RI_H1_ECONS_P1

1 RAFFLES INSTITUTION 2018 YEAR 6 PRELIMARY EXAMINATION Higher 1 ECONOMICS 8823/1 Paper 1 28 August 2018 3 hours Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your name, index number and CT 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 diagrams, graphs or rough working. Do not use paper clips, highlighters, glue or correction fluid. Answer ALL questions. At the end of the examination, fasten answer script for question 1 and 2 separately. Securely fasten cover sheets to each answer script. The number of marks is given in brackets [ ] at the end of each part question. Name: _______________________ ( ) Civics Class: ___________________ Economics Tutor: ___________________ Marks Q1 This document consists of 9 printed pages. © RI 2018 8823/01/Prelim/18 [Turn over

2 Answer all questions Question 1: The Food Industry Table 1: Madagascan exports of vanilla to the US Price of Vanilla (USD$/kg) Volume (kg) 2007 19 1,650,000 2008 21.5 1,300,000 2009 23 - 2010 21 - 2011 21 - Source: Datamyne Extract 1: Background knowledge of vanilla Vanilla is an essential ingredient used in sweets, food, alcohol, as well as scented perfumes and cosmetics. It is a difficult spice to cultivate, extracted from the delicate vanilla orchid flower. A vine takes three to four years to mature. Harvest in Madagascar, the main exporter in the world , is from May to August, after the rainy season has brought the usual cyclones. Thus, one of the world’s most popular spices , vanilla is the second most expensive spice in the world. T oday, vanilla represents 20% of Madagascan exports, worth $600m at current prices and is a significant contributor to the country’s GDP. Madagascar's vanilla policy since independence is in many ways typical of a pattern common to low income countries. Throughout history, the vanilla market had been marred by price instability and low incomes. Right after independence in 1960, the Government of Madagascar intervened in a bid to bring more stability and equity in the distribution of the gains from vanilla farming. A vanilla stabilis ation fund was created and a fixed price was guaranteed . The government intervened in the market to stab ilise the price of vanilla through a buyback programme that ensured the surplus stocks during good harvests were purchased and kept as inventory while releasing stock during poor harvests. Price fixing succeeded in keeping the price stabilised and high and brought about positive results for the farmers for a limited period. However, in the end, declining revenues meant that the cost of keeping exploding inventories