SRJC_H1_ECON_P1_ANSWER

1 © SRJC 8819/01/JC2PreliminaryExam/11 Section A Question 1 Suggested Answers (a) Using Figure 2, (i) Summarise the variations in the stockpiles of wheat. [2]  The stockpiles of wheat are expec ted to increase overall. (1m)  The stockpiles fell from 2007 to 2008, rose from 2008 to 2010 and are expected to fall thereafter. (Any two variations – 1m) Markers’ Report Data interpretation:  Candidates need to be more careful with data interpretation. E.g. o “There is an overall rise in stockpiles from 2007 to 2010” - this statement is not given full credit because the entire period runs from 2007 to 2011. Hence, the statement should be rephrased as “There is an overall rise in stockpiles from 2007 to 2011”. (ii) Account for the abovementioned variations. [2] Stockpiles of wheat depend on the global consumption and global production of wheat (0.5m) – For example, when global consumpt ion was less than global production from 2008 to 2010, the stockpiles rose. However, when the global production is expected to dip below global consumption from 2010 to 2011, the stockpiles are expected to fall. 1.5m – 1m for why stockpiles rose (fell) and 0.5m for why stockpiles fell (rose) Markers’ Report Question interpretation:  Candidates should take note that they are instructed to use Figure 2 to answer (ii) as given in the question. (b) With the aid of a diagram, analyse why prices of food commodities are expected to surge and remain volatile. [5] The export ban by Russia reduces the world supply of wheat (Extract 2). Additionally, Russia is one of the top producers of wheat in the world (Figure 1). Besides that, the rise in demand for biofuels (Extract 1) leads to a rise in the derived demand for food commodities such as rice and wheat which are factors of production for biofuels. shortage Price Quantity of food commodities P1 Q0 S1 D0 0 S0 E0 E1 P0 Q1 D1 Q3 Q2

2 © SRJC 8819/01/JC2PreliminaryExam/11 The fall in supply will shift the supply curve to the left from S 0 to S 1 and the increase in demand will shift the demand curve to the right from D 0 to D 1, causing a huge shortage of Q2Q3 at the original price of 0P0. Eventually, a new market equilibrium is reached at point E 1 where quantity demanded will once again be equal to the quantity supplied. In this instance, there is a surge in the price of food commodities from 0P 0 to 0P1. Volatility in the price of food commodities could be explained by the unpredictable changes in the demand for and supply of food commodities. In other words, when the demand for and supply of food commodities fluctuate, the price of food commodities would fluctuate as well. L2 3-5  Good application of demand and supply analysis with detailed reference made to a diagram  For 4m and above: Detailed explanation that takes into account simultaneo