2013_NYJC_H1_Econs_QP

8819/1 H1 Economics 1 PAPER 1 Monday 16 September 2013 14:00 – 17:00 TIME : 3 hours 00 mins INSTRUCTIONS TO CANDIDATES Do not open this paper until you are told to do so. Write your name, class and name of economics tutor in the space provided on the writing paper. Answer all questions in Section A and one question in Section B. The number of marks is given in the brackets at the end of each question. Write your answers on the writing papers provided. If you use more than one sheet of paper, fasten the sheets together. You are advised to spend several minutes per question reading through the data and questions before you begin writing your answers. There are _8_ printed pages including this cover page PRELIM EXAM 2013 Economics JC 2 H1 (8819) NYJC

8819/1 H1 Economics 2 Answer all questions in this section. Question 1 The Market for Rare Earth Metals Figure 1: Global rare earth metals price index Figure 2: Global Rare Earth Metals Supply and Demand 2005 - 2010 Source: The Economist, 2 Sep 2010 World Demand World Supply Metric Tons Source: Industrial Minerals Co. of Australia

8819/1 H1 Economics 3 Extract 1: China’s grip on the world’s rare earth market may be slipping For the past two years, the world has had a rare earth problem. Rare earth metals are crucial for a wide range of electronics, from solar panels, fluorescent bulbs to iPod headphones to hybrid vehicles. And China produces 95 percent of the world’s supply. So when China began sharply restricting exports in 2010 — allegedly to give its own industries an advantage — the global prices for rare earths skyrocketed. Bad news. Except now, it is looking like the rare earth crisis is receding. Despite their colorful name, rare earth metals aren’t actually all that rare. At one point or another during the twentieth century, Brazil, India, the United States and South Africa were all major producers. In the 1980s, China decided to ramp up production massively, driving out competitors and cornering the market. China managed to do this, in part, through preferential policies by the Chinese gov ernment and lax environmental standards. This quickly enabled China to become a dominant, low-cost producer of rare earths by the late 1990s. In 2010, China decided to restrict its export quota by 40 percent. That helped drive prices up and suddenly made it economical for other countries to start boosting their own production again. Out in Mountain Pass, California, for instance, Molycorp is now reopening and expanding its massive rare earth metals mine. Many countries are also doing the same. Meanwhile, Japan has rushed to reduce its dependence on rare earths over the past few years—especially since China has a habit of restricting exports every time the two nations get