(2017) 9757 H2 Econs Paper 2 Analysis
Q1 -Difficulty level = Hard
Analysis
For a), discussion of constraints would likely include how the small domestic market makes it hard for firms to attain economies of scale given low level of demand therefore low output levels. A lack of resources will also mean the need to import raw materials, where costs may be higher as a result, and supply shocks would be an issue affecting the certainty of profitability. Labour hiring could also be cited as an issue, high rentals cost could be also cited due to a lack of land etc.
For b) need to split up policies adopted by firms vs adopted by government. For firms, to maximize profits, need to discuss policies that can help increase TR and decrease TC (this would likely involve a discussion of mergers). For governments, policy discussions can include discussion of FTAs to access more export markets, relaxing of immigration policies to allow inflow of foreign labour, exchange rate policy to help keep imported raw materials cheap etc. Question is quite open-ended, and depends on your discussion in a)
Comments
This is likely the toughest question amongst the 6 questions and is the ‘surprise’ question for the paper. Merger would likely be a key policy to be discussed in b)
Q2 – Difficulty level = QuiteEasy
Analysis
For a) it’s a very simple demand & supply analysis. Falling interest rates would bring about lower opportunity cost of spending, increasing demand. Income growth would lead to an increase in demand as well. 2x increase in demand factors suggest significant increase in magnitude. Could suggest supply relatively price inelastic (see diagram below), price increase will be more significant. Supply is price inelastic as it takes time to build + limited land reserves in SG, subject to government policy etc
for b) it’s a discussion of macroprudential policies / cooling measures. If you studied policies like ABSD, SSD, TDSR, LTV & increasing supply of housing.. You are all GOOD!
Q3 – Difficulty level = Easy
Analysis
Land transport market probably means roads. Which means the market failure we are talking about is congestion.
Discuss market failure from congestion + discuss policies to address congestion.
3 policies u should discuss would be VQS (COE), ERP & improving public transport system as a substitute
No – I don’t think you will be penalized for not bringing in market dominance. You can bring in market dominance possibly as an issue to talk about reliability / comfort of buses / trains due to market power.
Comments
We did this just 6 days ago on 11thNovember, in Q3 of our simulated paper. Jackpot!
Q4 – Difficulty level = Quite Easy
Analysis
Discuss various causes of unemployment = standard book work. Discuss economic policies (all policies likely possible, but must address i) what unemployment you are dealing with ii) in depth explanation of policy and how it addresses the unemployment iii) limitations of policy)
Here’s the catch: You must discuss all of the above IN CONTEXT of today’s globalized world. Which means the focus is how globalization has made countries vulnerable to external shocks (cyclical) & the shifts and changes in technology / flows of investments has led to structural unemployment + your policy limitations should also link to globalization. If you didn’t CONTEXTUALISE – your marks will be limited to L2.
Comments
We have done this in class before. In the prediction list, I also did mention that globalization will come out as a sub-part and it DID in this question.
Q5 – Difficulty level = Moderate
Analysis
a) You have to define and properly explain all 3, and slowly link them up together. Discussion should include for e.g. how cost of living links to macroeconomic performance (inflation) and also standard of living (higher COL = lower SOL) and why.
Macroeconomic performance includes looking at economic growth, unemployment, BOP and price stability
b) The policies we will discuss would include i) modest and gradual appreciation of ER, ii) prudent fiscal policy & iii) supply side policy
There’s no one way to discuss this question, but the approach I would have been taken, will be to explain 1 policy at a time, and help to establish the link between the policy and the 3 things cited which are high SOL, high cost of living and strong overall macroeconomic performance.
Comments
This question is doable. The policies we have been discussing them to death but it requires application in an unusual way. Most likely issue with this question is time management because of the need to discuss 3 policies and its link with the 3 things cited.
Q6 – Difficulty level = Easy
a) Internal factors would likely include poorer consumer sentiments (AD issue), supply bottle neck due to tight labour market and low productivity growth (AS issue) while external issues likely due to poorer investor sentiments (FDI – AD issue), slower regional and global growth (China slowdown)
b) Can discuss supply side policies, expansionary fiscal policy & exchange rate policy.
Difficulties can be quite open-ended, but would mainly be how the limitations or trade-offs of the policies discuss could affect the economy.
Comments
Jackpot again!
This was on the predictions list, we’ve done almost the exact question in simulated paper during the 1stNovember lesson. (look at question 4)
Overall comments
If you’ve attended the 1st& 11thNovember lesson, and took the time trial seriously – we’ve covered TWOof the questions in this paper in the almost same exact format which should have been able to give you a distinctive advantage for Paper 2.
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