EAns - All CSQ (J2)

Explain why unemployment rate rises when growth rate is negative 

• [1]: -ve EG -> AD falls -> firms cut back on production -> reduce use of FOP 

• [1]: reduce derived demand for labour -> increase demand-deficient labour, assuming labour force unchanged -> unemployment rate increase

Using CFIO, explain how the observed changes in the trade balance between 2018 and 2022 could have caused India's national

• Increase W: Since withdrawals (W) from the Circular Flow of Income is made up of Net Savings, Net Taxes and Import Expenditure (M), a rise in M will lead to a rise in W

• Decrease J: At the same time, income flowing into the economy via Injections (J) is made up of Investment Expenditure (I), Government Expenditure (G) and Export Revenue (X), a decrease in X will lead to a fall in J

• This leads to J < W

• Multiplier thing 

1. Explain change in mSOL -> DEFINE mSOL 
   

2. Assess the effects of…on sustained growth and employment 

• R1: Positive SEG and employment 

• R2: Negative

Why does UK experience slowed EG 

• Why GDP increase factor 2m = evidence gives 2 factors for X

• Multiplier 2m 

• Why GDP decrease factor 2m = evidence gives 2 factors

  • Depreciation -> foreign goods included imported inputs, become more expensive in pounds -> AS falls -> movement along AD -> fall GDP 

  • This would offset some rise in real GDP, leading to slowed economic growth in UK

Explain one reason why the data in Table 1 may not support the above expected relationship

• EG could have been accompanied by structural change (digital transformation) 

• When restructuring occurs, a mismatch of skills possessed by labour and skills demanded by firms occurs -> structural unemployment

• Rise in structural unemployment > fall in demand-deficient unemployment -> overall increase in unemployment rate

In view of the market structure of the UK supermarket industry, discuss why non-price competition strategies are preferred over price competition strategies (R1)

• R1: Why non-price competition is awesome 

  • Decrease in profit regardless of whether they raise or decrease price 

  • PED < 1 -> decrease price -> profit fall 

  • PED > 1 -> raise price -> profit fall 

  • Price rigidity -> no incentive for firms to raise or lower price to see rise in TR

In view of the market structure of the UK supermarket industry, discuss why non-price competition strategies are preferred over price competition strategies (R2)

• R2: Why price competition is not awesome 

  • Increase profit + specific strategy as example 

  • Much more difficult to replicate than simple decrease in price

  • Firms need to accurately predict and adapt to consumer tastes and preferences

  • Only firms with a firm grasp of their clientele and can execute the strategies well are able to increase their profits

In view of the market structure of the UK supermarket industry, discuss why non-price competition strategies are preferred over price competition strategies (Eval)

• Main motivation for choosing non-price competition over price competition is because price competition presents itself as a lose-lose situation for all firms

• Price wars can be very costly for all producers involved

Explain why shortage persist in this market 

• Adjustment time lag to build housing -> DD persistently outstrips SS 

• HDB setting the ‘wrong’ price that is below market equilibrium -> shortage persists

• Price did not rise quickly enough to clear the market

To what extent is the coexistence of small cosmetic firms with large cosmetic firms a result of the rise of social media? (R1 + meaning of coexistence)

Coexistence: Coexistence refers to the ability to earn at least normal profits when both large and small cosmetic firms can operate alongside each other.

• R1: How social media reduces BOE 

  • Marketing EOS no more -> MES over larger output + large firms no cost advantage

To what extent is the coexistence of small cosmetic firms with large cosmetic firms a result of the rise of social media? (R2)

• R2: Niche products also both firms to earn revenue 

  • Market segmentation: Varying tastes and preferences leading to demand for different types of cosmetic products in the industry

  • Large firms can focus on mass produced items like generic make-up products -> capturing consumer demand with cosmetic products that tend to be more price elastic in demand->  ability to increase TR by charging lower prices

  • While small firms concentrate on providing customized services and products -> more inelastic due to the lower degree of substitutability ->  ability to increase TR by charging higher prices.

To what extent is the coexistence of small cosmetic firms with large cosmetic firms a result of the rise of social media? (Eval)

Eval: Consumers of cosmetics may ultimately prioritize the quality and effectiveness of cosmetic products -> impact of social media marketing efforts on revenue for small firms may be less significant than the product's actual performance which will impact the firm’s ability to make normal profits in the long run and coexist with big firms

Explain one reason why NOG might innovate in order to maintain their profits

• HOW to maintain profits 

• Oligopoly firm (with extract evidence) can use excess profits to innovate 

• Process innovation helps to improve their productivity through…reduce MC/AC 

Low labour productivity affecting AS 

• Vietnam’s low labour productivity growth -> increases in AD can bring the economy to Yf as productive capacity is increasing at a slow rate

• Further increases in AD will only cause GPL to increase and not have any impact on real GDP

• Low productivity growth increases UCOP if wage rates rise faster than labour productivity -> AS fall

Why does UK experience slowed EG 

• Why GDP increase factor 2m = evidence gives 2 factors for X

• Multiplier 2m 

• Why GDP decrease factor 2m = evidence gives 2 factors

  • Depreciation -> foreign goods included imported inputs, become more expensive in pounds -> AS falls -> movement along AD -> fall GDP 

• This would offset some rise in real GDP, leading to slowed economic growth in UK

Explain one reason why the data in Table 1 may not support the above expected relationship

• EG could have been accompanied by structural change (digital transformation) 

• When restructuring occurs, a mismatch of skills possessed by labour and skills demanded by firms occurs -> structural unemployment

• Rise in structural unemployment > fall in demand-deficient unemployment -> overall increase in unemployment rate
  

Discuss whether India should continue to pursue a “growth at all cost” strategy (check ans sheet) 

• Yes: mSOL ONLY 

• No: unsustainable growth + uninclusive growth (the table gave data! PM2.5 and GINI)

Explain 2 reasons why incumbent food delivery operators may NOT be producing at their profit-maximising output level = alternative objectives

WHY seek entry deterrence -> alternative objective of entry deterrence and conduct limit pricing by lowering their price and raising their output level beyond the profit- maximising level

Discuss how increase in governments’ spending on infrastructure may have different impacts on the real national income of Singapore and India = FACTORS (multiplier, spare capacity etc.) 

1. Explain how it affects exchange rate of India = in perspective of INDIA 

• Eg. US IR increase -> hot money outflow into US from India -> SS rupee increase -> depreciation
  

2. Crude oil price increase -> oil M increases as PED inelastic -> sell more rupee to buy USD to pay for oil imports -> SS rupee increase -> depreciation