2022 SAJC JC1 H1 WA CSQ Suggested Answers w Examiners' Comments

ST ANDREW’S JUNIOR COLLEGE Weighted Assessment 1 (WA 1) General Certificate of Education Advanced Level Higher 1 ECONOMICS 8843 Suggested Answer w Examiner’s Comments © SAJC 2022

Suggested Answers (a)(i) With reference to Figure 1, describe the trend in the global price of honey from 2013 to 2019. [1] Answer: General rising trend (1) Examiners Comments: Skills: i. No need to provide refinement to the trend, as there is only 1 mark available for this question. (ii) With reference to Extract 1 , and using a demand and supply diagram , account for the general trend in the global price of honey. [4 Answer: 1st part of the question: Demand factor (1m) Extract 1, para 1: “popular with people looking for healthier alternatives to cane sugar and high-fructose corn syrup” → taste and preference towards honey → global demand for honey increases → demand curve for honey shifts to the right from D1 to D2 Or Extract 1, para 1: “being used more as an ingredient in shampoos, moisturizers and other personal-care products that companies market as naturally made” → if demand for personal care products that need honey to produce, derived demand for honey increases → global demand for honey increases → demand curve for honey shifts to the right from D1 to D2 Supply factor (1m) Extract 1, para 3: bee populations in several nations suffered severe declines in the decade because of colony collapse disorder, disease as well as pesticide usage. → reduce global supply of honey as bees are essential factors of production of honey, supply curve shifts left from S1 to S2 Price adjustment process (1m) Due to the increase in global demand for and decrease in global supply of honey, → there would be a shortage at the original price → consumers would compete with each other to bid up the prices → as price start to increase, quantity demanded would fall while quantity supply would increase → such upward pressure on prices would continue till the new equilibrium is attained → at the new equilibrium, the price of honey increased from P1 to p2 Diagram (1m)

Examiners Comments: Skills: i. Need to include the 0 (zero) at the origin of the diagram. ii. Key words in price adjustment process were missing (see phrases in bold in answer above). iii. Some scripts presented only one factor (either DD or SS factor) when there were two factors presented in extract 1. iv. Some scripts presented two demand factors instead of one DD factor and one SS factors for a balanced answer. v. Students need to remember that they need to refer to the diagram drawn as they explain how the curves shifts. Content: i. Horizontal axis of graph ought NOT to be “Quantity of honey demanded”. ii. It would be good to develop a habit to contextualise the market as they draw the DD-SS diagram. For e.g. label the horizontal axis as “Quantity of honey” instead of “Quantity” iii. There are some students who failed to identify the shortage wrongly on their diagram. The shortage should be difference between the quantity demanded from the new demand curve and the quantity supplied from the new supply curve at the original price. o Students are advised not to identify the shortage on the diagram if they are not confident to label it in the first place. (b) With reference to Extract 2 and using a Production Possibility Curve (PPC), explain how the declining bee population would affect the production of honey and food crops. [3] Answer 0 Price Quantity of honey D1 D2 S1 S2 P1 P2 Shortage at P1 Q1 Q2 Qs Qd

Bees are factors of production/resources for honey production and food crops. (1) When bee population declines, quantity and quality of factors of production which are bees would fall. Productive capacity to produce both honey and food crops would decrease. (1) As a result, the PPC would shift inwards from AA’ to BB’ Diagram (1) Examiners Comments: Content: i. Some answers indicated bee population as one of the axes in the PPC. PPC relates to output of goods and services, not factor of production. ii. A handful of students did not used the keywords “productive capacity” nor the key phrase “potential output that can be produced” as they explained why there would be an inward shift of PPC curve. Note that a “fall in production of output” causing inward sh ift of PPC is not precise in explaining why there is a fall in potential output. iii. Some students did not answer the question directly as they concluded that there is negative potential growth instead of a fall in the potential output of food crops and honey produced . The question did not ask what happens to the potential growth but instead what happens to the production of food crops and honey. A B 0 B’ A’ Units of honey Units of food crops

(c)(i) Identify the economic relationship between cane sugar and honey. [1] Answer: Substitutes (1) Examiners Comments: Content: i. Quite a number of students identified that the relationship was competitive in supply which is incorrect. (ii) With reference to Figure 2, explain how this economic relationship accounts for the general trend in global prices of sugar during the period from 2013 to 2019. [3] Answer: From Figure 2, global prices of sugar generally fell from 2013 to 2019. [1] Since sugar and honey are substitutes as they both satisfy similar wants, consumers might opt for healthier alternative which is honey and change their taste and preference against sugar. This would cause the demand for sugar to fall. [1] Due to a fall in demand for sugar, there would be a fall in price of sugar [1]. Examiners Comments: Content: i. Several students showed confusion between quantity demanded and demand. ii. Students ought to analyse the effects of the rise in demand of honey and how this affected the demand and price for sugar. iii. Students should note that the starting point of analysis should not be price of honey that led to the fall in price of honey. o Instead the starting point should be change in taste and preference towards honey which led to an increase in demand for honey but a fall in in demand for sugar. (d) Explain the factors a rational honey manufacturer should consider when making his decision on whether to expand his business and comment on whether he should do so. [8] Answer: 1st part of the answer [6m] Objective of honey manufacturer → maximise profits (1m) The factors that a rational honey manufacturer should consider would be information, constraints, marginal benefit (i.e. marginal revenue) and marginal cost of producing honey. Marginal Benefits (MB): (1m - identify + 1m - explain)

• Refers to the marginal revenue (MR) that could be earned from selling honey. Marginal Costs (MC): (1m - identify + 1m - explain) • Refers to the additional cost of producing honey which includes the additional cost of setting up a factory, cost of beekeeping which is time consuming, maintenance cost of bee colonies, labour cost, rental cost of land etc, • The honey manufacturer would also incur opportunity cost as the given amount of labour and land (i.e. resources) that is allocat