2022 H2 Economics EOY P1 QP.docx

Class Adm No Candidate Name: 2022 Preliminary ExamsPre-university 3 ECONOMICS 9757/01 Paper 1 31 August 20222 hours 15 minutesAdditional Materials: Answer Booklet READ THESE INSTRUCTIONS FIRST Write your name and class 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, highlighters, glue or correction fluid. Answerallquestions. You are reminded of the need for clear presentation in your answers. Ananswer booklet will beprovidedwiththisquestionpaper. Youshouldfollowtheinstructionsonthefront cover of theanswer booklet. If youneedadditional paper, asktheinvigilator for acontinuation booklet. The number of marks is given in brackets [ ] at the end of each question or part question. Answerallquestions. This question paper consists of9printed pages and1blank page. [Turn over

2 Question 1: Bittersweet chocolate Extract 1: Soaring price could make it 'Like Champagne' As chocolate prices surged to near-record highs on demand from emerging markets,chocoholicsbraceforahikeinprice.ThisgrowthhasbeendrivenbydemandfromIndiaandChina, withconsumptionof the‘luxury” sweet treattriplingoverthelastfewyears.However,worldwide chocolate market sales revenue was affected by the lockdown measures andeconomic slowdown duetoCOVIDpandemic, but supplysidedidnot impact thechocolatemarket during the pandemic. Source: Adapted from https://www.cnbc.com17 April 2014 Figure 1: India chocolate market: Sales revenue 2016-2024 (in USD billion) Source : Adapted from mordorintelligence Figure 2: Worldwide chocolate market: Sales revenue 2012-2025 (in USD billion) Source : Adapted statista.com MI/9757/01/PU3/EOY2022

3 Extract 2: Chocolate or not? Cocoabutter madefromcrushingandgrindingcocoabeansisusedinmakingchocolatetogive the smooth, melt-in-the-mouth flavour and texture. Reduced rainfall and increasedtemperatures, which led to prolonged periods of drought, are causing a reduction in soilmoisture during the dry seasons. These conditions often lead to the killing of cocoaseedlings. If prices of cocoa butter go up too much, chocolate makers may shift tosubstitutes such as palm oil or even cotton seed oil instead of using cocoa butter. Thelimitation, ofcourse,isthatifyouputintoomuchofthepoorsubstitutes,youarenotallowedto call it chocolate. Noalternativesof cocoabutter havebeenfoundsofar that couldmeetthe exact demand of cocoa butter. Table 1: Price elasticity of demand and supply for cocoa butter Price elasticity of demand Price elasticity of supplyShort term -0.06 0.07Long term -0.34 0.57 Source: Adapted from African Journal of Agricultural and Resource Economics 2018 Extract 3: Volatility of cocoa prices Ivory Coast and Ghana in Africa are the largest global producers of cocoa, supplying 70percent of theworld’scocoabeans.Currently,cocoafarmers’ incomeislowcomparedtotheprofit madebythechocolateindustry.Whiletheprofitsofmultinational chocolatecompanieshave inc