MI_H2_ECONS_P2_QP_Answer

[Turn over 2015 Preliminary Examination 2 Pre-University 3 ECONOMICS 9732/02 Paper 2: Essay Questions 18 September 2015 2 hours 15 minutes Additional Materials: Answer Paper 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 or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer three questions in total, of which one must be from Section A, one from Section B and one from either Section A or Section B. At the end of the examination, hand in your answers to the 2 sections together. The number of marks is given in brackets [ ] at the end of each question or part question. This question paper consists of 3 printed pages and 1 blank page.

2 9732/02/P2/MI/2015 Answer three questions in total. Section A One or two of your three chosen questions must be from this section. 1 The government has raised the tax on alcohol and liquor in Indonesia. This spells bad news for both sellers and buyers of alcohol and liquor. At the same time, the economy is experiencing a downturn. The impact on different buyers – social drinkers and heavy drinkers - is different. a) Using elasticity concepts, explai n which party bears the greater burden of the tax increase. [10] b) Discuss the effects of the tax rise and the economic downturn on the market of alcohol and liquor for both social and heavy drinkers. [15] 2 In theory, firms are assumed to be motivated by the profit maximising objective in its decision making process. However, in reality, this assumption about the behaviour of firms may not be totally true. Discuss. [25] 3 Under Singapore’s Bus Service Enhancement Programme (BSEP), over 248 new buses were added to beef up 111 existing services. With more buses, more bus routes and greater frequency, bus travel in Singapore is going to be a more comfortable and convenient way to get around. a) Explain why there is a need for governments to invest more in managing road usage. [10] b) Assess whether the development of a more comprehensive public transport network is the best approach towards managing road usage in Singapore. [15]

3 9732/02/P2/MI/2015 Section B One or two of your three chosen questions must be from this section. 4 Economic slowdown and rising unemplo yment has caused many governments to implement protectionist measures such as tariffs to help shield struggling sectors from growing competition from foreign firms. Explain the types of unemployment in an economy and discuss whether protectionism can help governments solve these different types of unemployment. [25] 5 Prices in an economy can be affected by external factors as well as by domestic factors.