2025 CJC H2 Econs answer key (P1+P2)

1 H2 Economics Preliminary Examination 2025

2 Catholic Junior College Economics Department Examiners’ Report for Preliminary Examination 2025 H2 Economics Case Study Question 1 (a) Using the information provided in Extract 1 and a diagram, explain how the shift in market conditions contributed to the trend in plant-based food sales revenue shown in Figure 1. [4] According to Figure 1, plant-based foods sales revenue is rising/ increasing and projected to continue to rise/ increase. [1] From Extract 1, “food-related consumer habits often come and go as fads, but plant-based alternatives are here to stay – and grow” indicates a change in taste and preferences in favour of plant-based foods. [1] OR From Extract 1, “population growth to 4.6 billion by 2030” can also be accepted as a demand factor. [1] Demand rises and the demand curve shifts to the right from D1 to D2, assuming ceteris paribus. A shortage would occur at the original price, triggering an upward pressure on price, hence price will increase from P1 to P2 and increase in quantity from Q1 to Q2. Since retail sales revenue = P x Q, increase in both price and output will lead to an increase in retail sales revenue from P1Q1 to P2Q2. [1] Most students can recognise and state that sales revenue increased. When explaining TR change, there is a need to first explain how P and Q changed, to substantiate the claim of the change in the TR value. While the question was already clear it required only ONE shift, some candidates identified several factors and explained simultaneous shifts of DDSS. Some students did not explicitly state the information from Extract 1. Note that when quoting from the evidence, students should also practice the good habit of including the non-price determinant that has been affected. Some students did not link to a non-price determinant of demand, taste and preferences or population. Price adjustment process was sometimes missing from the explanation. Good answers include the Price Adjustment Process (PAP) with clear outcomes on P and Q. Good answers also stated that TR=PxQ Most students can draw the correct diagram with all the parts labelled. Answers that focus on BOTH demand and supply changing will be marked based on demand only. Answers that focus only on “increase in supply” will be marked based on relevant points only. Candidates are reminded that when analysing the impact of demand shifts on TR or TE, there is no need to bring in PES. Some students use a different tool of analysis: MC=MR P1 Price Quantity of plant- based foods 0 Q1 D1 D2 S P2 Q2

3 (b) Extract 2 mentions ‘more startups have joined frontrunners in launching or developing their own animal-free alternatives.’ Explain how the cross elasticity of demand can be used to predict changes in the producer surplus of traditional meat producers due to more startups. [4] Extract 2 states that there are more startups launching animal free alternatives. This suggests a greater number of producers, leading to an increase in the supply of plant- based “meat” products, leading to a fall in their price. [1] Plant-based “meat” products and traditional meat are close substitutes, with a positive cross price elasticity of demand (XED > 0). [1] value not needed, just positive. (students can choose to a specific XED value too) As the price of plant-based “meat” falls, the demand for traditional meat decreases. [1] The fall in demand for traditional meat causes both equilibrium price and quantity to decrease, reducing producer surplus for traditional meat producers due to lower prices. [1] Poor answers explained total revenue instead of producer surplus. There is a need for candidates to sharpen their understanding on XED. The trigger for the change in demand is the price change of the related good, not the presence of a substitute. Definition of XED, when provided, often came with mistakes. Stating that the two goods are substitutes are not sufficient, there must be a decrease in price of plant- based “meat” products. Some candidates did not link the increased start ups to a supply increase and the subsequent price fall in the alternative food market. Students were sometimes confused when two markets were being included as part of the explanation, while the change occurred in animal free alternatives, focus should also be on the market in question, the traditional meat market. There were a handful of candidates who erroneously thought that TR and PS were the same thing and expressed them the same way in the DDSS diagram. Some students drew a demand and supply diagram of plant-based “meat” products which is not the focus of the question. (c) Using the concept of opportunity cost, explain how active government funding in novel food research can impact the Singapore economy. [2] 1m: Opportunity Cost Opportunity cost refers to the net benefit (or value) of the next best alternative foregone when a decision/choice is made. 1m: Impact on Singapore Economy The opportunity cost must be clearly linked to one of the four macroeconomic aim/goals and/or standard of living. The opportunity cost of the “active government funding in novel food research” could have been spent in sector like education and forgoing benefits such as: - LRAS could have increase, promoting potential and actual growth - Reducing mismatch of skills and reducing structural unemployment Some did not include the definition of opportunity cost. Opportunity cost can be defined on its own or inserted into the explanation. A handful of candidates missed out on some key words like ‘net benefit’ and ‘next best alternative’ in the definition Most candidates did not understand that ‘impact the SG economy’ necessitates an opportunity cost at the level of the economy, i.e. effect

4 - Fiscal policy and AD could have increase, promoting actual growth and reducing demand deficit unemployment. on macroeconomic objectives of standard of living Many students explain opportunity cost in terms of microeconomic perspective instead of macroeconomic perspective. - The positive effect of healthcare or education forgone alone is insufficient. - Stating standard of living improves or worsen is insufficient. Any negative point of view (POV) is wrong. (d)(i) Using the information provided, identify and explain the market structure of meatpacking industry in the USA. [2] 1m: Identify the market structure of meatpacking industry in the USA. 1m: Explain using information provided from (Extract 4) ‘The four meat packing giants control a staggering 80-85% of the beef industry’. Answer: The market structure is an oligopoly because there are 4 dominant firms ‘The four meat packing giants control a staggering 80-85% of the beef industry’. or The market structure is an oligopoly because the 4 firms concentration ratio is more than 0.8-0.85, 80% to 85%. Most candidates were able to identify the oligopolistic market structure with the use of the concentration ratio provided in the case material. Many students can identify that there are FOUR dominant firms. Good answers explicit state the “4 firms concentration ratio” Poor answers state - A few dominant firms Four firms (without dominant) (d)(ii) Discuss the factors the government needs to consider when regulating prices in the meatpacking industry to manage the ills of market dominance. [8] Introduction: • Definitions of key concepts • Overview of answers Thesis: Factor 1 • Benefits • Cost • Constraints • Unintended consequences Thesis: Factor 2 • Benefits • Cost • Constraints • Unintended consequences Anti- Thesis: • Evaluation of Factor 1 Anti- Thesis: • Evaluation of Factor 2 Conclusio