TJC H2 ECONS P1 answers

TJC 2018 JC2 Prelims H2 Economics Suggested Answers 1 H2 CSQ1 Suggested Answers Question 1: Tiny Plastic, Big Problem? (a) (i) Explain whether the change in Europe’s share of global plastic production meant that Europe’s plastic production fell from 2006 to 2015. [2] • Even though Europe’s share of global plastic production fell [1], Europe produced more plastic in 2006 than in 2015 as the global production increased in the same period. [1] • Mathematically, the amount of plastic produced by Europe can be calculated using the data in Figure 1 and Figure 2: o 2006: 22% of 245 million metric tons = 53.9 million metric tons o 2015: 18% of 322 million metric tons = 57.96 million metric tons Marker’s Comments: • Many students recognised Europe’s share is determined by: o Absolute amount of plastic produced in Europe o Total global plastic production • Some students failed to recognise that the data presented in Figures 1 and 2 could be used to determine the absolute amount of plastic produced in Europe. o Some students presented all possible scenarios (i.e. it could have remained constant, it could have increased). o A few students erroneously presented a demand and supply analysis of the situation in Europe to determine the possible change in Europe’s production during this period. (a) (ii) Has the market for plastic production become more or less competitive from 2006 to 2015? Explain your answer. [2] • Using three-country/region concentration ratio: The market for plastic production has become more competitive [1m] as the top three countries/regions’ share of plastic production fell from 67% in 2006 to 65% in 2015. [1m] OR • Using four-country/region concentration ratio: The market for plastic production has become less competitive [1m] as the top four countries/regions’ share of plastic production increased from 81% in 2006 to 82% in 2015. [1m] Marker’s Comments: • Many students failed to recognise the concept of “concentration ratio” is relevant when determining the degree of competition in an oligopolistic market. o This question allowed for two different answers, depending on whether the three- or four-country/region concentration ratio is used. As such, it is important to indicate clearly which one is being used to determine the answer. Failing to do so would make the answer incomplete/inaccurate. • Some students inaccurately identified the market to be monopolistic because of the dominance of one country/region (NAFTA in 2006 and China in 2015). o These students failed to show clear understanding of the concept of monopoly, which requires one firm to dominate the market as the single large firm (i.e. have more than 50% market share).

TJC 2018 JC2 Prelims H2 Economics Suggested Answers 2 • A handful of students considered the change from 67% to 65% (for the three- country/region concentration ratio) or 81% to 82% (for the four-country/region concentration ratio) as negligible, and indicated that there was “no change” in the degree of competition in the market. o Such a response failed to address the requirements of the question, which clearly expected students to choose between “more” or “less” competitive. (b) Using an example from Extract 2, explain the concepts of scarcity and opportunity cost to farmers. [1m for precise definition of scarcity] • Scarcity is defined as the situation where there is limited resources and unlimited wants. [1m for explaining the choice to be made given the limited resource and competing uses of the resource] • As farmers have limited “land” space, they have to make a choice between the use of land to produce crops for food or to produce crops for making bioplastics. OR • The plants grown by famers such as corn and sugarcane are limited and farmers have to make a choice between using the plants to produce food or for the production of bioplastics. [1m for the correct application of opportunity cost to farmers] • When farmers chose to produce more crops to make bioplastics, they have to incur an opportunity cost and forgo the value of the next best option, which is the potential revenue/profit earned from producing more crops for food. Marker’s comments: • Quite a number of scripts had a misconception between the concepts of scarcity and shortage. The following table shows the differences between the two concepts: Scarcity Shortage • Arises because of limited resources (factors of production) relative to unlimited human wants • Arises because quantity demanded is greater than quantity supplied at the equilibrium price • Cannot be resolved by the price mechanism, may be alleviated by technology advancement and/or an increase in the quality and/or quality of resources • Can be eliminated through the price mechanism • Necessitates choice and incurs an opportunity cost when a choice is made. • In the free market, a shortage will lead to a higher price which will reduce quantity demanded and increase quantity supplied until a new equilibrium is reached

TJC 2018 JC2 Prelims H2 Economics Suggested Answers 3 • Some students confused the concepts of competitive demand and competitive supply. When two goods are in competitive demand, they are substitutes. Bioplastics and food production are in competitive supply as they use the same factor inputs (land, chemicals, fertilisers, plants). • Definitions of scarcity and opportunity costs were imprecise. The importance of precise definitions has been emphasised thoroughly and students are unwise to not heed such advice in their preparation for examinations. • The application of the concept of opportunity cost to farmers was relatively weak. The majority of students either did not identify the “value” of the forgone next best alternative, or did not explain the opportunity cost to “farmers”, choosing to talk about food prices hikes and a food crisis which did not address the question. • There were students who wasted time by dr awing and explaining a PPC when it was not required at all. (c) Explain how recycling bottles could benefit the Coca-Cola Company. [5] • Recycling bottles could lead to “cost savings” for Coca-Cola Company, hence allowing it to benefit from lower cost of production. [1] • Recycling bottles could also help the com pany “woo customers by improving its image” and this could increase the demand for Coca-Cola’s products due to the favourable change in taste and preferences towards Coca-Cola’s products. This would increase the price and quantity of the those products and hence increase its total revenue. [3] • With cost savings and increased total revenue, Coca-Cola company could benefit from an increase in profits. [1] Marker’s comments: • Many students did not get full marks for this question as their explanations are incomplete. o Many students did not explain the increase in total revenue for the firm but jump straight into stating the increase in profits o For students who did explain the increase in total revenue, many of them did not explain that the increase in revenue was due to the increase in price and quantity due to the increase in demand. Many students wrongly state that increase in price or quantity alone would increase total revenue. o Some students wrongly stated that revenue is equals to profit which is a conceptual error. o A diagram is not required for this question. However, if a diagram was to be used for explanation, students should draw a firm diagram since question ask about benefit for a firm. Many students draw a market diagram, which is inappropriate for this question.

TJC 2018 JC2 Prelims H2 Economics Suggested Answers 4 (d) Discuss whether the use of agricultural commodities, such as corn, to produce bioplastics could lead to a “food crisis” (Extract 2). [8] • Introduction o Agricultural commodities such as corn could be used to produce bioplastics and this