2026 Compiled Prelim P2 Questions

H2 Economics Prelims Paper 2 HCI 2026 Section A Question 1 In 2024, the United Kingdom (UK) raised its national minimum wage to increase the income of low-wage workers amid a modest economic recovery. Some business owners, however, have expressed concern over higher wage costs, warning that these may ultimately be passed on to consumers through increased prices. (a) Explain why, for normal goods, an economic recovery will increase consumer expenditure to different extents, while higher wage costs can increase or decrease consumer expenditure. [10] (b) Discuss the intended and unintended consequences when the UK government raises the national minimum wage, and consider whether you support the UK's decision to do so. [15] Question 2 (a) Explain what economists mean by allocative efficiency and why public goods would lead to allocative inefficiency. [10] (b) In some countries, governments provide free Wi-Fi even though it is not a public good. Access to the internet will allow critical information to be passed on to everyone, which not only benefits users themselves but also the wider community. Discuss the efficiency and equity reasons for the provision of free Wi-Fi by governments. [15] Question 3 The supermarket industry in Singapore has three big firms: NTUC FairPrice, Sheng Siong, and Macrovalue (operating Cold Storage, Giant and others), each taking up a relatively large market share and earning high profits. Newer firms like Scarlet Supermarket and Little Farms are merely earning normal profits. (a) Explain why a new firm may aim to earn only normal profits, and how such a firm's price and output would compare with those of an existing firm that aims to maximize profit. [10] (b) In view of the potential cost and revenue problems that a new firm may face when entering a supermarket industry dominated by a few large firms, discuss the strategies it could adopt to survive in the long run. [15]

H2 Economics Prelims Paper 2 HCI 2026 Section B Question 4 (a) Explain why governments are concerned with high rates of inflation and balance of trade deficits. [10] (b) Discuss the extent to which the reduction of high inflation may conflict with the attainment of other macroeconomic goals. [15] Question 5 The US Dollar's depreciation stems from multiple factors. While the US government welcomes a weaker dollar, which could help to enhance export competitiveness, some economists raise concerns about the negative impacts on the US economy. (a) Explain one possible demand-side cause and one possible supply-side cause for a country's currency to depreciate in a freely floating exchange rate system. [10] (b) Discuss whether, on balance, the depreciation of the US Dollar will benefit or harm the US economy. [15] Question 6 Singapore and the US are among the richest countries in the world in terms of real GDP per capita. The US has imposed protectionist tariffs in pursuit of an "America First" policy, while intensifying US-China trade tensions have prompted multinationals to relocate their operations back to the US, sparking fears of deglobalisation. (a) Explain how real GDP per capita can be a useful yet inadequate measure of standard of living in a country. [10] (b) Discuss the extent to which deglobalisation hurts a country's standard of living. [15]

H2 Economics Prelims Paper 2 RI 2026 Section A Question 1 Rare earth elements are critical inputs in the production of semiconductors, electric vehicles and other high technology products. Rising incomes have contributed to strong growth in these industries. While the extraction of rare earth elements can be challenging and time consuming, producers in some industries have also explored alternative materials. (a) Explain why the above events have led to a sharp increase in the price of rare earth elements, and the reason why shortages may continue to occur despite higher prices. [10] (b) Discuss how the rise in the price of rare earth elements may affect two related markets. [15] Question 2 The pharmaceutical industry is dominated by a small number of large firms that hold patents over many medicines. Patents and high costs of developing new medicines create significant barriers to entry, giving established firms considerable market power. Recently, governments have been encouraging the entry of low-cost alternatives. (a) Explain the likely effects on a pharmaceutical firm's price and output when its objective changes from profit maximising to an alternative objective. [10] (b) Discuss the extent to which entry of low-cost alternatives will benefit consumers and harm producers in the pharmaceutical industry. [15] Question 3 Japan is highly vulnerable to earthquakes and tsunamis. Tsunami warning systems alert communities to approaching waves. Households may also invest in earthquake- resistant housing to reduce the risk of buildings collapsing during earthquakes, which can also improve the safety of people in surrounding areas. (a) Explain why the market may fail in the provision of tsunami warning systems and earthquake-resistant housing. [10] (b) Discuss appropriate policies that can be employed to address the market failures associated with the provision of tsunami warning systems and earthquake- resistant housing. [15]

H2 Economics Prelims Paper 2 RI 2026 Section B Question 4 Income inequality may arise from changes in technology as well as changes in the demand for and the supply of workers with different skills. This has prompted governments to adopt a redistributive policy of progressive taxation with cash transfers. (a) Explain one demand and one supply factor that may contribute to a significant rise in income inequality. [10] (b) Discuss whether the above redistributive policy is the most appropriate for a government to achieve inclusive economic growth. [15] Question 5 For is a small and highly open economy that is closely integrated with the global economy through trade and capital flows. In recent years, changing global economic conditions have raised questions about the benefits and challenges of greater economic integration. (a) Explain how technology has facilitated globalisation and how an increase in international capital outflows can affect a country's exchange rate. [10] (b) Discuss the extent to which conflicts between macroeconomic objectives may arise as Singapore becomes increasingly integrated into the global economy. [15] Question 6 The UK has experienced periods of rising unemployment as economic growth weakened, while also recording persistent deficits in its trade in goods. These challenges have raised concerns about employment and the country's external economic position. (a) Explain why countries seek to achieve a low rate of unemployment and avoid a persistent balance of trade deficit. [10] (b) Discuss whether the use of supply-side policy is more effective than demand-side policy in achieving full employment. [15]

H2 Economics Prelims Paper 2 EJC 2026 Section A Question 1 Land is a scarce resource and must be allocated among competing uses (residential, commercial, industrial, and recreational). (a) Explain how a production possibilities curve can be used to illustrate the concept of opportunity cost, and how the price mechanism can help to allocate scarce resources. [10] (b) Discuss whether demand factors or supply factors have a greater impact on residential property prices. [15] Question 2 TicketMaster, a dominant ticketing provider in Singapore, mandates that major stadium concerts such as Taylor Swift and Coldplay sell tickets exclusively through its website, blocking rivals like Sistic. (a) Explain how Ticketmaster's dominance in the entertainment ticketing industry negatively impacts consumers and rival ticketing providers. [10] (b) Discuss the effectiveness of pro-competition policy compared to regulatory pricing in addressing these negative impacts. [15] Question 3 SkillsFuture faces a key challenge of low utilization. Many workers find it hard to balance training with