RI 2022 H2 Promotion Examination - Examiner's Report

ECONOMICS Higher 2 Syllabus 9570 Examiner’s Report Year 5 Promotion Examination 2022 R a f f l e sI n s t i t u t i o n N u r t u r i n g t h e T h i n k e r , L e a d e r & P i o n e e r TEL: 65 6419 9888 ● FAX: 65 6419 9898 http://www.ri.edu.sg ● One Raffles Institution Lane, SINGAPORE 575954

Y5/9570/Promo/2022 2 © RI 2022 [Turn Over ECONOMICS Y5 H2 Promotion Examination 2022 Paper 9570/01 Paper 1 Case Study (a) With reference to Figure 1, (i) describe the trend in the revenue of the US pharmaceutical industry from 2014 to 2019. [2] - General trend: There has been an increase in the total revenue for the US pharmaceutical industry over the whole period. - Refinement: The sharpest increase occurred between 2017 to 2018. Mark Scheme: - 1m for overall trend - 1m for refinement Examiners’ Comments: • This question was generally well done but some students failed to surface the most significant refinement, or used the wrong time period. Please be mindful of the period given in the question and that given in the data. (ii) explain one possible reason why the decrease in revenue of the US pharmaceutical industry is expected to continue beyond 2020. [2] Students are expected to explain any plausible reason with links to change in price, quantity, and hence revenue. Explain one demand factor: • Fall in demand as population is getting healthier • Fall in income due to recession caused by Covid-19 • The fall in demand leads to a fall in both P & Q and hence TR. OR Explain one supply factor: • An increase in supply of generic drugs due to the expiry of patents, and given that demand for drugs is price inelastic due to a high habituality of consumption, the fall in price only leads to a less than proportionate increase in quantity demanded and hence a fall in TR. Mark Scheme: - 1 m for reason explained - 1 m for link to effect on TR with an explicit link to P and Q

Y5/9570/Promo/2022 3 © RI 2022 [Turn Over Examiners’ Comments: • A significant number of students lost marks because there was no explicit link to P and Q in explaining total revenue change. • Those who identified price fall (due to increase in supply, or due to government regulation) did not use PED to link to total revenue. • Many said increase in R&D spending reduced revenue, suggesting a confusion over revenue and profits (b) With the aid of a diagram, explain whether an increase in a firm’s research and development spending will always increase its profits. [5] Short-run In the short-run, an increase in a firm’s research and development spending represents an increase in the firm’s fixed costs, since such spending does not vary with the current level of output produced by the firm. Hence there will be a rise in AC from AC0 to AC1, without any change in the profit-maximising output of