SAJC _H2 Economics 2008 Prelim Question Papers

ST ANDREW’S JUNIOR COLLEGE Preliminary Examinations Higher 2 ECONOMICS 9732/01 Paper 1 10th September 2008 2 hours 15 minutes Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your name 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, paper clips, highlighters, glue or correction fluid. Answer all questions. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages and 1 blank page. © SAJC 2008 09_9732_01 [Turn over

2 Answer all questions. Question 1 The Tourism Industry Extract 1: Emerging economies are transforming the travel industry The rise of emerging economies marks the third revolution the travel industry has undergone in the past 50 years. The first came in the 1960s, in the shape of cheap air travel and package tours. Rising incomes enabled people of modest means to travel more, to farther-flung parts of the globe, and to take advantage of “all-in” offers that may have included sightseeing trips, scuba diving or camel rides. The second was the advent of the internet, which has allowed millions to book flights, hotels, hire cars and package tours without going near a high-street travel agent. Now fast-growing emerging economies—not just Dubai but also the BRICs (Brazil, Russia, India and China) and others, such as South Korea and Vietnam—are changing the world of travel once again, either as destinations or as sources of newly affluent travellers. According to McKinsey, a consul ting firm, by the middle of the next decade, almost a billion people will see their annual household incomes rise beyond $5,000— roughly the threshold for spending money on discretionary goods and services rather than simple necessities. Consumers' spending power in emerging economies will rise from $4 trillion in 2006 to more than $9 trillion—nearly the spending power of Western Europe today. For the next year or two, the travel industry is likely to find its long-standing customers in rich Western countries a less than reliable source of growth. As American families plan their holidays, many will be worrying about t he frailty of their country's economy, the rising cost of petrol and—for those venturing outside the United States—the weakness of the dollar. Some European travellers, by contrast, will at least have the benefit of a strong Euro. Even so, Europeans are likely to feel the slowdown of the economy and the impact of the high price of oil. What might stop tourism's latest revolution? Political violence is one possibility. Developed countries are no strangers to terrorism, but the dangers in emergi