ACJC_H1_ECONS_P1_ans

Anglo-Chinese Junior College/2016/Prelims H1 Economics Answers 1 2016 Prelims H1 Case Study Question 1 The Market for Steel Suggested Answers (a) Using Tables 1 and 2, compare the relative changes in China’s crude steel production and consumption from 2011-2014. [2] Tables 1-2 Similarity: Both crude steel production and consumption increased from 2011 to 2014. Difference: Crude steel production increased more relative to consumption (17.2% compared to 10.2% respectively). (b) Using Extracts 1 and 2, explain one demand factor and one supply factor that could support the trend in global steel prices from 2011 to 2014. [4] Extracts 1-2 Identify trend: Global steel prices were generally decreasing from 2011 to 2014. Demand factor: Demand for steel decreased due to fewer metal pipe purchases in lieu of a weakening of oil and gas markets (extract 1) Supply factor: Subsidies from government increased the willingness and ability for steel producers to increase supply, OR China expanding steel production in Africa Combining both factors (students may draw graph), overall price for steel will fall. Mark scheme:  1 mark for identifying falling global steel prices  1 mark for explaining why demand fell  1 mark for explaining why supply increased  1 mark for on how combined effect of DD and SS changes lead to falling global steel prices. (c) Explain how the “current global glut” would affect the price elasticity of supply for metal. [2] Extract 2 “Current global glut” refers to a surplus or excess supply in production of metal. This would mean that there is an increase in spare capacity of metals, leading to a supply which is more price elastic as quantity supplied would be more responsive to a change in price. Full 2 marks for answers which show accurate conceptual knowledge of price elasticity of supply. (d) Explain the opportunity cost of Anglo American’s decision to sell its niobium mining business. [3] Extract 1 Define opportunity cost: value of the next best alternative forgone Identify & explain the opportunity cost in this context:  Opportunity cost in this context is potential revenue that could be earned from niobium mining business.  Anglo-American’s decision to sell its niobium mining business to invest in other commodities means that it is forgoing the revenue earned from niobium mining for higher revenue earned from other markets. Mark scheme:  1 mark for defining opportunity cost  2 marks for identifying & explaining the opportunity cost in the context of Anglo American’s decision (lost revenue)

Anglo-Chinese Junior College/2016/Prelims H1 Economics Answers 2 (e) With the use of relevant economic theory, explain why there have been protests against niobium mining proposals in Kanesatake and Oka. [5] Extract 3 There have been protests against niobium mining proposals in these two towns because of the harmful effects to environment and citizens’ health which would arise i