NYJC 2024 Prelim H1 Econ Suggested Answers

NYJC 2024 Prelim H1 Answers updated and aligned to TM Econs Question 1: Impact of Russia-Ukraine War on Various Industries Suggested Answers (a) With reference to Table 1, compare the prices of meat, cereal and dairy over the period shown. • The prices of meat, cereal, and dairy increase over the period of 2016 - 2022. [1] • The price of cereal rises every year over the period of 2016 – 2022 while others do not. [1] • The price of dairy ha s the largest increase, followed by the price of cereal and lastly the price of meat. [1] [3] (b) (i) Explain one function of the price mechanism. • Price serves signalling function as consumers indicate their desire for a good or service through the price he is willing and able to pay. The higher the desirability for the product, the higher the willingness and ability to pay. • This further serves as incentive function for producers, who will then channel resources towards producing goods and services that fetch the highest price since higher price guarantees higher profit. • Lastly, price also serves rationing function . As resources and hence goods and services are scarce, a shortage will exert upward pressure on prices. The increase in price will eliminate consumers who unwilling and unable to pay. Hence the scarce goods and services are rationed out to the consumers who are most willing and able to pay for them. State [1] and explain [1] any 1 of the 3 functions above. [2] (ii) With reference to Extract 1, explain and comment whether demand or supply factors have a greater impact on the rising price of food. • To determine whether demand factors or supply factors have a greater impact on the market for food in the long run, we will consider the extent of shifts in demand and supply. • Explain change in SS of food : From Extract 1, unplanted land in Ukraine and poor harvest worldwide due to bad weather will reduce supply of food grains and crops. Price of food grains will rise. Cost of production for food will rise. Cost of production will also rise due to increase payment and transport costs. With an increase in cost of production, supply of food will fall. [6]

NYJC 2024 Prelim H1 Answers updated and aligned to TM Econs • Explain market adjustment process to derive impact on eqm P & Q when ss falls: A decrease in supply will shift the supply curve for food leftwards from S0 to S1. At the original price, P0, this creates a shortage of Q0Q2, since quantity demanded (Q2) exceeds quantity supplied (Q0). The surplus puts a n upward pressure on price, causing quantity supplied to rise and quantity demanded to fall. The adjustment process continues until the new equilibrium price and quantity is reached at P1 and Q1 respectively. Hence, the decrease in supply causes a rise in the equilibrium price from