SAJC H2 Prelim 2024 P1 QP

St Andrew,s Junior Coll ge •• JC2 Preliminary xaminations for General Cert1f1cate of Education Advanced Level Higher 2 ECONOMICS Paper1 No Additional Materials are required. READ THESE INSTRUCTIONS FIRST 9 70/01 23 Aug 2024 2 hour 30 minu.""' An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Answer all questions. The number of marks is given in brackets [] at the end of each question or part question. ©SAJC 2024 9570/01/Aug/24 This document consists of 9 printed pages and 1 blank page. ST ANDREW'S JUNIOR COLLEGE Economics Department [Turn Over

2 . . Fertiliser Trap . phosphate f.ertiliser ,market. . . . . . . constrained as measures to fight climate change are imp eme , ,remain high for years to come. the solution to the fertiliser crisis is to increase supplies of natural gas and develop mor~ production supplies within Europe are severely constrained. They say this is necessary to protect domestic production from imports and to keep their factories in operation. 8,ut increased production of chemical fertilisers will not resolve this crisis. The era of cheap fertilisers is over, and the costs have become too much to bear - both in terms of the financial burden. for farmers and public budgets, the severe environmental and health impacts, and the long­ term risks to food security. While some short-term actions can be taken to cut waste and address excess profit taking by fertiliser companies, it is critical that governments focus on reducing consumption in the long-term, including programmes to support farmers to transition towards environmentally-sound and more cost-effective alternatives, such as agroecology. Agroecology .incorporates traditional knowledge with science. Instead of chemical fertilisers, farmers restore nutrients and fertility to soils through the use of manure or through the cultivation of plants that absorb nitrogen from the atmosphere. These farming practices also do less damage to soils in the first place. In many places, farmers are already demonstrating that they can transition away from the use of chemical fertilisers as part of a broader transition to agroecology, without sacrificing their yields. To make a transition away from chemical fertilisers, farmers need public support. Abrupt, top-down bans on chemical fertilisers, such as those in Sri Lanka in 2021, invite fail,ure. Source: Adapted from The Institute for Agriculture and Trade Policy, ''The Fertiliser Trap'', a Nov 2022 Extract 2: Soaring fertiliser prices force farmers to rethink how they farm It's a tough time to be a farmer. Just ask Rachael Sharp, a third~generation farmer in the us state of South Carolina, who grows a varied mix of soybeans, corn, wheat, cotton, peanuts and oats. She saw fertiliser prices for her crops soar 3203/o last year -the sharpest rise that she, or her father, can remember. ©SAJC 2024 9570/01/Aug/24

, 3 Ms ... nent of nitrogen fe;rt1l1sers. ose investments to 1pay off. uge challenge 1n our field," says Bhup1nder Farmaha, a nutrient management spec1al1st at fertiliser application that d,oes not take account of specific environmental ,conditions. Sri Lanka came up with a radical solution to the problem: the government abruptly banned chemical fertilisers in April 2021. The effects of the ban were catastrophic. Farmers who had depended o:n chemical fertilisers were suddenly scram.bling for o,rganic alternativesJ with little time to prepare. Very few Sri Lankan farmers were accustomed to organic fertilisers, which in any case were in short supply. A measured approach involves using technology like soil spectroscopy, which quickly assesses soii nutrient and pH levels, enabling targeted fertiliser application. Precision techniques like microdosing and slow-re.lease fertilisers also reduce fertiliser use. Dr. Dharmakeerthi advocates for utilizing organic waste, like fermented fish waste, as a promising alternative, highlighting the need for cost-effective nutrient extraction technologies. The fertiliser crisis has sparked increased interest in eco~friendly fertilisers, prompting a surge in research, according to Dr. Dharmakeerthi. Source: Adapted from BBC, May 2022 Extract 3: The botched Sri Lankan fertiliser ban Sri Lan.ka's economy is in free fall. Runaway inflation reached 54.6 percent last month, and the South Asian country is now headed towards bankruptcy. Nine in 10 Sri Lankan families are skipping meals, and many are standing in line for days in the hope of acquiring fuel. In April 2021, Sri Lanka's President Gotabaya Rajapaksa imposed a complete ban on the 1import and use of chemical fertiliser, becoming the first and only country in the world to impose a blanket ban on chemical fertiliser overnight. Citing healt,h risk presumably caused using and the exposure to chemical fertiliser, the president stressed that lives are more important than high yield. ioespite concerns raised by various quarters on the impracticality of an overnight blanket ban, the government proceeded with th~ plan. It demanded an increase i~ ,domest.ic organic fertiliser manufacturing to meet the required need by September. The overnight ban plunged the farmer community into distress. Chemical fertilisers and pesticides traders and companies continued' to hoard the already available fertilisers, creating a shortage in the country. • @SAJC 2024 9570/01/Aug/24

4 Most f rmer did not have the knowledge and skills to successfully im.plement or~anic farrnin yields. Rice Sri Lanka's dietary staple that ,t used to produce adequate.ly and even exported, saw The production of tea the country s prime export, fell by 181/o crimping its foreign exchange arnings. This farming disaster could not come at a worse time for the island nation of 22 million people. Previous Covid-19 lockdowns devastated Sri Lanka's tourist industry, which generates one-tenth of the country's economic output and provides a major source of foreign currency. The domestic currency, the rupee, has lost about one-fifth of its value, limiting Sri Lanka's ability to import even essentials like food, medicine and fuel. That added to lingering problems like its huge debt load, including on high-interest loans from Chinese state banks that required it to take out still more loans. The breaking point came when fuel prices skyrocketed with the eruption of the Russia-Ukraine war. Drowning in $51 billion in foreign debt, Sri Lanka was not even able to meet its interest obligations. In May this year the country defaulted on debt, for the first time in its history. Source: Adapted from Time July 2022, Reuters, Mar 2022 and Greenpeace Dec 2022 Figure 1: Sri Lanka's Government Revenue and Expenditure (2018 - 2022) ©SAJC 2024 25 20 0.. 0 15 (9 '+- 0 ~ 10 0 5 0 2018 2019 2020 Year 2021 I I 2022 Government Revenue ...ie Government Expenditure Source:Central Bank of Sri Lanka 9570/01 / Aug/24

5 ) ') E pi in t _e l'~ely market structure that global chemical fertiliser companies are likely to be operating in. [2] ii) Exp\ain how the type of market structure identified in a(i) has allowed t ese firms to capture mega profits Extract 1 ). [2] b) \n the light of the current and potential challenges faced by chemical fertiliser firms, discuss . hether firms should consider expanding their product·on of fertilisers. [8] (c) Using a demand and supply diagram and Extract 3 account for the inflation in food prices in Sri Lanka. [6] (d) Describe the Sri Lankan governments fiscal position from 2018- 2022. [2] (e) Assess the microeconomic and macroeconomic impact of the Sri Lankan government's decision to ban the use of chemical fertilisers. [1 O] [Total: 30] ©SAJC 2024 9570/01 / Aug/24 [Turn Over

6 Question 2· s· • Jngapore and the global