Candidate Name __________________________ ID Number ……………………

Final Term Examination

Economics 2281/22
Class 9 Total 90
Paper 2 July: 2022
Additional Materials: Answer Booklet/Paper 2 hour 15 minutes

READ THESE INSTRUCTIONS FIRST

Write your ID number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.

Section A

Answer this question.

Brief answers only are required.

Section B

Answer any three questions.

You may answer with reference to your own economy or other economies that you have studied where
relevant to the question.

The number of marks is given in brackets [ ] at the end of each question or part question.

[TURN OVER]

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 Section A

Read the source material carefully before answering Question 1.

Source material: Crisis in the chocolate market

There are concerns that the price of chocolate could rise significantly in the next few years. This
is because of increasing demand for chocolate, particularly in emerging countries, and supply
problems in the countries that produce cocoa beans.

Cocoa beans, the main ingredient in chocolate, are grown mainly in the west coast of Africa by
small farms using labour-intensive methods. In 2012 Côte d’Ivoire (Ivory Coast) produced 37%
of the world’s output of cocoa beans, followed by Indonesia which produced 13%.

Côte d’Ivoire is becoming well known for supplying good quality cocoa beans. Concentrating on
supplying the product its resources are most suited to has increased output in the country. Gross
Domestic Product per head rose to US$1240 in 2013. Some farmers and farm workers, however,
still live on less than US$2 a day.

In Indonesia, the income of most cocoa farmers and farm workers increased along with the rise in
the country’s average income between 2013 and 2014. Their purchasing power was, however,
affected by the consumer prices index rising from 108.0 in 2013 to 115.2 in 2014. While people’s
medical care in Indonesia is improving with more doctors per head, the government is seeking to
raise education standards.

Among the problems being experienced by cocoa bean producers are an ageing labour force, with
the industry experiencing difficulties attracting young farmers and farm workers. The industry
also regularly experiences problems caused by pests and diseases, including black pod disease. At
the same time people in Asia, particularly China, are eating more chocolate and drinking more
chocolate drinks. People in the United States of America and the European Union are also eating
more chocolate, although concerns about the health effects of eating large quantities of chocolate
are beginning to affect demand. For many people, however, chocolate is addictive. Chocolate
producers seek to take advantage of this by increasing the gap between revenue and costs. Most
chocolate producers come from developed countries and most are public limited companies trying
to keep their shareholders happy. These producers take advantage of their market power to keep
the price they pay for cocoa beans relatively low whilst the price they charge to consumers who
buy their chocolate is kept relatively high.

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1. a) Using example from the extract, labour intensive method of production. [2]

(b) Explain whether the extract suggests the demand for chocolate is price-elastic or price-
inelastic in developed countries. [2]

(c) Using information from the extract, explain two reasons why cocoa bean farmers do not use
much capital equipment. [3]

(d) By using diagram explain internal economies and diseconomies of scale as cocoa firm
increase its scale of operation. [4]

(e) Analyse two benefits of specialisation referred to in the extract [4].

(f) Discuss whether the price of chocolate is likely to increase in the future. [5]

(g) Using information from the extract, explain what is likely to be the main goal of chocolate

producers. [4]

(h) Discuss whether trade union always benefits firms and workers. [6]

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 Section B
Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material
and/or to other examples that you have studied.

2. There is an area of rubbish, three times the size of France, floating in the Pacific Ocean called
the Great Pacific Garbage Patch. It is made up of rubbish including old fishing nets but most is
plastic waste. It is forecast that, by 2050, there will be more plastic in the Pacific Ocean than fish.
A number of islands in the Pacific Ocean specialise in fishing. Greater pollution will increase the
social cost of the fishing industry.

(a) Identify the two types of costs that make up social cost. [2]
(b) Explain two causes of a shift to the right in the demand curve for fish. [4]
(c) Analyse how cleaning up pollution could benefit an economy. [6]
(d) Discuss whether or not a government should impose a maximum price on food. [8]

3.A number of countries are withdrawing high value banknotes. For instance, Singapore plans to
stop issuing its $10000 note. High value notes were originally intended to act as a convenient
store of value. Central banks are concerned some notes are now being used illegally. The
Singapore Police Force and the Monetary Authority of Singapore (its central bank) were trying to
recruit more workers in 2017. It was expected that the central bank would raise the rate of interest
in 2018.

(a) State two functions of money, other than a store of value. [2]
(b) Explain two advantages banknotes have as a form of money. [4]
(c) Analyse the influences on the mobility of workers. [6]
(d) Discuss whether or not a central bank should raise the rate of interest. [8]

4.A number of book publishers operate in Pakistan. These include multinational companies
(MNCs). They employ a range of specialist workers. A number of these specialists estimate the
price elasticity of demand (PED) for their firms’ books. There is a debate about whether some
books should be subsidised by the government.

(a) Define a multinational company. [2]

(b) Explain two disadvantages a worker could experience from specializing. [4]
(c) Analyse how a change in the PED for its products may benefit a firm. [6]
(d) Discuss whether or not the government should subsidise the production of books. [8]

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5The largest Indonesian aviation firm is a public corporation that started production in 1976. It
employs a relatively high value of capital goods and has a monopoly of aircraft construction in
Indonesia. It has been making parts for foreign firms for some time but is now trying to sell
aircraft to other countries. This involves it competing in a market where most of the firms are
public limited companies.
(a) Define fixed cost and variable cost. [2]
(b) Explain why fixed costs are high in the aircraft-making industry. [4]
(c) Analyse what determines a firm’s demand for capital goods. [6]
(d) Discuss whether the quality of products is likely to be higher in a monopoly or in a perfectly
competitive market. [8]