ANDERSON JUNIOR COLLEGE JC2 Preliminary Examination

ECONOMICS Higher 2

9732/02

Paper 2 31 AUGUST 2007

Additional materials: Writing paper

2 hours 15 minutes

READ THESE INSTRUCTIONS FIRST

Write your name, PDG and index number in the spaces provided on all the work you hand in. Write in dark blue or black ink. 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 all your work securely together, with this cover page in front. Indicate in the table below the question numbers of the three questions you have attempted. The number of marks is given in brackets [ ] at the end of each question or part question.

Question Number Name: ________________________________ ( )

Marks Awarded

PDG: _________________________________ Total Marks

75

This document consists of 2 printed pages, including this cover page. [Turn over

2
Answer three questions in total. Section A One or two of your three chosen questions must be from this section. 1 The mania over Applesa iPhone launch has created stratospheric expectations that are near impossible to live up to. The iPhone is not only a phone, but also a fully fledged iPod, as well as the first device that can really claim to bring the full internet into users pockets. a Apple Inc. develops, manufactures and sells iPhone. Adapted from The Economist, 9 July 2007, and USA Today, 26 June 2007 (a) (b) Illustrating with examples, explain price elasticity of demand, income elasticity of demand and cross elasticity of demand. Discuss how an understanding of the abovementioned concepts might be useful to the Chief Executive Officer (CEO) of Apple Inc. in making price and output decisions. Drug giant Pfizers merger with competitor Pharmacia in 2003 made it the largest pharmaceutical company amongst some ten to twelve companies. Pfizer also boasts the industry's largest pharmaceutical Research and Development (R&D) organisation, which invests $7.6 billion in R&D on average annually. (a) (b) Identify the likely type of market structure Pfizer operates in, and distinguish its key features with perfect competition. Examine whether having large companies, such as Pfizer, in the pharmaceutical market could be beneficial to society. Explain how smoking may be viewed as a source of market failure, and evaluate the policy measures that the Singapore government currently adopts to correct market failure caused by smoking.

[10]

[15]

[10] [15]

[25]

Section B One or two of your three chosen questions must be from this section. 4 (a) (b) What determines the level of consumption in an economy? Discuss how an increase in consumer spending and investment will help achieve growth in Singapore. Explain the reasons why a country might wish to restrict imports. Consider the likely economic implications on the Singapore economy as a result of the growing trend in her signing of free trade agreements (FTAs) with her trading partners. The Monetary Authority of Singapore (MAS) will maintain the policy of a modest and gradual appreciation of the Singapore dollar in the period ahead. This policy stance, which has been in place since April 2004, has benefitted the Singapore economy in the past few years. Adapted from MAS Policy Statement, 10 April 2007 Explain the key macroeconomic aims of the Singapore government and discuss how the policy mentioned above is part of Singapores strategy to achieve these aims. [8] [17] [10]

(a) (b)

[15]

[25]