SRJC_H1_ECONS_Answers

1 © SRJC 8819/01/JC2PreliminaryExam/14 2014 SRJC Preliminary Examinations – H1 Economics (8819/01) Suggested Answers Question 1 Middle Class and Education in Asia Extract 1: The rise of Asia's middle class Companies rub their hands with glee when they think of Asian consumers. The key is the rising middle class. In a DBS Bank’s report, Imagining Asia 2020, Asia today has a middle class of 525 million people. They make up 28% of the world's middle class. This is projected to expand significantly to an incredible 1.74 billio n people over the next 10 years. It's not just a China and India story but one of South-east Asia too. “Over the next nine years, Malaysia and Thailand will see a significant increase in the number of people who will spend more than US$10 a day,” DBS said. As Asia's middle class grows, so will its demand for goods and services. “The rising middle class will be a significant factor in reshaping national economies. They will be an influential and profitable market segment thanks to their size and emerging buying power,” noted DBS. Durable goods For a start, there will be much more demand for durable goods such as refrigerators, cars, television sets and mobile phones. While the middle class is growing, the more impressive expansion will come from the income groups of those earning between US$4 and US$10 a day, especially in Indonesia, Vietnam, India and China, said DBS. They will also demand goods and services but at a cheaper price, which will in turn drive the search for innovat ive solutions to achieve this. Godrej, an Indian manufacturer, is one such company, selling refrigerators for just US$70. Education and health care It is not just demand for goods that will rise. The middle class will also be willing to spend more on important services such as education and health care. This will in turn drive demand for infrastructure – more schools and hospitals. Source: The Straits Times, 23 October 2011 Table 1: Household final consumption expenditure per capita (annual % change) 2009 2010 2011 2012 China 8.9 7.7 10.6 7.3 India 6.0 7.3 7.9 3.7 Japan -0.6 2.9 0.2 2.5 Malaysia -1.2 5.0 5.0 5.9 Singapore -3.4 4.3 2.4 -0.3 Source: data.worldbank.org, 2014

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