MI_H1_ECONS_P1

2015 Preliminary Examination II Pre-University 2 H1 ECONOMICS 8819/01 Paper 1 15 September 2015 3 hours Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your name and class 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 or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. Section A Answer all questions. Section B Answer one question. You are reminded of the need for clear presentation in your answers. Start each question on a fresh sheet of paper. At the end of the examination, fasten your answers to the three questions separately. The number of marks is given in brackets [ ] at the end of each question or part question. This question paper consists of 10 printed pages. [Turn over

2 8819/01/P2/MI/15 Section A Question 1 Australia’s Agriculture Sector Extract 1: Challenges faced by Australian farmers A near-perfect growing season for small farmers in two of Australia's biggest food belt regions - south-east Queensland and Victoria - has produced a bumper crop. But despite a bountiful yield, oversupply has driven down prices. It should be a time for celebration for growers, who have become hardened to a relentless cycle of droughts and floods in recent years. Instead many are complaining that t hey are being paid less at wholesale markets than the cost of harvesting their crops. The number of farmers in Australia is shrinki ng, and it's not just the current domestic oversupply that is hurting the bottom line. The amount of imported fresh produce has reached record levels, and growers are facing unfair competition from overseas imports. Local farmers want prices to be set by the federal government to guarantee a decent return. If not, the sector will continue to contract. In Queensland's sugar capital, Bundaberg, Mark Presser, a fourth generation cane farmer, enjoyed a record crop last year, and is on course to harvest another reasonable yield this time around. Yet he too feels besieged by falling prices and growing competition from overseas, most notably Brazil and India, where production costs are far less. He also complains about protectionism in Europe and the US. Source: Adapted from BBC News, 31 October 2013 Extract 2: Milk is now cheaper than water Domestic and international demand for dairy produce (cheese, yoghurt, butter etc) is booming, but the price of Australian milk has declined so far that it is now cheaper than water. In South West Victoria, which produces about a quarter of Australia’s milk, net farm incomes fell, with some farms running at an absolute loss. Not surprisingly, milk production is falling as farmers cull their herds and sell their farms (sometimes handing the keys to the bank). Milk processors are already experiencing shortages of supply, and this situation can be exp