YIJC 2024 JC2 H2 Prelim Essay Q1 Suggested Answer

In 2022, the domestic price of rice in India increased drastically du e to poor monsoon rains and a rise in demand. In response, India, the world's largest rice exporter, has periodically imposed export bans. (a ) Explain the reasons for the significant increase in the price of rice in India. Suggested answer: Question Analysis: Command word: Explain – elaboration of reasons with relevant examples Content: Significant increase (magnitude of change in price) → suggesting use of elasticities / Use of demand/supply analysis or diagram Context: Market for rice in India R1: Explain demand and supply reasons for the increase in price R2: Explain how the demand and supply reasons lead to the significant increase in price of rice. The significant increase in the price of rice in India can be attributed to several demand and supply reasons. It can also be attributed to the price inelasticity of its demand and supply. R1: Explain demand and supply reasons for the increase in price - DD: In 2022, there is post -pandemic economic recovery in most countries. As countries open their borders, travel restrictions eased and improvement in trade → economic activities resumed, especially in food and beverage industry → see a rise in demand for rice globally as well as in India, since rice is a staple and essential input in the food and beverage market - SS: Due to poor monsoon rains (extreme weather conditions) → lack of rainfall, an important factor input to rice crops → this damaged crops, reduced yields, and led to lower rice output → reducing supply of rice in India. R2: Explain how the demand and supply reasons lead to the significant increase in price of rice. [10 ]

1. Reinforced effect: • The increase in the demand and fall in supply of rice will lead to a significant shortage of rice at the original price level. With a huge shortage, this will lead to significant increase in prices of rice in India to clear the shortage. • As seen from the diagram, the increase in demand and fall in supply creates a significant shortage. • As a result of a huge shortage of rice in the market, prices will have to increase significantly from P1 to P2 to clear the shortage in the market. 2. Elasticity • The demand for rice is price inelastic as it is a staple food in India and therefore a necessity. • The supply of rice is price inelastic as well as rice has a long gestation period. • The fall in supply and rise in demand has led to a shortage at the original price level. Given that both PED and PES of rice are likely to be low, quantity demanded and quantity supplied will not be responsive to price changes. Hence to eliminate the shortage of rice caused by the rise in demand and fall in supply of rice, price must increase significantly. In conclusion, the significant increase in the price of rice in India is the result of an interplay of factors. Markers’ Comment: - Question requirement: o Majority of answers understood the need to explain both demand and supply factors but only a handful recognised that the 2nd requirement which required them to explain the extent of increase in price. - Tools of analysis: o Majority were able to apply price mechanism (dd/ss analysis). o A few answers used AD/AS analysis to analyse the impact on prices. This is inaccurate as the question focuses on the market for rice and hence not acceptable. - Content: o All answers were able to identify the direction of change in demand and supply accurately, i.e. supply fell and demand rose. o However, a handful of answers were not able to elaborate on the reasons for the rise in demand (i.e. answers merely stated

that demand has increased based on the pre -amble) → This has resulted to most answers attaining a cursory grade. o Most answers were able to recognise that poor monsoon rainfall will result in lower crop yield, reducing supply of rice. o Some attributed the increased in demand to changes in the consumers’ taste and preferences. However, this is a weak reason as rice has always been part of the people’s diet in India. It is unlikely that taste and preferences have changed, resulting in an increase in the demand for rice. o Also, some explained the rise in demand is due to rice being a staple. However, this would explain the PED value (i.e. demand is price inelastic) and not the reason for an increase in demand. o Most answers were not able to explain clearly why prices of rice has increased significantly. Even when elasticity concepts were applied, the se concepts were explained without any application (i.e. answers accurately explained that demand for rice is price inelastic as it is a necessity or a staple, without showing how this concept can be used to explain the significant increase in price). A well-elaborated answer would explain that because quantity demand is not responsive to the price increase, prices would need to increase significantly to c lear the shortage in the market. o Besides, students tend to apply the wrong elasticity concept . I.e. applying PED when demand increased / applying PES when supply decreased. o Very few answers explained the significant rise in price of rice using the reinforced effect. o Quite a handful of students did not explain that the fall in supply and rise in demand will result in a “shortage” in the market, resulting in price to rise. Rather, answers described the rise in price via the diagram, lacking analysis. Mark Scheme: Knowledge, Understanding, Application, Analysis L3 Analysis & Application For an analytical answer that addresses the question thoroughly with clear explanation well supported by tools of analysis, such as demand supply analysis and diagram. The demand and supply reasons as well as how prices rise significantly is clearly explained. There is good ability to organise ideas or discriminate between relevant and irrelevant factors. Answer is well-focused on question. 8-10

Knowledge & Understanding For an answer that demonstrates an accurate knowledge and understanding of economic concepts, theories related to question, e.g. demand and supply analysis Marks within L3: Annotation Description Mark A + A Analytical explanations for 2 question requirements 10 A + C + K 1 analytical and 1 cursory explanation for 2 question requirements and an explanation of additional factor that is relevant 9 A + C 1 analytical and 1 cursory explanation for 2 question requirements 8 L2 Analysis & Application For an under-developed answer that attempts to address the question and explain why prices of rice increased significantly . Answers may be descriptive, lack an analytical approach (e.g. not supported with tools of analysis, incomplete use of diagram) or is incompletely explained with gaps in analysis. [Or For a one-sided analytical answer that address only one of the two question requirements. For an answer that is supported with some application to the context of the question. There is limited ability to organise ideas or discriminate between relevant and irrelevant materials. Answer has some relevance to the question context but is generic (e.g. pre-learnt answer that is not focused on addressing the question specifically) or addresses only selected parts of the question. Knowledge & Understanding 5-7

For an answer that demonstrates largely accurate knowledge and understanding of economic concepts, theories related to question (i.e. no major conceptual errors). Marks within L2: Annotation Description Mark A + K 1 analytical explanation for 1 question requirement and an explanation of additional factor that is relevant 7 C + C + K Cursory explanations for 2 question requirements and an explanation of additional factor that is relevant 7 C + C Cursory explanations for 2 question requirements 6 A +