IJC H2 ECONS P2 QP

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9732/02/IJC/September 2014 2 Answer three questions in total. Section A One or two of your three chosen questions must be from this section. 1 The world economy experienced subdued grow th for a second year in 2013. In addition, a rising number of low cost airlines exited due to high fuel costs. These have impacts on both national carriers and low cost airlines. Explain how the above changes will affect the world market for air travel and assess the usefulness of elasticity conc epts in determining the likely impact on different types of airline carriers. [25] 2 As the growth of online shopping cont inue, shoppers are focused on purchasing electronics, books, music, apparel and sporting goods. On the other hand, the markets for food and beverages, supermarket s, luxury fashion and healthcare tend to be less affected by the shift toward s online retail and continue to perform well. (a) Explain how economies of scale determi ne the type of market structure in different industries. [10] (b) Discuss how far the market structure of the firms in different retail industries will affect their prof itability when faced with the growth in online shopping._________________________________________________ [15] 3 As more countries are facing economic difficulties and an ageing population, some governments have sought to increas e competition within the healthcare sector to reduce its cost while others are reducing s ubsidies to prevent their healthcare spending from escalating. Discuss the economic case for the different approaches mentioned above. [25]

9732/02/IJC/September 2014 3 Section B One or two of your three chosen questions must be from this section. 4 In 2012, the Singapore government annou nced enhancements in measures to improve labour productivity and increase general living standards in Singapore. More grants were given to SMEs to invest in its workers and its operations. (a) Explain the main macroeconomic indica tors that can be used to compare changes in living standards across countries. [10] (b) Assess the extent to which an impr ovement in labour productivity is beneficial to the standard of living in Singapore. [15] 5 With the use of fiscal policy to reduce cyclical fluctuations, some economies like the USA, have been improving steadily despite facing fiscal drag. (a) Explain why governments aim to reduce cyclical fluctuations. [10] (b) Discuss the extent to which fiscal drag limits the effectiveness of using fiscal policy in managing cyclical fluctuations in an economy. [15] 6 Discuss the view that signing more free trade agreements is the best approach to sustained economic performance in an economy. [25]

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