PJC H2 ECON P2

Pioneer Junior College 2011 9732/02/O/N/11   [Turn over Candidate Name: _____________________________ CT Group: ___________ Index number: __________ ECONOMICS 9732/02 Paper 2 Friday 16 September 2011 2 hours 15 minutes Additional materials: Writing Paper READ THESE INSTRUCTIONS FIRST Write your class, index number and name on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer three questions in total, of which one must be from Section A, one from Section B and one from either Section A or Section B. At the end of the examination, fasten your work for each question separately. The number of marks is given in brackets [ ] at the end of each question or part question.   This document consists of 2 printed pages PIONEER JUNIOR COLLEGE JC 2 Preliminary Examination 2011 Higher 2

Pioneer Junior College 2011 9732/02/O/N/11   2 Answer three questions in total. Section A One or two of your three chosen questions must be from this section. 1 (a) Explain how an understanding of the concepts of price elasticity of demand and cross price elasticity of demand can aid producers in making price and output decisions. [10] (b) Discuss how an increase in goods and services tax on luxury goods might influence the revenue of producers of luxury goods and of related goods. [15] 2 US confectionary Mars received the all clear from the European commission to buy number one chewing gum maker Wrigley in a deal worth €15 billion. Their competitors are concerned that this would give Wrigley an unfair advantage over them. (a) Explain how, in economic theory, firms in imperfect markets would determine the price that would maximize profits. [8] (b) Discuss the assertion that acquisitions by large firms such as Mars are desirable to society. [17] 3 Sometimes, prices fail to reflect costs fully. (a) Explain why the above would be of concern to a government. [10] (b) Assess the use of taxation by the Singapore government to deal with the above problem. [15] Section B One or two of your three chosen questions must be from this section. 4 Countries with large trade surpluses must take steps to boost domestic demand. No nation should assume that their path to prosperity is simply paved with exports to America. Explain what is meant by equilibrium in the macroeconomy using the circular flow of (a) income. [8] (b) Discuss the extent to which countries should boost domestic demand in their pursuit of prosperity. [17] 5 Assess the view that monetary policy centred on exchange rate is the most effective measure to overcome the main macroeconomic problems faced by Singapore in recent years. [25] 6 “Rapid globalization has brought about greater market access and partners for development, but has also placed some economies in a more vulnerable position.” Discuss. [25]