2026 ASRJC H2 Econs P1 Prelim QP

1 © ASRJC Economics Department9570 / JC2 Prelim / 2024 [Turn Over ECONOMICS 9570/01 Paper 1 23 August 2024 No Additional Materials are required. 2 hours 30 minutes READ THESE INSTRUCTIONS FIRST An answer booklet 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 booklet, ask the invigilator for a continuation booklet. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages and 3 blank pages. ANDERSON SERANGOON JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATION Higher 2

2 © ASRJC Economics Department9570 / JC2 Prelim / 2024 [Turn Over Answer all questions. Question 1: Impacts of the electric vehicle industry Figure 1: Consumer and government spending on electric vehicles (2016 – 2021) 2016 2017 2018 2019 2020 2021 0 50 100 150 200 250 300 Consumer spending Government spending Source: International Energy Agency, 23 May 2022 Extract 1: Singapore Green Plan: EV-ready towns by 2025 Singapore is taking its climate action a step further with new initiatives, including plans to make every Housing and Development Board (HDB) town "EV-ready” (electric vehicle ready) ahead of schedule, and help more businesses improve energy efficiency. The Government said last month that it would bring forward the country's target to reach net zero "by or around mid-century", a move Senior Minister Teo Chee Hean described on Tuesday as "necessary, practical and implementable", given international developments in technology and carbon markets. Last week, a major UN report released dire warnings about climate change inaction, with findings showing that irreversible climate impacts are happening faster and with greater intensity than ever before. Rising temperatures could expose Asia to threats like food scarcity and human-health risks, with an increasing likelihood of heatwaves and floods as well as water- and vector-borne diseases. Minister Teo said the government will review its 2030 nationally determined contributions (NDCs) which is a national roadmap that charts how the country plans to reach net zero along with its long-term low-emissions development strategy (LEDS). A new target has also been set to reduce Singapore's land transport emissions by 80% from its 2016 peak of 7.7 million tonnes "by or around mid-century". Currently, the land transport system accounts for 15% of Singapore's emissions today, making it the third-largest source Billions USD Year

3 © ASRJC Economics Department9570 / JC2 Prelim / 2024 [Turn Over of emissions. Singapore will also accelerate its target of making every HDB town EV-ready by 2025, earlier than its previous target of the 2030s. This comes after a major survey of switch rooms and substations across the island conducted by the Land Transport Authority (LTA) to assess the additional electrical capacity needed to support electric vehicle (EV) charging. To support the implementation of EV-ready towns, EV charging points will be installed at nearly 2,000 HDB car parks over the next three to four years. Source: Channel News Asia, 8 March 2022 Extract 2: The effect of China’s EV dominance on the global automotive sector China's supremacy in the electric vehicle (EV) industry and its exports are reshaping the global automotive landscape. China now has the largest percentage share of the global EV market, accounting for approximately 50% or more of global EV production and exports. China's rapid ascent in the EV sector is partly attributed to the absence of significant entry barriers or bottlenecks. Unlike certain industries like semiconductor manufacturing, which require substantial capital investments and advanced technological capabilities, EV production involves readily available technology and less complex manufacturing processes. This accessibility lowers the barriers to entry for both established automakers and new entrants, facilitating China's remarkable rise in the sector. China boasts an immense manufacturing infrastructure that can be quickly adapted to EV production. The country's experience in mass production of conventional vehicles, consumer electronics, and other products provides a significant advantage. China's automakers can leverage their existing production facilities and skilled labour force to scale up EV production rapidly. This capacity to achieve economies of scale further solidifies China's dominance in the EV sector. Source: Hinrich Foundation, 28 November 2023 Extract 3: Tesla’s latest price cuts risk wiping out China’s earnings Tesla’s price cuts in China could cost the carmaker the entirety of its operating profit in the world’s biggest electric vehicle market. Tesla also dropped prices in both the United States (US) and Germany after disappointing first-quarter sales contributed to swelling inventory. In China, the revamped Model 3 fell to 231,900 yuan (S$43,635) from 245,900 yuan. China’s Li Auto immediately responding with discounts and cash rebates on new models. The company cut prices by 6% to 7% across its lineup. China’s EV price war has been running since late 2022, when Tesla started discounting its vehicles. Competition intensified as automakers struggled to meet sales targets, and has shown little sign of abating this year, with market leader BYD marking down some of its most popular cars. Its Seagull hatchback, for example, now costs less than US$10,000. Source: The Business Times, 22 April 2024 Extract 4: Singapore aims to phase out petrol and diesel vehicles by 2040 Singapore aims to ban petrol and diesel vehicles by 2040, making a bigger bet on electric cars as part of its efforts to cut greenhouse gases and fight climate change.

4 © ASRJC Economics Department9570 / JC2 Prelim / 2024 [Turn Over The wealthy city-state of 5.7 million, which is hiking investment in flood defences, joins Norway, Britain and others in setting a target to cut the use of vehicles with combustion engines. "Our vision is to phase out internal combustion engine (ICE) vehicles and have all vehicles run on cleaner energy by 2040," Finance Minister Heng Swee Keat said in his budget speech. This process includes ceasing the registration of new ICE cars and taxis from 2030. Singapore, which has been criticised by Tesla’s Elon Musk as not being supportive of electric vehicles, is one of the most expensive places in the world to buy a car and there are few electric vehicles on the roads. In Tuesday's budget, Heng said measures to encourage electric vehicle adoption included a registration fee rebate on purchases of fully electric car and taxis. The country, an oil-refining hub, will also expand public charging infrastructure to 28,000 points by 2030 from 1,600 now. Source: Reuters, 18 February 2020

5 © ASRJC Economics Department9570 / JC2 Prelim / 2024 [Turn Over Questions (a)With reference to Figure 1, compare consumer and government spending on electric cars between 2016 to 2021. [2] (b)Explain two reasons why electric vehicle charging points are not public goods. [4] (c)With reference to Extract 3, (i)State the economic concept you would use to measure the relationship between the fall in price of Tesla’s electric vehicle and the resulting change in demand for Li Auto’s electric vehicle. [1] (ii ) Explain the value you would expect to get from this measurement. [3] (d)Imagine that you are a potential new firm trying to enter the electric vehicle market in China. Considering the developments described in Extracts 2 and 3, discuss whether you should enter the electric vehicle market in China. [8] (e)Explain the externality that exists in the internal combustion engine (ICE) car market. [2] (f)Discuss whether banning new ICE cars or provision of more electric vehicle charging points is more effective in achieving efficiency in resource allocation in