MI_H2_ECONS_EQs_Answer

1. Smartphone usage is predicted to overtake computer usage in the near future. This is due to advances in smartphone technology and greater affluence. Discuss how the combination of smartphone technology and greater affluence might affect the expenditure by consumers on different models of smartphones. [25]  Normal-Luxury Models Normal-Necessity Models Inferior Models (e.g. 2nd hand lower-end smart phones) in technology COP falls  Increase in SS  P falls, Q increases. PED>1, with a given fall in price, more than proportionate increase in Q TE increases. COP falls  Increase in SS  P falls, Q increases. PED<1, with a given fall in price, less than proportionate increase in Q TE falls. COP falls  Increase in SS  P falls, Q increases. Since there are close substitutes to inferior models, PED>1. With a given fall in price, more than proportionate increase in Q TE increases. [Also accept if student justifies why PED<1 and explains that TE falls]. In income YED>1. Income increases DD increases by more than proportionate amount  T E increases (by a large amount). 1>YED>0. Income increase DD increases by less than proportionate amount  TE increases. YED<0. Income increases, dd falls  TE falls. Combined effects SS & DD TE increases. SS & DD TE indeterminate SS & DD TE indeterminate. Evaluation As YED>0, large shift in dd curve when income increases. This large increase in dd combined with PED>1  large increase in TE. If increase in dd > increase in ss  TE increases. Singapore is a rich developed countries with one of the highest smartphone penetration rates in the world. Fall in dd > increase in ss  TE likely to fall.

L1 Answer merely identifies the different models of smartphones that are available in Singapore and recognizes how advances in smartphone technology and greater affluence affect the market for smartphones. No reference to elasticities of demand. 1-9 L2 Undeveloped answer on how the advances in smartphone technology and greater affluence affect the smartphone markets for the different models of smartphones. There is some reference to PED & YED. 10-14 L3 Answer provides a thorough analysis of the impact of the expenditure on at least two different models of smartphones. There is good reference to PED & YED in the analysis. 15-21 E1 Answer provides an unsubstantiated opinion on the extent of the impact of greater smartphone technology and greater affluence on the different models of smartphones in the Singapore context. 1-2 E2 Answer provides a substantiated opinion on the extent of the impact of greater smartphone technology and greater affluence on the different models of smartphones in the Singapore context. 3-4 2. (a) Explain the various forms of barriers to entry. [8] (b) Should the government act to reduce barriers to entry whenever possible