JJC_H2_ECONS_Answer_Booklet

JURONG JUNIOR COLLEGE 2018 JC2 ECONOMICS 9757 (H2) PRELIMINARY EXAMINATION ANSWER BOOKLET

2 Prelim Answers for Paper 1 CSQ1 (a) Using Table 1, identify the year that Russia has the lowest growth in nominal GDP and state the growth rate. [2] Russia has the lowest growth in nominal GDP in 2017 (1m) with the growth rate of 5.2% (1m). (b) Explain why the ticket pricing strategy for the 2018 World Cup Final as shown in Table 2 can be considered an example of third-degree price discrimination. [4] The ticket prices for category 1 seats of the 2018 World Cup Final are higher than that of category 2 and 3 seats (Table 2). This can be considered an example of third-degree price discrimination as the following conditions are satisfied. Firstly, FIFA has market power as there is no alternative supplier selling the World Cup tickets (Extract 1). Secondly, markets are effectively separated/segregated to prevent resale, that is, resale is not possible between seat categories. Category 3 lower-priced ticket holders cannot resell their tickets to those holding higher-priced tickets as ticket holders need to have a FAN ID with their photographs in order to gain entry into hosting stadiums (Extract 1). Thirdly, there is different price elasticity of demand (PED) in the separate markets. On one hand, category 1 seats are closest to the centre of the field and the demand for these seats would be relatively more price inelastic (PED<1) as supporters can have better view and they do not deem other category of seats as close substitutes (Extract 1). On the other hand, demand for category 2 and 3 seats are relatively more price elastic (PED>1) as ther e is availability of other category seats as substitutes. [3m] Hence this ticket pricing strategy is an example of third-degree price discrimination as it is the practice of charging different groups of people different prices for the same product (same final match between 2 teams) for reasons not associated with differences in costs of production (no different in costs to produce the seats in the different categories). [1m] (c) Explain how Russia’s hosting of the 2018 World Cup would create ‘indirect jobs’. [2] Russia’s hosting of the 2018 World Cup would create direct jobs in the building of important infrastructure projects (Extract 4), which will lead to higher employment. These workers would then be able to able to purchase consumer goods, ranging from food and beverages such as Domino’s (Extract 2) and sportswear such as Nike (Extract 3). Producers of these consumer goods will expand production and hence hire more workers resulting in the creation of indirect jobs (Extract 4). These workers will in turn lead to further increase in consumption and production of other consumer goods leading to a multiple increase in indirect jobs. [2m as a whole] (d) Explain how Domino’s can make use of cross elasticity o