(2022) Review of H2 A Level Econs Paper 2
Hi students
I’ll only be doing up the answers to the Essay questions next week! So here are my comments on each question
Question 1
a) Requires understanding of the concept profit satisficing - instead of profit maximising (where MC = MR)
For profit satisficing, there’s no unique ‘price’ or ‘output’ but price will likely be lower / output will be higher
This shows what is required for this question
b) Should discuss three strategies:
Appropriate strategies could include
R&D to develop new/better products → increase barriers to entry
Predatory pricing → subject to prior retained supernormal profits
Merger → increase size of firms and devouring rival firms
We’ve actually explicitly indicated that Alternative Objectives of Firms would come out in our predictions.
Question 2
a) Increase GST → increase COP → fall in supply → increase in price
Thus we know PED can be used
Decrease in incomes → fall in demand
For this, we can use YED
Luxury goods: PED > 1 (large proportion of income / low degree of necessity), YED > 1 (luxury)
Then discuss accordingly
b) Note that this part of the question is no longer focused on luxury goods. So the discussion will just be on whether the increase in 2% would likely raise tax revenues (it should!)
+
Unintended consequences would include affecting the low income households more as spending on goods & services take up large % of income (you can also evaluate by talking about GST offset package)
Can also discuss about spending on large ticket items being brought forward (to avoid paying 2% more)
This is a standard DDSS / Elasticities question which we said would come out in most years.
We also covered the GST increase extensively in August 2022 under Lesson V9. That’s one of the three key themes we focused on this lesson.
See the reading list that was issued to students:
https://docs.google.com/spreadsheets/d/1wxpmWqMJA5TP1xHfKNY5_71eUalWNRGKqzVSQ0lWzVA/edit#gid=0
We covered all the unintended consequences during this lesson
Question 3
a) Discuss how public goods are non-excludable and non-rival resulting in free-ridership problem & absence of market, then address negative externalities from light pollution
b) How I would structure the essay:
Provision (to provide or not to provide = yes must provide because market fails completely)
But decision-making also comes in here on where to provide
Benefits must be weighed against costs instead of discriminately providing street lights anywhere and everywhere
Discuss how this weighing should be done
The first part is actually on public goods (50%). We did a question on dams in the Mock Exams which was very similar to this question (especially on whether dams should be built really depends on whether benefits > costs)
Question 4
a) Cyclical vs structural unemployment
b) Fiscal policy vs SSP (or fiscal with SS intent)
PS: It’s phrased in an obscure way of course, but if you recognise it, we’ve totally covered this
Policies we discussed in ALP12 Q5 can also be used here under the “Human capital” part
Question 5
a) This question is about why SG doesn’t use interest rates
b) This question is testing on how other countries changing interest rates can affect SG
This was included in both the Pre A Level checklist
And on Sunday night, the message I sent in the J2 Telegram channel
https://docs.google.com/spreadsheets/d/1wxpmWqMJA5TP1xHfKNY5_71eUalWNRGKqzVSQ0lWzVA/edit#gid=0
The very first point I indicated that you need to look at was what came out for part a)
Also. We covered this very frequently
We did part a) in Macro Essence Workshop Q4a
We also did part b) in ALP11 Question 5b
The answer can be used almost wholesale.
Question 6
a) Pros & cons of globalisation to Singapore
b) Can discuss modest and gradual appreciation, prudent fiscal policy & SSP
We predicted this.
And we also did this in Q6 of ALP12
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