2013_SRJC_H2_Econs_P2

© SRJC 9732/02/JC2 Prelim Exam/2013 ECONOMICS 9732/02 Higher 2 Paper 2 Essay Questions 2013 2 hours 15 minutes Additional Materials: Writing paper SERANGOON JUNIOR COLLEGE JC 2 Preliminary Examination READ THESE INSTRUCTIONS FIRST Write down your name and civics group 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. Answer three questions in total, of which one must be from Section A, one from Section B and one from either Section A or Section B. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question.

© SRJC 9732/02/JC2 Prelim Exam /2013/Suggested Answer Outline 2 1 Most people buy luxury wristwatches for their perceived excellent quality or higher status. Others can only afford cheaper brands. Critically examine the likely impact of a large fall in cost of production in the midst of a recession on the revenue earned from the sales of different categories of wristwatches. [25] Question requirement  Wristwatches range from higher-end luxury brands like Rolex and TAG Hauer to cheaper brands.  A supply (fall in cost) and a demand (incomes fall in a recession) triggers are given.  Focus on elasticities of demand – the use of PED and YED would be sufficient, given the triggers.  Appropriate diagrams are necessary.  Focuses on the impact of each trigger and combined impact of both triggers on the sales revenue (PxQ) of different wristwatches.  Answer should conclude with some generaliz ation on the similarities and differences observed in the revenue earned. Suggested Answer Introduction  Wristwatches have different brands, ranging from the higher-end luxury brands like Rolex or TAG Hauer to the mid-range Citizen or Rado and cheaper unknown brands.  There is a wide variety to cater to the different consumer wants based on their ability & willingness to pay.  A supply (cost) and a demand (incomes) triggers are given.  The elasticities of demand – namely price-elasticity of demand (PED) & income- elasticity of demand (YED) – would affect the equilibrium prices and quantities of different brands of wristwatches when there is a large fall in cost of wristwatch manufacture and a fall in incomes. Body When there is a large fall in the cost of wristwatch manufacture, ceteris paribus, the equilibrium quantity would increase while the equilibrium price would fall in the market. The large fall in the cost of wristwatch manufacture could arise from decreases in prices of inputs like labour or