JJC H2 ECONS P1 QP

[Turn over 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 an HB pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. Begin each case study question on a fresh sheet of writing paper. Attempt case study questions in ascending order of question sequence and indicate questions attempted clearly on answer sheet. Fill in the necessary information on the cover sheet. At the end of the examination, tie 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 7 printed pages. JURONG JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATION 2018 ECONOMICS Higher 2 9757/01 Paper 1 27 August 2018 2 hours 15 minutes

2 Answer all questions. Question 1 World Cup and its related industries Table 1: Selected Indicators for Russia over the period 2013-2017 2013 2014 2015 2016 2017 Annual rate of growth in real GDP (%) 1.8 0.7 -2.8 -0.2 1.5 Inflation rate (%) 6.8 7.8 15.5 7.0 3.7 Unemployment rate (%) 5.5 5.2 5.6 5.5 5.2 Current account (% of GDP) 1.4 2.7 4.9 1.9 2.2 Carbon emission (metric tons per capita) 10.8 10.5 10.3 10.2 10.1 Source: OECD Table 2: Tickets at the 2018 World Cup Final Category 1 Category 2 Category 3 US$1 100 US$710 US$455 Source: fifa.com Extract 1: World Cup tickets Major football organisations implement the strategy of different category prices based on the attractiveness of specific seat locations. That typi cally means that the closer to the centre of the field the category of seats is (Category 1), the bette r the view and the more valuable it will be for the fans and supporters. Tickets at the 2018 World Cup range from $105 for Category 3 at group stage matches to $1 100 for Category 1 at the final. FIFA said that only tickets bought from the official website will be valid. A ll ticket holders need to hold a FAN ID, an identification document with their photographs, together with a valid match ticket in order to enter the stadiums. Source: Reuters, 13 September 2017 Extract 2: Domino's takes on 3 000 new staff With Russia’s economy recovering from negative growth, Domino’s, the popular pizza chain, wants to take on 3 000 new staff. To compete with other close rivals such as Pizza Hut and Papa John’s, Domino's has launched their new pizza "The Meatfi elder" that is packed with pepperoni, chorizo, meatballs, smoked bacon and its secret sauce. It has also used the prominent figure of retired English footballer Jimmy Bullard to publicise itself as the food of choice during the World Cup. Domino’s has finalised a new multi-year beverage supplier contract with The Coca-Cola Company. "We are excited that Domino's fans can continue to 'Open Happiness' with a Coca-Cola beverage while watching the World Cup," said Tony Ferlauto, Coca-Cola Europe Vice President of national sales. Customers can celebrate this week by including a Coca-Cola product in their online order – while also enjoying 50 per cent off any pizza at menu price. Source: dailystar, 14 June 2018 and Forbes, 26 January 2018

[Turn over 3 Extract 3: Nike’s just-do-it behaviour Sportswear companies have become increasingly interdependent in the competitive industry, with Nike, Adidas, Reebok and Puma taking up 70 per cent of market share, as they consider their competitors’ reactions when setting prices, output, advertising budgets and other business models. Such interdependence is not the only reason affecting the decisions of Nike, the world’s largest manufacturer of sportswear, over the past few years. In 2014, Nike reported a substantial jump in the cost of production due to rising cost of raw materials such as cotton and nylon that pushed down its profit margins by 0.5-1 per cent. Nike said that the company was successful in passing heightened costs on to consumers. However, in 2016, Nike allowed retailers to give 25 per cent discounts all year when its main competitor, Adidas, experienced strong growth, and has had a number of successful product launches such as its "athleisure" clothing line. Nik e's reaction, seeking to regain market share, is very common. Lowering prices is very easy and has an immediate effect of raising its sales. Come 2018, the World Cup isn’t just a battle be tween countries, but also a competition between the two biggest sportswear companies. For example, the World Cup prompts consumers to buy the Nike jersey they see on Cristiano Ronaldo or the Adidas jersey they see on Lionel Messi. Source: Adapted from pricebeam.com, 24 April 2017 and Financial Times, 9 December 2015 Extract 4: Does hosting a World Cup make economic sense? Organisers of the World Cup in Russia have predicted that the total economic impact of the tournament could be as high as $30.8 billion by 2023. Indeed, the case is often made that hosting any major sporting event, can boost a nation’s economy by attracting tourists, initiating important infrastructure projects, creating direct jobs and in direct jobs across many industries ranging from food and beverages to sportswear, and showcasing Russia as a good place to do business. Economists argue that there may be limited economic impact at the national level given the short duration of the World Cup and the very large size of the Russian economy. Moreover, hosting the tournament could lead to an increase in consumer prices in Russia. There is also the opportunity cost of hosting a major sporting tournament given that governments have limited amount of resources and that Russia has been running on a budget deficit since 2012. The money spent on new or upgraded infrastructure is likely to be more wisely used in long-term investments in critical areas of the economy. An increase in spending should lead to a rise in Gross Domestic Product, but the World Economic Foru m’s Inclusive Growth and Development Report argues that focusing on inclusive growth is more important. This means spending to deliver both economic growth and broad-based, sustained improvements to living standards. Unfortunately, sporting infrastructure is expensive to construct and run, takes up scarce resources, and is often difficult to use with enough frequency to cover maintenance costs. A stadium is not really essential to the economic well-being of an average worker. Economist Andrew Zimbalist lists examples of the white elephants left barely used in host cities once tournaments have ended. Before the 2010 World Cup in South Africa, low-income residents living in settlements near tournament sites were reportedly evicted in an attempt to improve the country’s image, leading many to question whether the money would have been better spent on improving impoverished communities instead. Source: weforum.org, 7 June 2018

4 Extract 5: A more sustainable World Cup in Russia Hosting the World Cup does bring about problems. Firstly, air pollution is already a concern to people across Russia, who are well aware of the main cause of the problem that is emissions from fossil-fuelled vehicles. With the influx of foreign visitors, such air pollution will only worsen. Authorities of some host cities are doing something a