2013_NJC_H1_Econs_Prelims (Ans)

National Junior College Economics Department Preliminary Examination 2013 Answer Booklet Senior High 2 H1 Economics (Syllabus 8819)

1 NJC 2013 8819 / Sep 13 Examiners’ Report for 2013 H1 Economics Prelims Section A: Case Study Question 1 (a) With reference to Table 1 and Extract 1: (i) Compare the change in prices of HDB Resale Residential property and Commercial Shop Space from 2006 to 2011. [2] Similarity: Property prices of both HDB Resale Residential property and Commercial Shop Space show a general increasing trend. [1] Difference: HDB Resale Residential property prices increased at a faster rate as compared to Commercial Shop Space property prices. [1] (ii) Explain how the supply of new flats might help to 'keep a lid on prices' of resale flats. [2] The resale and new flats are substitutes in consumption as both serve the same purpose of providing a shelter/home to the people. [1] When there is an increase in supply of new flats, the quantity demanded of new flats will increase, leading to a fall in the demand for resale flats, thus preventing the price of resale flats from increasing. [1] (b) (i) Describe the trend in Private Residential property prices over the period 2006 to 2011. [2] From 2006 to 2011, private resident ial property prices experienced an overall increase. [1] The private residential property prices dipped from 2007 to 2008 and increased steadily thereafter. [1] (ii) Using economic analysis, account for the trend in Private Residential property prices over the period 2006 to 2011. [4] Residential property prices show an increasing rate of increase.  This is due to the increase in Residential property which could be attributed to the following factors:  Increasing household income with a “buoyant economy”  Availability of housing loans with “low interest rates”  Lifestyle changes  Speculators fuelling increase in investment demand  State and explain clearly a reason for an increase in demand . [2]  Interpret that the phrase “it takes time for supply to cat ch up with demand because of the period required for construction” meant that supply of housing is likely to be price -inelastic (make reference to Extract 2). [1] Thus any increase in demand would like to a sharper increase in prices. [1] (c) With the a id of diagrams, explain how the change in the prices of Residential property could cause changes in the prices of Commercial property. [4]

2 NJC 2013 8819 / Sep 13  There is a positive correlation between the prices of Residential property and Commercial property.  They are substitutes in production (or in competitive supply) as URA land parcels are “earmarked for competing uses such as for commercial, hotel and private residential developments” (Extract 2). Land resource is a common factor of production that can be used for development