2013 RVHS H1 EC P1

This document consists of 7 printed pages and 1 blank page. [Turn over 1 ECONOMICS 8819/01 Paper 1 17 September 2013 3 hours Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your index number and name on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. At the end of the examination, hand in your work for Section A and B separately. The number of marks is given in brackets [ ] at the end of each question or part question. RIVER VALLEY HIGH SCHOOL YEAR 6 Preliminary Examination in preparation for General Certificate of Education Advanced Level Higher 1

2 Section A (70%) Answer all questions in this section. Question 1 Issues in the agricultural sector Table 1: Global Commodity Prices (US$/tonne) 2007 2008 2009 2010 2011 Wheat 234.76 268.59 185.51 227.95 286.75 Poultry 934.75 996.92 988.92 1,032.25 1,147.00 Source: Food and Agricultural Organisation of the United Nations Extract 1: Higher food prices Global warming ha s already harmed the world's food production and has driven up food prices by as much as 20% over recent decades, new research has revealed. A rising appetite for meat is another critical factor, said a Researcher. "We actually have enough calories to feed the world quite comfortably, the problem is meat is really inefficient," as many kilogrammes of wheat are needed to produce one kilogramme of meat, he said. Source: The Guardian, 17 March 2011 Extract 2: Reforms for Common Agricultural Policy It is "morally wrong" for European farmers to receive billions of pounds of state aid, a cabinet minister has said, warning that rising food prices mean it is only a matter of time before farmers will no longer receive billions in pounds of state aid, in form of high export subsidies. More than half of all the profits of British farmers come from EU subsidies, the National Farmers Union calculates. Mrs Spelman said the Common Agricultural Policy (CAP) “ distorted trade by keeping prices artificially high in the EU while imposing import tariffs on developing countries trying to sell to Europe. At the same time, export subsidies are used to clear market surpluses." Her comments come as negotiations begin ahead of major reform of the CAP in 2014. At €55 billion, the CA P accounts for 42 per cent of the EU budget, making it the largest agricultural aid programme in the world. Source: Telegraph, 5 January 2011

© RVHS 2013 8819/01 [Turn over 3 Extract 3: Pesticides in waterways Insecticides enter rivers through runoff from fields and to a lesser ext ent when they drift into the water during application. This will have devastating effects on biodiversity as potential pesticide and excess fertilizer water contamination kills native species that are part of the normal food chain for birds, fish and other stream wildlife. It is estimated that in the decades ahead, some 40% of Europe’s waterways will be degraded. Researches recommend a reduction in pesticide through organic farming. Source: Environmental New Network, 8 December 2011 Extract 4: GM crops promote superweeds Biotech (Bt) companies have claimed that Genetically Modified (GM) farming will lead to higher food yields, fewer pests and weeds , and less chemical use . However, a report warns that GM crops have failed to deliver higher food yields but have created dangerous super weeds. When these crops are modified to withstand herbicides and pests, nearby weeds and pests can develop a resistance to the chemicals. In India, the use of pesticide has increased 13-fold since Bt cotton was introduced. Source: Daily Mail, 21 October 2011 Extract 5: GM crops in a tide of change Historically, many biotech crops are grown to feed livestock or as ingredients for biofuels, rather than for direct human consumption. But that's changing. A new survey found that many Americans were receptive to foods containing GM wheat if it was produced sustainably. However, the survey also suggested that Americans are wary about the long term effects of GM food due to the lack of information on biotechnology. In other parts of the world, a similar change is happening. China, the world's second -largest corn consumer, said it is testing the use of GM crops to boost output. Eager to expand its farm production capabilities, China is running field tests of biotech seeds to grow wheat and rice. Source: Reuters, 6 January 2011 Questions (a) With reference to Table 1, compare the trend in the price of wheat with that of poultry prices from 2007 to 2011. [3] (b) (i) Explain why global warming has such a significant impact on food prices. [2] (ii) With the use of a diagram, explain how the rising appetite for meat affects the market for wheat. [3] (c) (i) Explain the underlying reason for the existence of the CAP in the European Union. Justify your answers. [6] (ii) Explain the reasons behind the EU’s plans to reform the CAP. [3] (d) (i) With reference to the data, explain how the farming of non -GM crops can lead to market failure. [5] (ii) Assess the view that the switch to GM crops helps solve the market failure. [8] [Total: 30]

4 Question 2 The Australian Economy Table 2: Quarter on quarter percentage change in selected economies Wage rate Labour productivity Q4 2010 Q1 2011 Q4 2010 Q1 2011 Australia 0.4 2.3 -0.1 -1.2 United States 0.5 1.0 0.7 -0.3 Source: OECD Extract 6: Labour Shortages in Australia The floods in Queensland and Victoria this summer have exacerbated the problem of wage inflation. Prior to the Queensland floods, the Sunshine state was already experiencing labour shortages, partly because of the expansion of the minerals sector and the major infrastructure improvements. Emboldened by the jobless figures that show near full employment and citing cost of living pressures, Australia's still powerful union movement is demanding hefty wage increases for their workers. Source: BBC News, 6 April 2011 Extract 7: Australia Central Bank cuts key rate The Reserve Bank of Australia (RBA) lowered its benchmark interest rate today for the first time since April 2009 as recent data suggests t he subdued demand conditions and the high exchange rate have contained inflation. Australian Prime Minister Julia Gillard said the decision brought ‘welcome relief’ to households. Commonwealth Bank of Australia, the nation’s biggest lender, and Westpac Banking Corp. matched the RBA’s rate reduction. Westpac said the lower borrowing costs announced today would save customers A$41 monthly on a A$250,000 mortgage. A government report today also showed Australian house prices declined in the three months through September, the third straight quarterly drop. “The rate cut is especially good news for the retail and housing sectors,” said Craig James, a Sydney -based senior economist at Commonwealth Bank. “Even tourism and export sectors will receive a boost.” Source: Bloomberg, 1 November 2011 Extract 8: Mining the truth The mining industry in Australia has boomed, surging from around four per cent of GDP in 2004 to around nine per cent today. Much has been said about the changing face of the mining industry, where the effects of the boom have been both substantial and positive. But until very recently there has been