2024 YIJC H1 Economics Prelim P1 QP

YISHUN INNOVA JUNIOR COLLEGE JC 2 PRELIMINARY EXAMINATION Higher 1 CANDIDATE NAME CG INDEX NO ECONOMICS Paper 1 Case Study Questions Additional Materials: Writing Papers Cover Pages 8843/01 23 August 2024 3 hour READ THESE INSTRUCTIONS FIRST Write your name, CG and index number on the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a HB pencil for any diagrams or graphs. Do not use staples, paper clips, glue or correction fluid/tape. There are two questions in this paper. Answer all questions. Start each question (not each part) on a fresh piece of writing paper. At the end of the examination, fasten your work for each question separately. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 8 printed pages and 2 blank pages. [Turn over

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©YIJC2024 8843/01/Prelim/24 3 Answer all questions. Question 1: Electricity Market Table 1: Electricity consumption by sector (in Gigawatt hours) 2018 2019 2020 2021 2022 Household 7231.5 7681.3 8244.5 8277.7 7911 Industrial- related 21439.8 21463.9 20978.9 22293.1 22693.9 Source: Energy Market Authority, 1 June 2023 Extract 1: Rise in electricity prices Electricity prices will go up in Singapore as a result of higher carbon tax, a scheduled increase in the goods and services tax (GST) and rising energy costs. “The carbon tax is part of a suite of measures to support Singapore’s transition to a low -carbon economy, by steering consumers and producers away from carbon -intensive goods and services, holding businesses accountable for their emissions, and enhancing the business case for the development of low -carbon solutions,” said Energy Market Authority’s (EMA) spokesman. Power generation companies levied the carbon tax are expected to pass on some of the cost to electricity retailers like SP Group, which could then pass on these additional co sts to customers. Dr David Broadstock, senior research lead for energy transition at the National University of Singapore said the rising cost from the carbon tax could encourage innovation among companies to reduce the carbon content of the fuel used. At the same time, having more clean energy imports in the future could also have a bearing on the influence of carbon tax on future electricity prices, he added. Around 95 per cent of Singapore’s electricity comes from imported natural gas, which means Singapore cannot be fully insulated from developments in the global energy market. EMA said that natural gas which is the cleanest form of fossil fuel will remain the country’s main source of energy for the next decade, accounting for more than 50 per cent of Singapore’s energy mix by 2035, even as the Republic turns to cleaner technology to decarbonise the energy sector. Dr Broadstock expects global natural gas price s to continue to rise over the next three to four years due to geopolitical uncertainties like the Israeli -Hamas conflict affecting energy supply chains. Source: The Straits Times, 29 Dec 2023 Extract 2: More generation capacity needed to meet Singapore’s growing electricity demand Singapore will need more generation capacity to meet the growing demand for electricity, largely due to new investments in energy-intensive sectors such as advanced manufacturing and data centers, as more businesses digitalise and more artificial intellige nce services are rolled out. [Turn over

©YIJC2024 8843/01/Prelim/24 4 The growth of data center activity is at odds with Singapore’s environmental goals due to the huge amounts of energy required to cool data centers. The tech industry is estimated to be responsible for up to 4 per cent of global greenhouse gas emissions, and this figure is sure to grow rapidly amid the rising use of data storage and processing. Singapore’s digital economy contributes to almost a fifth of its gross domestic product. Source: The Straits Times, 30 May 2024 Extract 3: Singapore’s energy transition towards a net-zero future Power generation accounts for about 40% of Singapore’s emissions today. The price we all pay for electricity generally does not reflect the “true costs” of producing it. To decarbonise our power sector, we will be importing electricity from the region and exploring low -carbon alternatives such as hydrogen. Hydrogen is often held up as a potential clean fuel of the future, because it can be burned like oil or gas but releases no climate -warming carbon dioxide – only water. The Singapore government will set up a Future Energy Fund to support infrastructure investments for our energy transition towards a net-zero future. Net zero refers to the balance between the amount of greenhouse gas that's produced and the amount that's removed from the atmosphere. It can be achieved through a combination of emission reduction and emission removal. Examples of energy transition infrastructure which could be supported by the Future Energy Fund include undersea cables to import low -carbon electricity as well as new hydrogen terminals and pipelines. These projects may involve nascent technologies or require high upfront capital expenditures, and furthermore exposed to significant commercial and geopolitical risks. The establishment of the Futu re Energy Fund ensures that the Government is ready to provide financial support to catalyse energy transition projects to secure low-carbon energy supplies to meet Singapore’s decarbonisation ambitions. This will better prepare our businesses and economy for a low-carbon future and allow Singapore to remain an attractive investment destination. Source: Energy Market Authority, 1 March 2024

©YIJC2024 8843/01/Prelim/24 5 Questions (a) With reference to Table 1, compare the change in electricity consumption between household and industrial -related sectors from 2018 to 2022. [2] (b) (i) With the use of a demand and supply diagram, account for the increase in electricity price and comment on whether it will continue in the future. [8] (ii) Explain how the opportunity cost differs for households and producers of goods and services given an increase in electricity price. [6] (c) Using a Production Possibility Curve, explain how the establishment of Future Energy Fund by the Singapore government can affect its current and future living standards. [6] (d) Explain why electricity is not likely to be a public good. [4] (e) Explain why “the price we all pay for electricity generally does not reflect the “true costs” of producing it” as mentioned in Extract 3. [4] (f) Discuss whether the use of carbon tax is the best policy to support Singapore’s energy transition to a net-zero future. [10] [Total: 40] [Turn over

©YIJC2024 8843/01/Prelim/24 6 Question 2: Japan’s economic challenges and the road ahead Table 2: Economic indicators for Japan 2018 2019 2020 2021 2022 Real GDP Growth (annual %) 0.6 -0.4 -4.1 2.6 1.0 Consumer Prices (annual %) 1.0 0.5 0.0 -0.2 2.5 Total Unemployment Rate (% of total labour force) 2.5 2.4 2.8 2.6 2.6 Final Private Consumption Expenditure (current US$ in Trillions) 3.75 3.81 3.79 3.77 3.28 Source: data.worldbank.org, 18 June 2024 Table 3: Economic indicators for USA 2018 2019 2020 2021 2022 Real GDP Growth (annual %) 3.0 2.5 -2.2 5.8 1.9 Consumer Prices (annual %) 2.4 1.8 1.2 4.7 8 Total Unemployment Rate (% of total labour force) 3.9 3.7 8.1 5.3 3.6 Final Private Consumption Expenditure (current US$ in Trillions) 16.8 17.4 17.4 19.4 21.1 Source: data.worldban