2025 TJC P1 Prelim H2 Econs

TEMASEK JUNIOR COLLEGE 2025 JC2 PRELIMINARY EXAMINATION Higher 2 ECONOMICS 9570/01 Paper 1 26 August 2025 2 hours 30 min Additional Materials: two 12-page answer booklets READ THESE INSTRUCTIONS FIRST Answer booklets will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Answer all questions. Indicate the question number clearly in your answers. Start Question 1 and Question 2 on separate answer booklets. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 8 printed pages and 0 blank pages.

2 Question 1: The economics of tea Figure 1: The volume and value of Kenyan tea exports from 2020 – 2024 Source: Tea Board of Kenya, 2024 Figure 2: Kenyan tea price Source: International Monetary Fund, accessed May 2025 Extract 1: Kenyan tea to China Tea is Kenya’s top export crop, bringing in over $1 billion yearly. The country is also the world’s biggest exporter of black tea. Tea has deep roots in Chinese culture, used for centuries in ceremonies, daily life and medicine. So China might seem like a perfect destination for Kenyan tea. But there’s a twist: China is the birthplace of tea, the largest producer, and one of the top exporters globally. Why would it need to import tea at all? And yet, it does. And increasingly, it’s importing tea from Kenya. Between 2022 to 2024, there has been a more than fourfold increase in just two years and ranking China the 10th export destination of Kenyan tea. China’s interest in Kenyan tea is clearly growing, driven especially by health-conscious consumers seeking orthodox, or traditionally produced, tea. Source: Africacheck.org, 23 April 2025 518.92 558.92 450.33 522.91 594.5 120.04 136.59 138.09 180.47 181.69 0 20 40 60 80 100 120 140 160 180 200 0 100 200 300 400 500 600 700 2020 2021 2022 2023 2024 Value in Billion Kenya Shilllings Volumne in Million Kilograms Volume (Million in Kilograms) Value (Billion in Kenya Shillings)

3 © TJC 2025 [Turn Over Extract 2: What is the true price of a cup of tea? The true price of tea reflects the visible as well as the hidden costs of its production. The calculated true price of conventional green tea leaf is €1.05/kg green tea leaf. This is the sum of the farm gate price (€0.35/kg green leaf) and the external costs of cultivation (€0.70/kg green leaf). The latter is also called the true price gap. Cultivation of tea in Kenya requires extensive use of fertili sers. This leads to high concentrations of nutrients, particularly nitrogen and phosphorus, entering water bodies through leaching and surface runoff, which causes eutrophication. Eutrophication is a process in which water bodies become excessively enriched with nutrients, leading to rapid algal growth that blocks sunlight, reduces oxygen levels through decomposition, and ultimately disrupts aquatic ecosystems by causing the death of marine life, which in turn affects fish populations and the livelihoods of fishermen as well as the seafood trade. The underpayment of hired labour and poor working conditions also contribute to hidden effects associated with tea cultivation in Kenya. Studies, for example, indicate that a lack of personal protective equipment and exposure to pesticides on farms is widespread, posing health concerns for workers, many of whom are women. Small-scale farmers who cultivate tea are often directly affected themselves and, due to low yields, are unable to adequately compensate hired labour. Experts say changes on the production side can help the tea industry reduce its environmental footprint. That involves moving away from farming practices that degrade and pollute soils with chemical fertilisers. The hope is that the use of organic fertilisers will enable farmers to increase productivity and incomes while creating more sustainable tea, thereby regenerating depleted soils and benefiting biodiversity. Source: IDH and True Price, March 2016 Extract 3: Competition authority okays Lipton teas’ takeover The competition regulator in Kenya has permitted Browns Investments’ acquisition of Lipton Teas and Infusion, setting the stage for one of the most watched deals in the East African region this year. Other formidable competitors are the Kenya Tea Development Agencies (KTDA), Eastern Produce Kenya Ltd. and Williamson Tea. The merger aims to elevate Kenya's tea industry through a 1 billion Kenyan shillings investment in community projects and initiatives like Lipton's Tea Academy and a new fertiliser plant. This academy will train farmers on global best practices, enabling them to maximise the value of their crops. Additionally, a state -of-the-art tea-specific fertiliser plant will be established to support tea cultivation in Kenya further. This partnership, alongside government reforms, seeks to increase value -added tea exports from 5% to 50% by 2027, boosting export value to over USD 1.85 billion and benefiting smallholder farmers. The Authority has also assessed that the merger will not lead to any employment losses even after the acquisition. The merger positions Lipton Group to focus on brand management and improvement of value -addition. The company has pledged to re -invest its proceeds in the region to boost the local economy. The merger has been challenged by local communities, who cite concerns about potential job losses and increased mechani sation under new ownership, which could displace workers, along with allegations of human rights abuses and the displacement of locals from their land. Source: The Kenyan Wall Street, 6 December 2024

4 Extract 4: Tea tourism Traditionally a major agricultural product for export, tea has increasingly taken on a new role in recent years for Kenya. This East African country offers tantali sing tea tourism, giving visitors a unique opportunity to understand what makes its brew special. Tours to the farms offer visitors an educational experience of understanding Kenyan tea, participating in tea picking, tasting the beverage as well as getting insights into local culture. They can also visit factories to learn about tea processing. Gatura Greens is a family run purple tea farm that offers an authentic experience, including tasting over 10 different types of tea. While many businesses were forced to close shop during the COVID -19 pandemic, Gatura Greens saw an opportunity to venture into tea tourism and indeed, business thrived. It takes a maximum of 30-40 people and a minimum of four depending on the season and the day. There is more growth potential for tea tourism in Kenya, and small scale tea farmers across the country are urged to try and offer unique experiences in their farms. Tour operators are called to include agri -tourism in their packages. Tourism represents an alternative for diversification of the economy, particularly considering the country’s environmental attraction suitable for nature tourism together with an abundance of labour. Notably tourism will contribute to the country through employment of local workers and the multiplier effects that their earnings generate in their communities; foreign exchange earnings to support the national balance of payments and social cohesion. The Kenyan government is constantly working to attract more international visitors. It has asserted its commi