2022 TJC H2 Prelim Paper 1 Suggested Answers.docx

2022 TJC JC2 H2 Economics Preliminary Examination Suggested Answers Question 1: Government intervention in the market for rare earthsSuggested answers (a) With evidence from Extract 1,(i) What can you conclude about the price elasticity of supply of rareearth elements (REEs)? [2]● Extract 1 mentionsthat “extracting, processingandrefiningREEsaretrickyfor amyriadof technical and environmental reasons”. This suggests that the production of REEs ishighly complex with a lengthy production process.[1]● The supply of REEs wouldhencebepriceinelastic[1] withquantitysuppliedincreasingless than proportionately when price increases. (ii) Using a demand and supplydiagram, explainthelikelychangeintheREEs market in the future. [4]● The demand for REEs like dysprosium and terbium are derived from the demand forelectric vehicles because these elements are factor inputs in the production of electricvehicles.[1]● Amid the ongoing race to create a large electric vehicle market (Extract 1), thederiveddemand for REEs will continue to increase, shownbytherightwardshift of thedemandcurve from D0 to D1.[1] Figure 1: REEs market ● [1]for a fully labelled and accurately drawn diagram● Givenapriceinelasticsupplyof REEsasconcludedin(a)(i), anincreaseinthedemandfor REEsinthefuturewill leadtoasignificantincreaseinpricefromP0toP1,andaslightincrease in equilibrium quantityfrom Q0 to Q1.[1] 1

2022 TJC JC2 H2 Economics Preliminary Examination Suggested Answers (b) WithreferencetoFigure1, summarisethetrendofthepriceofdysprosiumoxide during the period 2009 – 2024. [2]General trend:o The price of dysprosiumoxide is forecasted to increase generally during theperiod2009-2024.[1]Refinement:o except for the years 2016-18 where the price decreased.[1]ORo There was a spike in 2011.[1] (c) Explainthemeaningofapositivestatementandanormativestatementandidentify an example of each type from Extract 2. [4]● A positive statement isanobjectivestatement whoseaccuracycanbetestedbylookingat evidence.[1]● One example is “the removal of these elements fromthe earth’s crust, using a mix ofwater and chemicals, caused extensive water and soil pollution.”[1]OR● “Other pollutants, such as cadmium and lead, also are released during the miningprocess; long-term exposure to these metals poses health risks.” ● A normative statement involves value judgement andissubjective; cannot beprovenordisproved by looking at facts.[1]● An example is “There is talk that similar mining could be started in Africa and otherregions, so we should not repeat the same mistakes.”[1]OR● “Ma’sfear isthatotherregionsaroundtheworldcouldsufferasimilarfateiftheybecome,likeChina, thesupplier of cheaprareearthelements, withlittleornoenvironmental priceattached.” (d) To what extent would rare earth mining improve the standard of living ofpeople in China? Discuss. [8]Question interpretation Commandphrase To what extent…improve Balanced discussion on both sides (SOLimproved and worsened) before anevaluative conclusion on the overall extentC