2022 HCI H1 Econs Prelim Paper 1

1 © Hwa Chong Institution 2022 8823/01/S/C2 Prelim 2022 HWA CHONG INSTITUTION C2 Preliminary Examinations Higher 1 CANDIDATE NAME CT GROUP 21 ECONOMICS Paper 1 Case Study Questions Additional Materials: Answer Booklet 8823/01 12 September 2022 3 hours READ THESE INSTRUCTIONS FIRST Read all instructions printed on the cover page of the 12-page answer booklet carefully. Write all your particulars clearly on the cover page of the 12-page answer booklet. Write in dark blue or black pen on both sides of the paper. You may use a soft HB pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid and tape. Answer ALL questions. Write all your answers in the 12-page booklet and subsequent 4-page booklets (if required). Do all your rough work in pen using the answer booklet and cross it through without making it illegible. Do not tear out any part of this booklet. Begin case study question 1 and question 2 on a new page within the answer booklet. All work must be handed in. If you have used any additional 4-page booklets, please insert them inside the 12–page answer booklet. The number of marks is given in brackets [ ] at the end of each question or part question. You may use a calculator. You are advised to spend several minutes reading through the questions before you begin writing your answers. You are reminded for the need for good English and clear presentation in your answers. This document consists of 9 printed pages and 1 blank page. [Turn over

2 © Hwa Chong Institution 2022 8823/01/S/C2 Prelim 2022 Answer all questions Question 1: The market for face mask Figure 1: Global price in polypropylene (PP) from January 2020 to March 2021 (US dollars per metric ton) Source: https://www.researchgate.net, accessed on 27 May 2022 Extract 1: The global face mask market The market revenue of protective face masks will cross US$7.1 billion by 2027. Increasing prevalence of COVID -19 infection across the world will positively influence the market growth. According to the US Centre for Disease Control & Prevention (CDC), approximately 120 million individuals are suffering from COVID-19 infection across the world. To overcome this situation, several authorities such as CDC and World Health Organisation (WHO) have advised the use of face masks to reduce the unintended spread of infections. Also, due to a rise in the number of cases, there has been a global surge in demand for masks for personal health. To overcome such shortcoming, manufacturers are ramping up the production across the globe. Source: Global Market Insights, 22 March 2021 Price in US dollars per metric ton

3 © Hwa Chong Institution 2022 8823/01/S/C2 Prelim 2022 Extract 2: Bottlenecks in the face mask value chain Factor inputs for face masks can be in short supply and are hard to manufacture quickly. In terms of inputs, oil and metal are the main raw materials for the manufacture of non - woven materials, metal strips and ear loops. The main bottleneck in the value chain in terms of inputs has been the non-woven fabric manufactured with polypropylene. Polypropylene (PP) is a form of manufacture d plastics which is derived from oil. It is commonly used in baby diapers, disposable wipes, as well as in the automotive and construction industries. However, the specific substance used for face masks - PP electret melt-blown non-woven, is a specialised fabric produced by a limited number of companies globally due to the high initial investment required in heavy machinery. For this reason, it has been more difficult to increase production during the crisis, or to find companies that can switch to this manufacturing within a reasonable time and without massive investment. Source: OECD, 4 May 2020 Extract 3: Shortage in the market for face mask Across China and in Hong Kong, but also as far afield as San Francisco and Rome, in stores, shelves have been swept clean of face masks amid surging demand. This has given rise to a simple question, but no easy answers: how to address the mask shortage so that those who need them can get them? One approach, offered by most economists, is to let market forces do the work. This means allowing sellers to charge higher prices in response to surging demand. Basic economic theory posits that when demand outstrips supply, producers tend to raise prices. Those who can and want to pay the higher price, for example, people at the highest risk of exposure or transmission - get their hands on the scarce masks. Prices rise until a new equilibrium is reached, that is, when demand again matches supply. In Hong Kong, that means prices for much sought-after masks have skyrocketed. The thought of profiting off people’s very real fears of an epidemic may be off -putting, and governments understandably try to stop this kind of dramatic price increase. But whether putting a cap on prices achieves its intended effect of allocating masks more effectively and fairly is another matter. Many economists think price cap distorts the market and makes it harder for people to acc ess much -needed supplies. The argument is that artificially suppressing prices incentivizes people to hoard products when they can get it, worsening the shortages. Source: Quartz, 4 February 2020 [Turn over

4 © Hwa Chong Institution 2022 8823/01/S/C2 Prelim 2022 Extract 4: Infectious disease prevention and preparation in Singapore Singapore gained international recognition in its efforts to mitigate the spread of the virus, keeping infection rates low in the initial months of the COVID-19 outbreak. This was largely due to their pandemic taskforce which was established soon after th e outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003. Since SARS, the country has invested heavily in infectious disease prevention and preparation. As soon as the COVID-19 outbreak was announced by WHO on 31 December 2019, Singapore’s pandemic taskforce acted quickly, implementing risk mitigation measures as early as 2 January 2020. These measures included border control, mandatory 14 -day quarantining for all returning residents and contact tracing thus reducing community transmission. For the month of February 2020, Singapore did not experience any exponential growth of infections of COVID-19. Source: https://www.ncbi.nlm.nih.gov/pmc/PMC7795346/, accessed on 28 July 2022 Extract 5: Coordinated public action in the pandemic With infectious diseases like COVID-19, how one person behaves necessarily affects other people’s wellbeing. To achieve good overall outcomes for society, it is not enough to rely on individuals’ incentives to protect themselves. In the context of infection control, there are many ways to help people factor in their costs or benefits on third parties. For example, the government can offer subsidies for personal protective equipment, like face mask, to encourage people to help protect themselves. Other indirect measures include statutory sick pay schemes that encourage people who may be infected or have symptoms to stay at home to avoid spreading the disease further. As a last resort, one can consider imposing fines on those who do not wear face masks in public or who do not respect social distancing restrictions. Such fines have recently been introduced in the UK. In addition to providing explicit incentives such as subsidies and fin es, there are other measures that can be used to encourage people to protect themselves and each other better. Clear communication on the costs of infections m