TPJC_H1_ECONS_CSQ2_ANS

H1 CSQ 2 Suggested Answers (a) Using the data in Table 1, (i) Describe the trend in real Gross Domestic Product for Singapore from 2013 to 2016. [1] Real Gross Domestic Product for Singapore increase from 2013 to 2016. [1] (ii) Identify the year where General Price Level was the highest. [1] General Price Level was the highest in 2014. [1] (b) What conclusion would you draw about the overall ec onomic performance of Singapore in 2016 compared with 2013? [4] Comparing between 2013 and 2016, Singapore’s real GDP growth fell from 2.6% to 2.5%. This implies that its real GDP is inc reasing at a decreasing rate and its unemployment rate rose from 1.9% to 2. 1%. The increase in unemployment reflects an increase in unutilised resources in the economy. Since GDP measures the total value of final goods a nd services produced within the geographical boundary of a country in a given year. A fall in Singapore’s real GDP growth rate reflects a slower growth and this is supported by a -2.5% growth in its gross fixed capi tal formation. This signifies a fall in the level of investment in the country which is detrimental to the economy both in the short and long run. Alth ough there is an improvement in the Balance of Trade in 2016 as comp ared to 2013, we have insufficient information to conclude on the overall Balance of Payment account of the country. Hence, the overall economic performance of Singapore deteriorated in 2016 compared to 2013. [1] Any 3 indicators – 3m State the conclusion – 1m (c) Using elasticity concepts, analyse the incidence of agricultural subsidy on producers and consumers of grain. [4] From Extract 6, Para 2 “Separately the government p ledged increased agricultural subsidies…set aside 14 billion yuan (U S$2.26 billion) in subsidies to grain farmers” Lower cost of producing grain Supply curve shifts to the right a fall in equilibrium price and increase in equilibrium quantity. [1] Concept of price elasticity of demand and supply can be used to determine the incidence of subsidy that is experienced by the producer and consumer of final goods and services. Demand for grain tends to be price inelastic due to grain being a staple in Asian country like China. Hence, degree of necessity is high. [1]

Use diagram to illustrate the incidence of subsidy on consumers and producers of grain Since PED for grain is more price inelastic than PES for grain [1] Where demand for grain, which is a necessity for Ch ina (since most Asian consume rice as a staple) are highly price inelastic, a fall in price leads to a less than proportionate increase in quantity demand ed by consumers. As consumers are relatively less responsive to price c hanges than producers, producers can more easily pass on the fall in cost of production to consumers. As a result, the consumers would bear a greater proportion of the subsidy while producers bear a smaller proportion