TJC_H2_ECONS_P2_answers

TJC 2018 JC2 Prelims H2 Economics Suggested Answers 1 H2 Paper 2 Suggested Answers 1 Amidst a growing economy and the increased use of personal mobility devices, the food delivery industry has changed the way food reaches consumers. If restaurants and hawkers choose to deliver their food to the doorsteps of customers, they have to pay a small commission fee. Discuss the impact of the above events on the market for food delivery and its associated markets. [25] Question Interpretation Command word/phrase Discuss the impact This is a cause-and-effect question where students are required to consider the impact of factors in the preamble on the different markets and how the impact might vary in different markets. Content impact of above events on the market(s) The ‘cause’ are the various demand and supply factors in the preamble and the ‘effect’ are the price and quantity changes in the various markets Context food delivery… associated markets The context is on food delivery and other food markets associated with it. A relevant response requires students to consider how the factors in the preamble affects the food delivery market and at least two other markets. Students will be required to show a thorough understanding of demand and supply factors, as well as factors affecting the various elasticity concepts, in order for a deep discussion of the impact on different markets. Introduction: Identify the markets to be discussed and recognise what ‘impact on market’ means • In this essay, I will be discussing various markets that will be affected by the events indicated in the preamble, namely the food delivery market, the market for restaurants who use food delivery services , the market for hawkers who use food delivery services and the market for other food businesses who do not use food delivery services. • For each market, I will be discussing the impac t in terms of changes in equilibrium price and quantity in each market, based on the events in the preamble, while considering elasticity factors, as well as any potential effects of one market on another. Body: Market 1: Impact of events on food delivery market • In the market for food delivery, the increase in income levels due to Singapore’s growing economy will likely cause an increase in demand for food delivery. o With the relative high income levels of Singaporeans, food delivery services can be seen to be a normal, necessity good that results in a less than proportionate increase in demand (i.e. 0< income elasticity of demand (YED) <1). As such, the rise in demand will be less than proportionate to the increase in income. o To consider the impact of the rise in demand on equilibrium price and quantity, we should consider the Price Elasticity of Supply (PES) for food delivery services. As there is easy access to persona