DHS 2025 Y5 WA1 (mock paper A answers)

©DHS2025 3 Year 5 Weighted Assessment 1 [Mock Paper] Economics (Higher 1) 8843 SUGGESTED ANSWER Question 1 Undoubtedly, the use of mineral fertilizers has played a key and historical role in raising agricultural productivity, thus contributing to food security globally. The fallout of Russia's invasion of Ukraine has seen fertilizer prices soar, adding to farmers' costs, and further inflating food prices. In this context, rapidly increasing fertilizers prices lower affordability and reduce fertilizer use by farmers, leading to additional issues of food availability and compounding the food access problem. (a) Using a demand-supply diagram, explain t he effect of Russia’s invasion of Ukraine on the market for food. [5] “effect… on the market” apply market dd-ss analysis (including graph & market adjustment process) to explain the effect on eqlm P & Q i.e. the PEEL link back to the question is through changes in eqlm P & Q [Trigger] Russia’s invasion of Ukraine would lead to a decrease in the supply of food. [GERMSO] Fertilizer is a key factor input in the production of food. As “fertilizer prices soar”, this raises the marginal cost relative to marginal revenue. Rational producers reduce supply to avoid marginal loss. Market for food [MAP] The decrease in supply (S 0 to S 1), holding demand constant (D0), creates a shortage of Q0Q2 at the original equilibrium price P0, exerting an upward pressure on price. As price rises, quantity demanded declines while quantity supplied increases. The adjustment will continue up to the point where Qd balances Qs and the shortage is eliminated. <L> Resultantly, equilibrium price rises to P 1 while equilibrium quantity declines to Q1. ©DHS2025 4 (b) Using the concept of price elasticity of demand, explain the effect of a(i) on the consumer expenditure on food. [3] “price elasticity of demand”  To relate to specific PED determinant(s) ADAPTO  Include both reason and reasoning  Include the phrase “more / less than proportionate” “consumer expenditure” Apply formula: cr expenditure = P × Q [PED: ADAPTO] Demand for food is likely to be price inelastic. As a necessity, consumers are unable to forgo the consumption of food (for sustenance) despite price increases. Thus the increase in price (P0 to P1) would bring about only a less than proportionate decrease in quantity demanded (Q0 to Q1). <L> Consumer expenditure, given by P X Q, must therefore increase. Question 2 Roughly 70% of carbon dioxide (CO2) produced in the U.S. is used for food and beverages. The gas puts the pop in soft drinks and the fizz in beer, and is turned into dry ice to keep food frozen. During the summer, demand for products such as beer and soda increases, and high temperatures this year have intensified that demand. On the other hand, maintenance shutdowns at industrial facilities that produce CO2 gas are expected to keep supplies tight. Using a supply and dema