2024 RI H1Econs Prelims Questions

8843/01/Prelim/Y6/24 © RI 2024 [Turn over RAFFLES INSTITUTION 2024 YEAR 6 PRELIMINARY EXAMINATION Higher 1 ECONOMICS 8843/01 Paper 1 27 August 2024 3 hours Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your name, index number and CT class on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for diagrams, graphs or rough working. Do not use paper clips, highlighters, glue or correction fluid. Answer all questions. The number of marks is given in brackets [ ] at the end of each part question. Start each question on a fresh sheet of paper. Use the cover sheets and tie your answer to the questions separately. This document consists of 9 printed pages and 2 blank pages. H

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8843/01/Prelim/Y6/24 3 © RI 2024 [Turn over Answer all questions. Question 1: Government intervention in Agricultural Markets Figure 1: World Rice Price Index, Jul 2022 to Jul 2023 Source: https://www.statista.com Extract 1: Why are rice prices surging? Rice prices have surged to their highest levels in a decade. The situation is primarily caused by warmer, drier weather and erratic rainfall damaging rice production throughout Asia. In the past months, torrential rains and floods in northern India, for ex ample, have damaged many rice fields, prompting the world's top exporter of rice to impose a ban on rice exports. Additionally, rising fertilizer prices have contributed to increased production costs. The price of fertilizer, which is among farmers’ greatest expenses, reached all -time highs after Russia, the world’s top fertilizer exporter, halted hundreds of exports. This was in response to economic sanctions against Russia imposed by the international community, after Russia invaded Ukraine. Adding to the concerns is Russia's withdrawal from the Black Sea grain deal. The ongoing war in Ukraine and the termination of the grain deal have also constrained the global supply of wheat and corn, raising the demand for rice as an alternative staple. This has fueled concerns that disruptions in the global rice trade could worsen the already endangered food security situation in many countries. Rice is one of the world's primary staple food items, feeding about half of the world's population. Source: https://www.dw.com, 6 Aug 2023 stlouisfed.org, 4 Oct 2022

8843/01/Prelim/Y6/24 4 © RI 2024 Extract 2: Fertilizer and Climate Change The notion of public goods is becoming increasingly important at the international and global levels. Many environmental problems transcend national boundaries, with climate change being the most prominent example, and maintaining a stable climate is essen tially a global public good. One of the primary sources of environmental degradation is greenhouse gas emissions from agricultural activities, such as applying fertilizers. In the last century, fertilizers have greatly boosted crop production. This brought about food security and environmental benefits, letting farmers grow more food on less land. Globally farmers apply around 115 million tonnes of nitrogen to our crops every year. Only around 35% of this is used by them, meaning 75 million tonnes of nitrogen runs off into our rivers, lakes and natural environments. During the 1960s and 1970s, many of today’s middle-income countries kickstarted their ‘Green Revolution’ and achieved large increases in food production. Governments offered subsidies for farmers to use fertilizers and other inputs. This made fertilizers c heap and reduced the incentives for farmers to use it efficiently. This cheap fertilizer is one of the reasons that these countries massively overapply nitrogen today. Source: Various Extract 3: The Rice Price Cap in the Philippines A price cap is not the normal practice for all goods but it has been focused on those goods that are considered essential, e.g., oil, heating services and food. Economists have opined that a price ceiling can be justified in only two cases. Firstly, to pre vent unjustified price increases by sellers. Secondly, as a temporary measure against the rapid rise in prices for essential products in the event of a rapid supply shortage caused by forces that cannot be reasonably anticipated or controlled e.g. natural disaster or war. In the wake of soaring rice prices, President Bongbong Marcos, implemented a price cap on this essential commodity. As the staple food of the nation, rice plays an integral role in the daily lives of millions, making its affordability and accessibility cru cial. By imposing a price ceiling on rice, the government aimed to stabilize the commodity’s price in the face of these challenges, ensuring that Filipinos could afford this staple food item. In the context of the Philippines’ recent rice crisis, President Bongbong Marcos introduced a price cap to counteract two primary concerns: • Alleged illegal price manipulation attributed to hoarding by traders. • External global pressures beyond the Philippines’ control, such as the Russia -Ukraine conflict, India’s ban on rice exportation, and fluctuations in global oil prices. Source: https://sedpi.com

8843/01/Prelim/Y6/24 5 © RI 2024 [Turn over Extract 4: Managing Greenhouse Gas (GHG) Emissions Due to Agriculture The agriculture sector is highly susceptible to the impacts of climate change as extreme weather events can affect agricultural productivity. Ironically, the sector is also a major contributor to these changes. Global agriculture greenhouse gas (GHG) emissions (excluding land use change) have risen by more than 20 percent since 1990 as populations and food demands have grown. The sector accounts for roughly 12 percent of annual global GHG emissions and is the largest anthropogenic* source of methane and nitrous oxide emissions, two potent GHGs with global warming potential far greater than carbon dioxide. Emissions from livestock activities and crop production have been growing over the years. The increase in livestock raised for meat, dairy, eggs, and seafood production has contributed to higher emissions from these sources. Livestock, particularly cattle, produce significant amounts of methane through digestive processes and manure. Emissions from crop production include the release of nitrous oxide from the application of fertilizers and manure, as well as methane emissions. The most polluting crop in terms of greenhouse gas emissions is rice. In 2023, rice production accounted for 1 2% of global methane emissions and 1.5% of global greenhouse gas emissions. This is largely due to common practices such as flooding the fields to accelerate decomposition, which result in significant gas emissions. The International Rice Research Institute (IRRI) has long advocated the use of innovative technology and research to promote sustainable farming. Growing techniques such as alternative wetting and drying are also being experimented with, to curb water use and emissions. Other promising solutions include coating seeds in a biodegradable film which lowers their water requirements and training farmers to adopt sustainable farming and cultivation methods, such as improved tillage practices, as well as tailored fertilizer application. Denmark is poised to become the first country to tax farmers for the greenhouse gas emissions from their livestock in an effort to accelerate the green transition in farming. From 2030, methane emissions caused by flatulence from cattle and pigs will be ta xed at a rate of 300 kroner (S$58) per tonne of CO2 equivalent. This amount will rise to 750 kroner in 2035 under the terms of an agreement reached between the government, part of the opposition and representatives of livesto