2024 TYS H2 Economics Paper 1 CSQ Answers (HCI) -- updated 2026

Suggested Answers to A Level 2024 H2 Economics (CASE STUDIES) by Hwa Chong Institution Economics Unit 2024 A-Level Case Study Question 1 (a) Using the information in Table 1, compare the change in forecast total retail grocery sales to that for online sales in the UK between 2021 and 2026. [2] Table 1 Year 2021 2022 2023 2024 2025 2026 Forecast total retail grocery sales (billions pounds) 212 214 216 220 224 229 Online sales as % of forecast total retail grocery sales 10.5 10.6 10.8 11.2 11.4 11.7 Calculations from Table 1 % change in forecast total retail sales 0.9 0.9 1.9 1.8 2.2 Online sales (billion pounds) 22.3 22.7 23.3 24.6 25.5 26.8 % change in online sales 1.9 2.8 5.6 3.6 4.9 Both forecast total retail grocery sales and online sales in UK between 2021 and 2026 are expected to increase. [1] Online retail sales is expected to increase at a faster rate. [1] (b) Explain two factors that are likely to determine the forecast increased demand for online shopping. [4] Demand is the willingness and ability of consumers to pay for the good or service. In this case, there is projection of an increase in willingness of consumers to use online shopping. 1. Change in taste and preferences Convenience of online shopping has caused more and more consumers to make purchases f rom the comforts of their homes hence the projected increase in demand for the service. Evidence from the extract states that consumers can order and have goods delivered without having to step out of the house. [2] 2. Increase in income Online shopping would increase with income as most are normal goods which have positive income elasticity. As income continues to increase, the willingness and ability to use online shopping is projected to increase. [2] (c) Using the evidence in Extracts 1 and 2, explain two features of UK supermarkets that demonstrate the characteristics of an oligopoly. [4] 4-firm market concentration ratio of 67.9% (Figure 1) indicates the market is dominated by a few large firms. [2]

Suggested Answers to A Level 2024 H2 Economics (CASE STUDIES) by Hwa Chong Institution Economics Unit UK supermarkets are mutually interdependent, as there are only a few dominant firms in the industry, any dominant firm, before it decides, has to consider the reactions of the other rival firms in the industry. In extract 2, Tesco is the market leader and other retailers may follow the pricing changes made by Tesco. [2] (d) With reference to Extracts 1 and 2, explain one possible reason why supermarkets might seek to control their supply chains. [2] Cost is rising due to inflation and this will shrink supermarkets’ already thin profit margin (Ext 1). By controlling their supply chains, the cost of inputs at every stage of production can be reduced, hence raising/maintaining profit, assuming no change to revenue. or By controlling the supply chain, the firm can prevent new competitors if the firm can prevent new firms from access to key resources. This raises barriers to entry, and helps incumbent supermarkets maintain their revenue and profits, assuming no change to costs. (e) If Sheng Siong and DFI decide to merge, discuss whether the CCCS should intervene in the merger due to adverse effects on consumers and other supermarkets in Singapore. [8] CCCS’ decision to intervene in the merger will depend on its impact on consumers, namely consumer surplus, choice and quality, as well as whether it will drive smaller supermarkets out of the market. Consumer surplus is the excess of what consumers are willing and able to pay over the price they actually pay. R1: CCCS should intervene. ● If Sheng Siong and DFI merge, their market share will be 48.1%. With reference to Fig 1, demand (say for Sheng Siong) increases from AR1 to AR2 and becomes more inelastic. The merged firm gains market power and with a more price inelastic demand, it is also able to raise price from P1 to P2 and quantity demanded will fall less than proportionately from Q. Consumers suffer from increase in price. At the same time, variety may be reduced too, restricting the choices. (Fig. 1)

Suggested Answers to A Level 2024 H2 Economics (CASE STUDIES) by Hwa Chong Institution Economics Unit ● There could also be adverse impact on other supermarkets in Singapore in terms of loss in market share and profit as demand for their goods fall, especially if the merged entity is able to intensify competitive tactics to eliminate the smaller supermarkets. [given there are already two diagrams in the answer, it is not advisable to illustrate impact of this in detail] R2: CCCS should not intervene. ● However, a larger supermarket enjoys internal EOS which lowers unit cost, such as from bulk purchase. As a firm increases its scale of production, this will lead to a downward movement along the LRAC as it reaps internal economies of scale. In the short run, this will translate to lower AC and MC than before. With reference to Fig. 2, as the firm profit maximises at MR=MC and MC falls, consumers will enjoy a decrease in price from P1 to P2, and a higher consumer surplus. ● In addition, profits increase from P 1adC1 to P 2beC2, and if it is channeled to enhance quality of products/service, consumers may benefit. (Fig 2) Summative Conclusion Given that the CCCS aims to ensure that mergers would not “lead to a substantial lessening of competition” (Ext 4), it should intervene as a merger leads to very high combined market share of 48.1%. Moreover, as there is a limit to gains from economies of scale to bring cost savings (Extract 1 para 4), consumers will unlikely benefit from lower prices if there is a merger. Hence, it is more likely that consumers will suffer after the merger and hence CCCS should intervene. (f) Discuss whether price competition is the best way for supermarkets to raise revenue. [10] R1: Price competition can help raise revenue. By cutting price (i.e. firm chooses not to profit maximise where MR=MC), quantity demanded for the firm’s product will increase. If demand is price elastic, the increase in quantity demanded will increase more than proportionately from Q1 to Q2 compared to the reduction in price from P1 to P2 resulting in increase in total revenue from 0P1aQ1 to 0P2bQ2 as total revenue is price x quantity.

Suggested Answers to A Level 2024 H2 Economics (CASE STUDIES) by Hwa Chong Institution Economics Unit R2: Other methods to raise revenue. Non-price strategies can raise revenue as well. This is done by increasing the demand for the firm’s product. If the firm increases demand for its products from D 1 to D 2, total revenue will increase from 0P 1AQ1 to 0P1BQ2. This can be achieved through providing quality assurance (in the case of Aldi and Lidl Extract 1 para 5), reducing price of related goods such as discounted petrol (Extract 1 para 5), having loyalty card & expanding range of products (in the case of Tesco, Extract 2). Summative Conclusion Given that supermarkets are in an oligopoly, there is mutual interdependence, price competition is likely to lead to rival firms to cut price as a response, leading to a price war and resulting in a loss of revenue as the quantity demanded increases less than proportionate to the reduction in price. Firms are also likely to be wary of pricing strategies making them the target of regulatory bodies. Hence non-price rather than price competition may be the best way for supermarkets to raise revenue.

Suggested Answers to A Level 2024 H2 Economics (CASE STUDIES) by Hwa Chong Institution Economics Unit 2024 A-Level Case Study Question 2 (a) With reference to Figure 2: (i) Explain how the appreciation of the Chinese yuan against US dollar is represented in a particular time period. [2] Between mid-2020 and early 2021, the Chinese yuan appreciated against the US dollar [1]. The exchange rate moved from a