H2 ECONS 2008 CASE STUDY

Examine case materials to support market failure: Increase foreign reserves must mean that Chinese authorities are selling Yuan increase SS of Yuan in FX market and purchasing foreign exchange increase DD for FX over the years to exert downward pressure on the value of the Yuan. For the capital account because we have elected to choose exchange rates and free capital movements as our two choices from the Triffin ‘trilemma’ it does not use. This might be with the help of the Chinese government through, for example, subsidised rents and tax exemption. Extract 2 However, between March and October , it could be reasoned that the supply of natural gas to the British market had increased because of the opening of a new pipeline from Norway. We export tourism to Australia and import it from Australia, but the exports and imports are clearly very different, and so are logically determined by exploitation of mutually advantageous trade opportunities. Hence a fall in prices of iPods, MP3 players will increase the DD for recorded music since they are close complements.

Level 3 answers are also able to clearly illustrate the pricing setting behavior of a perfect competitive firm in the short run and go on to explain how due to the lack of entry barriers, that the relative ease of entry and exit of new firms led to a situation of only normal profits in the long run. Lower prices are not reflected by lower costs of production, but due to deliberate government policy. However, the appreciation is very marginal. They can practise monopoly pricing which causes allocative inefficiency. Introduction – Link the examples to be used respectively to the causes of market failure – Eg. The market in such countries may be small.

If there is poor use of economic terminology, e. Although electricity comprises a higher weight in the UK Retail Prices Index as seen in Table 2, this proportion has been falling over the period.

H2 Economics Case Study Questions

Economic welfare is not maximised. However, there remains economic ecosn in the market due to relatively small number of energy firms in the market and the business strategies employed.

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h2 econs 2008 case study

This begs the question which you must address of where does the improved current account performance come from and how can policy influence it? Depends on governments to overcome the costs of globalisation.

Develop CA in areas of higher value added to tap into growing world incomes and to avoid goods such as those primary csse exported by many developing countries where prices are volatile. Q5 Discuss the relative significance of the multiplier, the price elasticities of demand for imports and exports, and crowding out in influencing policy decisions. CSQ2 a i It appreciated. This will lead to a more than proportionate increase in the qty demanded of the recorded music.

Economics Tuition Singapore | A-Level H2 Econs Case Study

This represents allocative inefficiency as natural gas is not allocated to the highest bidding market. USAs rising current account deficit is seen in figure 1 and this is to be contrasted with Chinas big rise in foreign reserves.

Evaluate that this is not the reason: We do not know how the countries have performed in trade in services. Question focuses on 1. Hence, the UK fuel market remains an example of market failure. Creation of Energywatch to represent the interest of consumers also limits the ability of energy firms to 200 price, hence improving allocative efficiency.

Critically you must say sstudy policy instruments need to be used and enhanced to achieve these three goals.

h2 econs 2008 case study

Explain that there is a range of market structures. As the Asian economies grow, theyll be importing more from the West. Students will have to consider the impact on two markets ie recorded music and associated products.

If price of natural gas remains below price of electricity, natural gas consumers may not switch to electricity. Level 3 answers are also able to clearly illustrate the pricing setting behavior of a perfect. Body 1 Multiplier – Explain the multiplier process Show how a change in econa expenditure will lead to a multiple change in equilibrium Y.

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Answers to H2 Economics GCE a Level Exam

Telecommunication companies having market power as a result of imperfect information and ecpns of factors of production – Eg.

Do not suggest that the exchange rate caused the BOP to strengthen. India does not have comparative advantage in the production of whiskey as it is unable to compete against foreign competitors. They can practise monopoly pricing which causes allocative inefficiency. This will in turn affect their pricing decisions.

Which raises the question is this a good idea? Introduction – A brief explanation of how market forces can achieve allocative efficiency – Highlight the right assumptions for the price mechanism to work well – The equilibrium outcome of the perfect market would meet the conditions required ie.

Imposition of tariffs and quotas are examples of protectionism. To reach Level 3, answers should include diagrams MC, AC curves to show how profit- maximising decisions are made within a range of market structures. Holding other factors constant, an increase in price of other fuels will result in an increase in demand of electricity – Applying the concepts of PED and CED in context of case data?

Trade is also not a zero sum game. Extent of increase in demand for electricity csae to price changes identified in case material is likely to be greater in long term as electricity consumers may be tied to contracts and unable to respond to price changes.

While price of electricity is increasing, prices of other fuels are increasing as well.

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