TMJC 2023 A Level H2 EQ2_AP Answers

2023 A Level H2 Economics (9570) Suggested Answers to Paper 2 EQ2 © TAMPINES MERIDIAN JUNIOR COLLEGE Question 2 Bad weather and falls in consumer incomes can have different impacts on the prices of agricultural products such as vegetables, rice and grains. (a) Explain the different impacts on the prices of vegetables due to bad weather and falls in consumer incomes. [10] (b) Discuss the effectiveness of different measures that might ensure stability of food prices to consumers. [15] (a) Requirement (1): DD reason (falls in consumer incomes) to explain different impacts on prices of vegetables Requirement (2): SS reason (bad weather) to explain different impacts on prices of vegetables Suggested answer Introduction Question interpretation: • In a free market economy, prices of goods are determined by the forces of demand and supply. Hence in this context, changes in demand for or supply of vegetables will affect the prices of vegetables. Definition of terms: • Demand for vegetables refers to the quantities of vegetables that consumers are willing and able to purchase in a given period of time at various prices, ceteris paribus. • Supply of vegetables refers to the quantities of vegetables that suppliers are willing and able to sell in a given period of time at various prices, ceteris paribus. Body/ Development Using ISSUE framework as a tool of analysis: State initial equilibrium: Initially, the market for vegetables is in equilibrium at the intersection of demand (D1) and supply (S1). Requirement 1: Link to demand factor Falls in consumer incomes would cause the demand for vegetables to fall. As incomes fall, purchasing power of consumers falls h ence demand for vegetables de creases, assuming vegetables are normal necessities (0<YED<1), ceteris paribus. Demand curve

2023 A Level H2 Economics (9570) Suggested Answers to Paper 2 EQ2 © TAMPINES MERIDIAN JUNIOR COLLEGE will shift to the left from D1 to D2 by a small extent as seen in Figure 1 . At the original price P1, there is a surplus of vegetables and this will result in a downward pressure on price. When price falls, quantity demanded increases while quantity supplied rises. The surplus will gradually be eliminated and a new equilibrium is attained where new equilibrium is at Q2 and equilibrium price at P2. Hence there is a slight fall in price of vegetables from P1 to P2. Figure 1 Explore the different impacts of change in demand on prices However, if consumers consider vegetables as an inferior good, the fall in incomes may instead cause the demand for vegetables to rise instead, as consumers eat more vegetables than meat due to affordability, although vegetables may not be good substitutes for meat. Hence the demand for vegetables may rise f