2025 EJC Paper 2 - Mark Scheme

1 2025 EJC Prelim Exam H2EC P2 EQ1 SAMS (Suggested Answer and Mark Scheme) 1. Using innovative urban farming technologies, Singapore aims to produce 30% of its nutritional needs locally by 2030. While consumers are interested in buying local farm produce, local food manufacturers are still reliant on imported farm produce as their r aw materials. (a) Explain how a rise in the prices of imported farm produce leads to a rise in the consumer expenditure on local farm produce and a fall in consumer surplus in the local food manufacturing market. [10] (b) Discuss whether the Singapore government could rely solely on using supply-side policies to increase the sales volume of local farm produce. [15] Question Analysis (a) Framework Details Approach Command Explain - 10m Explain R1 and R2 - No EV needed Context -Market for local farm produce and -Market for local food manufacturing Start Pt. Rise in the prices of imported farm produce End Pt. -Rise in consumer expenditure (Price x Quantity) and -Fall in consumer surplus (difference between max. price consumers are willing to pay and market price) Content (R1) A rise in the prices of imported farm produce leads to a rise in consumer expenditure on local farm produce. (R2) A rise in the prices of imported farm produce leads to a fall in consumer surplus in the local food manufacturing market. Explain - A rise in the prices of imported farm produce will lead to consumers substituting towards relatively cheaper local farm produce. - Assuming that XED>1, demand for local farm produce increases by more than proportionate. - As equilibrium price and quantity both increases, consumer expenditure on local farm produce increases. - A rise in the prices of imported farm produce will lead to an increase in cost of production for local food manufacturers. - Supply of local manufactured food will fall. - As equilibrium price rises and equilibrium quantity falls, consumer surplus falls.

2 Introduction A rise in the prices of imported farm produce in Singapore , which could be due to an external supply shock, will have serious implications for related markets in Singapore, given our heavy reliance of imported food. Specifically, it can result in a rise in consumer expenditure (calculated as equilibrium price multiplied by equilibrium quantity) on locally grown farm produce, and a fall in consumer surplus (the difference between the maximum amount that a consumer is willing and able to pay for a good and the actual amount paid) in the local food manufacturing market. (R1) A rise in the prices of imported farm produce leads to a rise in consumer expenditure on local farm produce. Consumers, seeking nutritional needs,