SAJC H1 ECONS QP

1 ST. ANDREW’S JUNIOR COLLEGE PRELIMINARY EXAMINATIONS – 2017 (JC2) General Certificate of Education Advanced Level Higher 1 ECONOMICS 8819/01 28 August 2017 Paper 1 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, 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. At the end of the examination, fasten your answers for each question separately. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 8 printed pages. © SAJC 2017 [Turn Over]

2 Section A Answer all questions Question 1 Global Food Market and Potato Problems Table 1: Food and Agriculture Organization (FAO) Food Price Index (2002 - 2004 = 100) Year 2011 2012 2013 2014 2015 Index 230 215 212 207 179 The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five com modity group price indices, weighted with the avera ge export shares of each of the groups for 2002-2004. Source : Food and Agriculture Organization of the United Nations, 2015 Extract 1: Global Food market Cheap oil contributed to abundant global supplies of food in 2014 and prospects of a bumper crop for wheat, maize, potatoes and rice in 2015—fa ctors that are driving the sharp decline in international food prices. The agriculture and f ood sector continue to benefit from less expensive chemical fertilizer, fuel and transportation costs brought on by the previous year’s oil price declines. Falling oil prices have also affected the demand for biofuels, made from crops like maize and potatoes, while the developments in rice support policies for the needy are other factors that could impact food prices. However, unexpected domes tic food price fluctuations remain a possibility so it is crucial that countries are pre pared to address dangerous food price hikes when and if they unfold. Source : World Bank, 1 July 2015 Extract 2: Potatoes facts around the world The potato has risen to become the third most important food crop in the world after rice and wheat in terms of human consumption, with fewer alt ernative food crops available. More than a billion people worldwide eat potato, and glo bal total crop production exceeds 300 million metric tons. It is a major food crop that is grown in over 100 c ountries across the world. China, Russia, India, the United States and Ukraine are the larges t producers of potatoes. Although many countries across the globe are boosting their potat o production, China and India are emerging as the clear world leaders. China is aimin g to have 6.66 million hectares on which to grow potatoes by 2020, as the crop is set to bec ome the nation's fourth food staple after rice, wheat and corn, and the government strongly s upports this move. The development of the potato industry and the government’s push for c onsumption of potatoes as a staple food is an important step in China’s agricultural development For years, growers have grappled with the problem o f getting too good at what they do. Enhanced technology and growing techniques, especia lly when it comes to controlled irrigation, have allowed potato farmers to be more productive with the same amount of land, year after year. The average potato farmer is able to produce 1.5% more per year thanks to these advances. The Brazilian Agricultural Research Corporation has been carrying on a breeding program to develop well adapted and market quality varieties, targeting to obtain high-yielding, improved tolerance to crop diseases and harsh environment conditions Source : Adapted from USA Today, 10 Feb 2016

3 Extract 3: Happy Problems in the Potato Market Potato growers in the key growing regions of India are set for a long wait for better return of their crop. Total potato production is at a record 44.89 million tonnes for 2014-15, which is about 8% higher than the 41.55 tonnes produced in 2 013-14. The decline in food prices is welcome, because more poor people can potentially afford to buy food for their families. However, over the past one month, prices have started firming up as farmers hold back their produce. Farmers, who could stock their produce in the cold storages, have already done it. But still there is a large quantity lying in the fields with the farmers. They will first bring that to market and cold storage stock will get released. Sm all quantity is also stored by the growers in temporary storages, which have to be disposed of within 2-3 months of harvesting. There are a total of 240 cold storages in Agra, a c ity in India, that can store 45 million packets of potatoes, but since there are no buyers of potatoes currently and the farmers could not pay the transporters to take the potatoes to other states for selling due to cash crunch, the cold storage owners were dumping the po tatoes out of their units as the farmers were unable to pay them, This, even as a production glut has forced farmers of this starchy tuber to dump their crop on roadsides. Source : The Hindu Business Line , 16 June 2015 Extract 4: Environmental Impacts Associated with Major Food Crops In countries like India, agricultural intensification (involving the adoption of modern irrigation, fertilizers, improved seeds, and pesticides) has co ntributed to dramatic gains in food yields since the 1960s. However, increasing evidence sugge sts that intensive farming systems, if not properly managed, can cause serious environment al harm by reducing soil fertility, polluting soil and water, depleting groundwater, us ing large amounts of fossil fuels for water pumping, and contributing to climate change. All ag riculture inevitably changes the natural environment. However in many instances, harm to nat ural ecological systems is either unnecessary or outright undesirable. India, as the largest groundwater user in the world , with an estimated usage of around 230 cubic kilometers per year, more than a quarter of t he global total, is severely affected by such environmental issues that are inevitable for a n economy that is reliant on agriculture. With more than 60 percent of irrigated agriculture and 85 percent of drinking water supplies dependent on it, groundwater is a vital resource of clean water for both rural and urban areas. This era of seemingly endless reliance on groundwat er for both drinking water and irrigation purposes is now approaching an unsustainable level of exploitation. Many governments have considered the merits of policy measures, incl uding environmental taxation, pollution permits, subsidies for innovation into curtailing u sage and subsidies to encourage firms to recycle water. Source : Adapted from World Bank, 6 March 2016

4 Extract 5: Brazil imposes anti-dumping duty on imported frozen potatoes Brazil may be tempted to enforce a temporary 'anti- dumping rule' for imported frozen french fries sometime this month. The tax would mainly hit Belgian and Dutch potato product manufacturers. Brazil is an important export market for the Belgia n and Dutch potato manufacturers. The Dutch exported some 83,000 tons of frozen food to B razil, which equates to about 166,000 tons of potatoes. That means the Netherlands are th e second largest exporter to Brazil, following Argentina. Belgium, with 71,000 tons (whi ch represents 142,000 tons of potatoes) is third in the list. Overall, B