2026 ACJC H2 Econs P1 Q1 Prelim ANS

ACJC ECONOMICS 2026 ACJC H2 P1 Case 1 Suggested Answers a With reference to Extract 2, explain how a cognitive bias may cause consumers to be willing to pay much higher prices for concert tickets on resale platforms. [2] Loss aversion ● Loss aversion refers to the tendency for people to: o prefer avoiding a loss over making an equivalent or greater gain OR o value a loss greater than an equivalent or greater gain. Note: Either definition is accepted. ● In the context of Extract 2, some fans may view failing to attend Taylor Swift’s concert as a significant loss, especially because Singapore was the only Southeast Asian stop and the concert was seen as a rare opportunity. Due to loss aversion, the disappointment or regret from missing the concert may feel greater than the benefit of saving an equivalent amount of money by not buying an expensive resale ticket. As a result, fans may focus more on avoiding the perceived loss of missing out than on the high financial cost, making them more willing to pay far above the official price on resale platforms, even if the ticket is much more expensive than they had originally planned. OR Sunk cost fallacy ● Sunk cost fallacy arises when a person’s decision is affected by fixed rather than marginal cost. ● In the context of Extract 2, fans who had already spent hours queuing or made travel arrangements may treat these costs as a reason to continue trying to attend the concert. However, these costs are sunk and should not affect the current decision. They should instead compare the marginal cost of purchasing the resale ticket with the marginal benefit from attending the concert. Due to sunk cost fallacy, they may be reluctant to “waste” their time and spendings already incurred and therefore become more willing to pay much higher resale prices. Note: ● Salience bias is not accepted as it is not presented in Extract 2. b With reference to Extract 2 and with the aid of a demand and supply diagram, explain how a shortage of concert tickets at the official ticketing platform can lead to a relatively higher ticket prices in the resale market. [3] Diagram: Official Concert Ticket Market © ACJC Economics Department 1

ACJC ECONOMICS OR OR Alternative Diagram: Resale Ticket Market ● At the official ticket price, demand for Taylor Swift concert tickets was very high, especially given that Singapore was the only Southeast Asian stop. However, the © ACJC Economics Department 2

ACJC ECONOMICS supply of official tickets was fixed due to limited venue capacity and the number of show dates. ● Since the official concert ticket price (P1) was priced below the market-clearing price, quantity demanded exceeded quantity supplied, creating a shortage as many fans who were willing to buy tickets at P ₁ were unable to obtain them through the official ticketing platform. ● These unsuccessful buyers may then turn to the resale market. Demand for resale tickets would be high because some fans have a high willingness to pay to avoid missing the concert. However, the supply of resale tickets would be limited because only some ticket holders would be willing to resell their tickets. ● As a result, the high demand for resale tickets, combined with the limited supply of resale tickets, places upward pressure on resale prices. Hence, the resale market may clear at a much higher price, P ₂ , compared to the official ticket price, P ₁ . c Identify the type of market structure that Ticketmaster is likely to operate in. Justify your answer. [4] ● Ticketmaster is likely to operate in a monopoly market structure. ● Ticketmaster is the largest firm with a significant market share of 83.4% market share , significantly higher than the next largest firm. ● Strong barriers to entry : high cost barriers to entry as firms have to incur substantial upfront cost to set up secure payment method. This high cost prevents firms from entering the industry easily. d Using examples from Extract 3, explain the difference between variable cost and fixed cost of a firm providing ticketing services. [3] Fixed cost ● Cost of maintaining secure online payment systems is an example of fixed cost as the cost of maintaining such system will not vary with the number of users purchasing tickets from the platform / number of concert dates. ● Alternative examples of fixed cost: Cost to maintain online queue-management tools / fraud-detection software / technology capable of handling very high volumes of purchases within a short period. Variable cost ● On the other hand , cost of employing labour for venue-entry verification is an example of variable cost that varies with output. When additional concert performance date is added, the ticketing firm will have to incur additional cost of employing additional labour. ● Alternative example of variable cost: Payment-processing charges / customer enquiries / refunds. e “The United States Department of Justice alleged that Ticketmaster used long-term exclusive agreements that prevented some venues from using rival platforms or switching to alternative providers” (Extract 3). © ACJC Economics Department 3

ACJC ECONOMICS Discuss whether the removal of long-term exclusive agreements used by ticketing platform would benefit concertgoers. [8] Question Analysis: Command Word "Discuss" — requires two requirements of analysis, balanced perspectives (both sides of the argument), and a supported evaluative judgement. Content Keyword(s) “Removal of long-term exclusive agreements” ● Reduction in Market dominance / monopoly power ● Reduction in the strength of the barriers to entry “Benefit concert goer” – Performance of firms ● Competition and its effects on consumer welfare (price, quality/service) in the market for concert ● Potential costs of increased competition on consumer welfare Requirement 1: Removal of exclusive agreements may benefit concert goers through increased competition. Requirement 2: However, the removal of exclusive agreements may not fully