaluation:Itislikelythatthe