2013 PJC H1 Econs

Candidate Name: __________________________ CT Group: _______ Index number: __________ ECONOMICS 8819/01 Higher 1 Paper 1 16 September 2013 3 hours Additional materials: Writing Paper READ THESE INSTRUCTIONS FIRST Write your class, 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. Section A Answer all questions. Section B Answer one question. At the end of the examination, fasten your answers for Questions 1, 2 and 3 or 4 separately. The number of marks is given in brackets [ ] at the end of each question or question part. This document consists of 8 printed pages [Turn over PIONEER JUNIOR COLLEGE JC 2 Preliminary Examination 2013

2 Section A Answer all questions in this section. Question 1: Car pollution Figure 1 Figure 2 Source: World Bank Extract 1: Pollution from car emissions killing millions An explosion of car use has made fast-growing Asian cities the epicentre of global air pollution. Worldwide, a record 3.2m people a year died from air pollution in 2010, compared with 800,000 in 2000. It now ranks for the first time in the world's top 10 list of killer diseases, says the Global Burden of Disease (GBD) study. According to a UN report - in 2010, more than 2.1m people in Asia died prematurely from air pollution, mostly from the minute particles of diesel soot and gasses emitted from cars and lorries. 65% of all air pollution deaths are now in Asia. Air pollution also contributes to higher rates of cognitive decline, strokes and heart attacks. The full effects of air pollution on health in Asian cities may not be seen for years. Toxic effects like cancer surface after a long latency period. Therefore, exposure to air pollution will have to be reduced today to reduce the burden of disease. Improvements in car and fuel technology hav e been made since 2000 but these are nullified by the sheer increase in car numbers. Nearly 18m are expected to be sold this year alone. Experts suggested the need to "demand restraint measures", to put a check on the growing number of cars so that there was a check on pollution. Adapted from The Guardian, 17 Dec 2012 0 2000000 4000000 6000000 8000000 10000000 2003 2004 2005 2006 2007 2008 2009 China CO2 emissions (kt) 0 10 20 30 40 2003 2004 2005 2006 2007 2008 2009 China Passenger cars (per 1,000 people)

3 Extract 2: Test-bedding of Electric Vehicles In Singapore A multi-agency taskforce comprising of different ministries, statutory boards and industrial partners are involved in the Electric Vehicles (EVs) test-bedding programme. $20 million has been set aside as part of this programme to support infrastructure development and test-bed EV. “Singapore is well-positioned for the deployment of EVs because of our compact urban environment, and robust electrical grid and IT infrastructure”, says Mr Lawrence Wong, Chief Executive, Energy Market Authority. The EV test-bed also offers potential economic benefits for manufacturing and R&D, for example, in areas like battery technology, pow er electronics and electric drive systems. Singapore’s capabilities in electronics and R&D will enable us to attract and anchor such new and high-value activities. The EV test-bed also serves as a platform fo r companies to experiment and adapt innovative solutions for use in other countries. Factsheet on EV  EVs can help reduce carbon emissions. Pure battery EVs offer significant energy and pollution advantages compared to conventional petrol and diesel vehicles. The magnitude of this advantage depends on the source of the electricity. For example, electric vehicles charged from renewable energy sources like solar and wind have virtually zero carbon emissions.  Even for countries with limited renewable energy sources, if the EVs are charged using natural gas power generation (as is the case in Singapore), it is still possible to achieve some reduction in carbon emissions compared to conventional petrol vehicles. Adapted from Energy Market Authority, press release, 6 May 2009 Extract 3: China consumers shun green vehicles The hope that China will become a pioneer in the shift towards "clean car" technology have suffered a setback as the Chinese consumers show little sign of interest in electric and hybrid vehicles despite ambitious government pl ans. It had been hoped that government subsidies and policy support would help China's manufacturers, such as BYD, to mass-produce electric cars. But BYD has scaled back its ambitions after failing to find a market because of costs, safety concerns and underdeveloped battery technol ogy. Reflecting the lack of progress, Prime Minister Wen Jiabao recently published an article in a Communist party journal calling for a rethink of China's "road map" towards alternative green vehicles. Registrations of new passenger cars, especially the luxury sector (Mercedes, BMW, Audi and Rolls-Royce), are still surging. This runs directly opposite to the government's stated goal of creating a more equal, environmentally friendly nation, suggesting a change of strategy may be needed. The state is unlikely to completely abandon its promotion of "clean" car technology, but it may have to revise its plans. [Turn over

4 Despite subsidies of 60,000 yuan (£5,700) for pure electric vehicles and 50,000 yuan (£4,700) for plug-in hybrids in five pilot cities, there have been few buyers because regular cars are still cheaper and more reliable. Rather than jump directly to electric cars, it now expects government officials to pay more attention to hybrid cars and fuel-efficient conventional vehicles. Although "in the long term pure [electric vehicles] may still become mainstream, it is welcome to see the government slowly but surely recognising that its targets are inflated," IHS, a Shanghai- based consultancy noted. With the frequent traffic congestion and smog even at current unhealthy levels, even if all the new cars were hybrid or electric, the congestion would be incredible. "Green growth" now looks a less likely prospect than a simple market slowdown. Adapted from theguardian.com, 24 August 2011 Questions (a) (i) Using Figure 1, describe the trend of China’s CO 2 emissions from 2003 to 2009. [2] (ii) Explain one possible reason to account for the trend observed in a(i). [2] (b) (i) Explain what is meant by the term ‘negative externality’. [2] (ii) With reference to Extract 1, explain how the existence of a negative externality can lead to market failure. [4] (c) Analyse the impact of the Electric Vehicles (EVs) test-bedding programme on Singapore economy. [6] (d) (i) Using DD/SS analysis, explain how “consumers show little sign of interest in electric and hybrid vehicles despite am bitious government plans” (Extract 3) affect the market for EV. [6] (ii) In light of the “lack of progress” in reducing car pollution through the use of subsidies, what recommendations would you present to the Chinese government? Justify your answer. [8] [Total: 30 marks]

5 Question 2: Rising prices, falling prices Table 1: Inflation Rates in Selected Countries, 2007-2011 Country 2007 2008 2009 2010 2011 Brazil 3.6 5.7 4.9 5 6.6 China 4.8 5.9 -0.7 3.3 5.4 Japan 0.1 1.4 -1.3 -0.7 -0.3 Singapore 2.1 6.5 0.6 2.8 5.3 Source: The World Bank Extract 4: Brazil’s rising inflation hampers growth Keeping inflation under control is one of the main challenges facing the new government, amid risks that the economy is o