RVHS_H2_ECONS_P2_Soln

1 RVHS 2018 Y6 H2 Prelim II Essay Q1 (Section A) When adverse weather in Malaysia led to a dramatic fa ll in the production of vegetables for export, this led to a rise in the price of fresh vegetables in Si ngapore. This will affect different types of firms -- vegetables farmers in Malaysia as well as supermarkets and hawker stalls in Singapore. Explain why different types of firm came to diffe ring decisions about the increase in the price of vegetables or vegetable-based products, and discuss how their revenue would be affected. [25] Suggested Mark Scheme (a) Knowledge, Application/ Understanding and Analysis L3 Developed explanation of: (i) Why different types of firms make different pricing decisions [must consider three types from the following: M’sia farmer (≈PC firm), Large supermarket in Sg (≈Oli), Hawker stalls (≈MC firm)] (ii) How TR is affected ‘Developed’ – Uses economic analysis involving PED (with relevant determinants to justify), features of market structures affecting firm’s pricing decision 15-20 (18) L2 Undeveloped explanation of pricing decision made by at least two types of firms & impact on TR OR Developed explanation made by one type of firm & impact on TR ‘Undeveloped’ – Descriptive, superficial reference to features of market structures without linking to pricing decisions and TR appropriately 9-14 (12) L1 Smattering of valid points i.e. some knowledge of factors that might affect pricing decisions and how elasticity can affect TR 1-8 (5) E3 Arrives at an analytically well-reasoned judgement about the key factors that determine the extent of price increases 4-5 E2 Makes some attempt at a judgement about possible factors that determine the extent of price increases 2-3 E1 Unsupported statement about possible factors that affect price increases 1

2 Suggested points:  Adverse weather in M’sia  ↓SS of fresh vegetables  ↑P  ↓Qd  ↑P of fresh vegetables  ↑COP of veg-based products  ↓SS  ↑P  ↓Qd • Extent of ΔP and ΔQd depends on PED and also mkt structure i.e. mkt which a firm operates in • Essay considers different pricing decisions by: o Vegetable farmers in M’sia; o Large supermkst in Sg; o Hawker stalls in Sg (I) M’sia vegetable farmer Pricing decision: • M’sia farmers as a whole operate in an industry which approximates perfect competition  each firm produce an insignificant mkt share + homogeneous product (veg)  likely takes the mkt price as determined  price setting decision based on this Impact on TR: • ↓SS of fresh vegetables  ↑P  ↓Qd • Extent of ↓Qd depends on their PED • As Sg supermkts/ hawker stalls may also have some stockpiles from previous months  PED likely > 1  Qd ↓ more than proportionately  TR ↓ for M’sia farmers • EV: In short run, perhaps PED may be < 1 as alternat ive suppliers of vegetables may not have been found OR contractual agreements prevent any changes in P • If so, then M’si