SAJC_H2_ECONS_P2_(Answers)

1 © SAJC 2014 9732/02 (Preliminary Examinations) St. Andrew’s Junior College Economics Department JC 2 Preliminary Examinations (2014) Suggested Answers H2 Economics Paper 2 (Syllabus 9732)

2 © SAJC 2014 9732/02 (Preliminary Examinations) 1 In recent years, there have been increased environmental awareness and improvements in green technology. These have led to changes in demand for and supply of products and services such as electrical appliances, materials used for packaging and garbage disposal services. Assess how relevant markets could be impacted by the above developments. [25] Suggested Answer Question Analysis:  Impact on markets relate to Pe, Qe and TR.  Markets to be analysed: o The good/service itself o Substitutes o Complements o Factors of production o Competitive supply Note: there is no need to repeat the analysis of the above 5 sub -markets for each of the three goods/service given in the pre -amble. However, all five markets should be showcased in the entire essay to gain top marks.  Demand and supply framework as well as relevant elasticity concepts are required to produce an analytical response to this question. INTRODUCTION  Increased environmental awareness and improvements in green technology were factors that led to changes in demand for and supply of the various markets and also related markets such as their substitu tes and complements as well as their respective factor markets.  Impact on such markets refers to the change in Pe and Qe as well as Total Revenue. Such impact differs both in direction and extent of change, depending on the nature of the goods in question. BODY  Framework to be used – Demand and Supply. With aid of diagram, briefly explain how Pe and Qe might change given a change in factors affecting demand and/or supply. Detailed workings of price mechanism as well as the assumptions are not required. 1) More Environmentally-friendly Electrical Appliances and Packaging Materials  Increased environmental awareness   demand for such goods. Assume constant supply and that PES is high (manufactured goods), there will be increase in Pe and more than proportionate increase in Qe. TR will increase.  Improvement in green technology   supply of such goods due to reduced cost of production. Assume constant demand and that PED is low (due to increased awareness), there will be fall in price and less than proportionate increase in quantity sold. TR will fall.  Combined effects: Assuming that the increase in demand is higher than the increase in supply, Pe and Qe are likely to rise and hence, TR is likely to rise as well. a) Markets for Factors of Production With higher Qe, demand for factors of production fop expected to rise as well. Hence, Pe and Qe as well as the TR in the factor market should also rise, assuming

3 © SAJC 2014 9732/02 (Preliminary Examinations) constant supply in the fa