PJC H1 ECONS answer

Name: Centre No. / Index No.: / Class: 8819 / 01 / PJC Preliminary Exam / 2017 [Turn over PIONEER JUNIOR COLLEGE, SINGAPORE JC2 Preliminary Examination 2017 Higher 1 ECONOMICS Paper 1 Additional Materials: Answer Paper 8819/01 14 September 2017 3 hours READ THESE INSTRUCTIONS FIRST Write your Centre number, index number and name 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, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Section A Answer all questions. Section B Answer one question. Please begin your answer to each question on a fre sh piece of writing paper. At the end of the examination, fasten your work for Questions 1, 2 and 3 or 4 separately. The number of marks is given in brackets [ ] at t he end of each question or part question. This document consists of 6 printed pages. Pioneer Junior College Ministry of Education Section A

2 Pioneer Junior College 2017 8819 / 01 / PJC Prelimi nary Exam / 2017 [Turn over Answer all questions in this section. Question 1 The impact of climate change Table 1: Food Price Index (2002-2004 = 100) The table below shows an index of food prices over the period of 2006 to 2015. Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2 015 Index 127.2 161.4 201.1 160.3 188.0 229.9 213.3 209 .8 201.8 164.0 Source: Food and Agriculture Organisation of the United Nation Extract 1: The Paris Agreement A historic, legally binding climate deal that aims to hold global temperatures to a maximum rise of 1.5 degrees celsius above pre-industrial levels, starvi ng off the worst effects of catastrophic global warming, has been secured. The culmination of more than 20 years of fraught Un ited Nations (UN) climate talks has seen all countries agree to reduce emissions, promise to rai se $100 billion a year by 2020 to help poor countries adapt their economies, and accept a new goal of zero net emissions by later this century. Source: The Guardian , 13 December 2015 Extract 2: Climate change and the continual demand for economic growth The agreement reached at the climate change talks i n Paris is certainly a great improvement on anything that has gone before. Whether it is enough to save the planet is questionable. It was suggested that the agreement will create more jobs and economic growth driven by investment in clean energy sector. But growth, even “green growth”, is precisely the problem. In order to reduce the consequences of climate change such as rising carbon emission, growth could be sacrificed. We live on a finite planet with finite resources which we a re already exploiting to the limit and beyond. The aim must be to achieve a steady-state economy, with resources fairly shared, but that is incompatible with conventional growth strategy, which was to simply raise output. Adapted from: The Guardian , 14 December 2015 Extract 3: Climate change and food prices Due to climate change, extreme weather events that impact food production could be happening in seven years out of ten by the end of this century. Poor harvests and low stocks of grains in 2008, combined with a host of other factors resulted in a spectacular rise in food prices. In 2010, a heat wave in Russia led to the country's worst drought i n 40 years, destroying the grain harvest and leading indirectly, to food riots in North African countries as prices of bread rose rapidly. In addition, increasing population will drive demand for food up by 60% by 2050 in any case, so there is going to be significant pressure on food production. The biggest impact of these production shocks were likely to be felt across Africa and the Middle East. Countries like the UK and the US would be able to c ope because more processed food is consumed in the wealthier regions so the changing price of b asic commodities was less of a factor in the final price of the product. The most vulnerable countries that are going to be worst affected are low income food-deficit countries, predominantly those in sub-Saharan Africa. This is because the poorest households in these sorts of countries are spending about 50% of their income on food. So if food prices increase by 50-100%, it would leave the citizens in sub-Saharan Africa in an almost unbearable position. The researchers say that inter national trade worked well when food was in

3 Pioneer Junior College 2017 8819 / 01 / PJC Prelimi nary Exam / 2017 [Turn over plentiful supply but when global demand increased, countries often imposed export controls which usually made the situation worse. Hence, governments must try to understand the risks , rather than simply stockpiling food and grains. There should be efforts to reform world trade so th at countries don't retreat behind barriers when crops fail. Significant research on agriculture must be carried out to ensure it can cope with increased demand and increasing temperatures. Source: BBC , 14 August 2015 Extract 4: Is there an economic case for tackling climate change? What is the economic case for tackling climate chan ge? Economists have been wrestling with the question since the early 1980s. There are externalities: emissions produced by a pe rson or business lead to costs - and sometimes benefits - for others which the emitter has no ince ntive to consider. The mainstream economic view of how to deal with an undesirable externality is t hat you tax it. In this case it is greenhouse gas emissions that would be taxed. This approach is gen erally known as a carbon tax or sometimes as a carbon price. There are alternatives, notably emissions caps with tradable permits. The idea is that the curbs in emissions would be made by those businesses that co uld do it at the lowest cost. There have been experiments with this approach, notably in the Euro pean Union. If implemented effectively, the approach does have much in common with a carbon tax . Emitters have to pay and in doing so are in effect forced to take account of the externality. T he other main approach has been to use regulation or subsidies to promote particular low emissions te chnologies, especially in electricity generation. Markets are generally seen as more effective than governments, although needing a bit of a nudge in cases of market failure, such as climate change. Mo derate warming might actually be beneficial at least for some, with reduced heating costs and cold weather related health problems, and increased crop yields in some places. Source: BBC , 28 November 2015 Questions (a) Using Table 1, compare the overall change in food p rices between 2006 and 2010 with that between 2011 and 2015. [3] (b) With reference to Extract 2, define opportunity cost and give an example. [3] (c) With reference to Extract 3, explain whether supply or demand factors are likely to be more important in explaining changes in the price of food. [6] (d) With reference to Extract 3, explain why countries like the UK and the US are able to cope better compared to Africa and the Middle East in vi ew of the significant rise in food prices. [4] (e) With reference to Extract 3, explain whether the us e of export controls by governments to prevent rising food prices is justified. [6] (f) Discuss the view that the problem of negative exter nalities caused by carbon emission from firms can best be solved by using a policy of tradable permits. [8] [Total:30] Question 2 Econom