IJC 2008 H1Econs Prelim2 Paper1CaseQ1

Question 1 Tourism and global warming (a) (i) Using Figure 1, compare the trend for international tourist arrivals from 2000 to 2007. [2] 1m for general trend, 1m for specific/refinement All rising [1m] Africa rising slowest/ Asia rising fastest [1m] (ii) Explain possible reasons for this trend. [4] Need to explain; no marks will be awarded for merely stating a valid reason. Possible reasons: - All rising • Growing affluence/Rise in income levels (Rightwards shift in dd curve) • Lower prices due to advent of the internet, budget air travel (Rightward shift in ss curve) • Change in taste and preference Possible reasons: - Asia rising fastest • Increase in tourism related invest ment by Asian governments e.g. airports, roads and railways Æ more attractive as a tourism venue (Change in taste and preference) Award marks for explanation of any 2 valid reasons [2m per reason] While students are not required to draw diagrams, they are still expected to relate to fundament al concepts of demand and supply in order to gain full marks. (iii) Discuss the possible impact of this trend on an economy. [6] Command word: Discuss - Students have to discuss at least 2 perspectives. E.g. +ve vs –ve, Int vs Ext, different macro or micro goals Possible impact: • Increase in economic growth (actual and potential)/SOL • Increase in employment levels • Improvement in balance of payments • Increase in foreign direct investment • Presence of negative externalities 3m given for each point Level Descriptor Marks L2 Well-developed explanation of 2 different effects 4 – 6 L1 Undeveloped answer that merely identifies the effects with little attempt to explain them. 1 – 3 8816/01/IJC/Sep 08

2 (b) In the light of Extracts 1 and 2 , assess the impact of risi ng global oil prices on the airline industry. [6] Potential impact • Cost – increase in cost of operations • Revenue – reduction in disposable in come and therefor e a reduction in demand There is a need to assess – therefore st udents will need to explain the relative possibility of the above consequences. Level Descriptor Marks L2 Well developed answer on at least 2 different effects. 4 – 6 L1 Underdeveloped explanation of 2 different effects 1 – 3 (c) (i) Explain how negative externalities can arise in the airline industry. [4] To gain full marks, students need to (i) identify a relevant example of negative externality arising in the airline from the extract [1m] (ii) explain convincingly w hat made it a negative exte rnality, by making clear how some specified third party suffered a resulting external cost [2m] (iii) explain that negative externality causes a dive rgence between the marginal social cost and marginal private costs. [1m] (ii) Discuss one policy that might be used to correct the negative externality in the airline industry, and its likely effect on global warming. [8] Students can propose any relevant policy Suggested policies: • Carbon taxes/fuel taxes • Tradable permits • Subsidies on aircraft manufacturing – R& D for producing more fuel efficient planes There is no need to suggest al ternative policies. Students must evaluate the effectiveness of the stated policy. Level Descriptor Marks L3 Well developed answer on one policy with appropriate evaluation on the likely effectiveness on curbing global warming. 6 – 8 L2 Underdeveloped explanation of the policy and with some attempt to evaluate its effectiveness on curbing global warming. 3 – 5 L1 Mere description of the policy with little or no attempt to evaluate its effectiveness on curbing global warning. 1 – 2 [Total: 30] 8816/01/IJC/Sep 08