TJC 2024 Prelim H1 Econ Suggested Answers

TJC 2024 Prelim H1 Answers updated and aligned to TM Econs 1 Question 1: The clothing and textile industry Suggested Answers (a) With reference to Figure 1, compare the percentage change in price index of food to that of clothing from 2019 to 2022. [3] Similarity: • The percentage change in both price indices have increased over the period. [1] Differences: • While the percentage change in price index for food has been positive over this period, the percentage change in price index for clothing has been negative except after mid-2021. [1] • The percentage change in price index for food has always been higher than that for clothing. [1] (b) With reference to Extract 1, (i) Explain why the value of price elasticity of demand (PED) of clothing will change. [2] • Given “the wallet is fixed and with price of clothing going up” (Extract 1), this suggests that the proportion of income spent on clothing is increasing. [1] • Hence, the value of PED of clothing is increasing / getting larger [1]; demand is becoming more price elastic. (ii) Using a demand and supply diagram and given the relationship that exists between PED and total revenue, explain why “retailers can’t expect the price increases to translate into higher profits” (Extract 1). [4] • Given from (bi) that the demand for clothing is becoming more price elastic, the rise in price of clothing will lead to a more than proportionate decrease in quantity demanded, ceteris paribus. [1]

TJC 2024 Prelim H1 Answers updated and aligned to TM Econs 2 • The fall in revenue due to the decrease in quantity demanded (area Q2BCQ1) is likely to exceed the increase in revenue due to the increase in price (area P2ABP1). [1] • Assuming that the cost of production remains constant / ceteris paribus, profits of producers will fall. [1] (c) A public good has the characteristics of non-rivalry and non-excludability. Comment on the extent to which a clean aquatic environment (Extract 2) fulfils these characteristics. [6] Question Interpretation Command phrase Comment on the extent This question requires a balanced approach on whether a clean aquatic environment exhibits the characteristics of a public good. Content Public good Two characteristics of non -rivalry and non - excludability are to be examined. Context Clean aquatic environment Context has been specified. Introduction: • Non-rivalry refers to the case