2017 H2 Economics Paper 1 Case Study 1: Suggested Answers
The case study looks at the Westernisation of the Japanese diet and the market for beef imports into Japan, drawing on it to test negative externalities, income and price elasticities, cross elasticity of demand, food self-sufficiency and free trade agreements such as the TPP.
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A two mark question asking, with reference to Extract 1, to identify and explain one negative externality arising from the Westernisation of the Japanese diet.
A negative externality is a cost imposed on third parties who are not directly involved in the consumption or production of a good or service. The shift towards a more meat heavy diet in Japan raises the incidence of obesity, which in turn causes health problems such as heart disease and diabetes.
These health problems lower the productivity of the labour force and raise the public cost of treatment, costs that are not borne by the consumers or producers of these animal products. The negative externality is therefore the burden of deteriorating public health that falls on wider society.
Define negative externality and identify a specific third party cost (the public health burden) evidenced from Extract 1.
Tests: Externalities
A two mark question asking, with reference to Table 1, to explain which meat product is considered more of a necessity by consumers in Japan.
Poultry is considered more of a necessity. It has the lowest income elasticity of demand of the three meats in Table 1, at 0.02.
A low positive income elasticity of demand means the quantity demanded responds very little to a change in income, which is the defining feature of a necessity. Demand for poultry stays relatively stable as incomes change, unlike beef which has a higher value of 0.76.
Identify poultry, cite its lowest income elasticity value, and link a low income elasticity to necessity behaviour.
Tests: YED and XED
A question asking what would happen to total spending by Japanese consumers on imported chilled beef from (i) Australia and (ii) the rest of the world if the price of imported chilled beef rises, using the price elasticity values given.
(i) Australia. Total spending is likely to increase. The price elasticity of demand for Australian chilled beef is 0.92, which is less than one in magnitude, so demand is price inelastic. A price rise leads to a less than proportionate fall in quantity demanded, so total spending rises.
(ii) Rest of the world. Total spending is likely to decrease. The price elasticity of demand for chilled beef from the rest of the world is 1.18, which is greater than one in magnitude, so demand is price elastic. A price rise leads to a more than proportionate fall in quantity demanded, so total spending falls.
Classify each elasticity as inelastic or elastic and link the value correctly to the direction of total spending.
Tests: PED and PES
A four mark question asking, using the information in Extract 2, to calculate and interpret the cross elasticity of demand in Japan between Australian chilled beef and (i) US chilled beef and (ii) chilled beef from the rest of the world.
Cross elasticity of demand is the percentage change in quantity demanded of one good divided by the percentage change in the price of another good. Extract 2 states that a 1 per cent rise in the price of Australian chilled beef raises imports of US chilled beef by 0.74 per cent and imports of chilled beef from the rest of the world by 1.34 per cent.
(i) Australian and US chilled beef. The cross elasticity is 0.74 divided by 1, which is positive 0.74. The positive sign shows the two are substitutes: a rise in the price of Australian beef raises demand for US beef.
(ii) Australian beef and beef from the rest of the world. The cross elasticity is 1.34 divided by 1, which is positive 1.34. This larger positive value shows that beef from the rest of the world is a closer substitute for Australian beef than US beef is.
State the formula, compute both values from the extract, and interpret the sign as substitutes and the relative size as closeness of substitution.
Tests: YED and XED
An eight mark discussion of the ways in which Japan might raise its self-sufficiency in food, and whether this aim is achievable for Japan.
- Frame what raising self-sufficiency requires, anchored to Japan's current low self-sufficiency rate, and set up the two broad routes of boosting supply or managing demand.
- Develop a first supply side policy using a market diagram in words, then weigh its main cost.
- Develop a second supply side policy through a different cost lowering channel.
- Turn to feasibility: weigh the supply response against the path of demand for food.
- Bring in the trade agreement dimension and how cheaper imported substitutes work against the aim.
- Reach an evaluative judgment on whether full self-sufficiency is achievable, and over what horizon.
This part is gated. The full model answer with the worked market diagrams and the evaluative judgment, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
Tests: Government intervention in markets, Demand and supply analysis
A ten mark question asking, in the light of the opposition to the TPP in the United States, to assess whether the gains from free trade agreements outweigh the losses.
- Set up the gains side, identifying the channels through which a free trade agreement can raise output and welfare.
- Develop the demand side gain and the supply side gain, each with a diagram described in words.
- Add a further gain that draws investment into member economies.
- Build the losses side around displaced industries, distribution and the external balance.
- Weigh the gains against the losses, referencing the specific US opposition in the case.
- Reach an evaluative judgment on whether the gains outweigh the losses, and on what it is contingent.
This part is gated. The full model answer with the worked ad and as analysis and the evaluation, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
Tests: Protectionism, Comparative advantage
Questions students ask
Where can I get the full worked answers to the 2017 H2 Economics paper 1 case study 1?
The full model answers, with the diagrams and the higher mark evaluation, are in the ETG TYS Answers book published by SAP and sold at Popular, and are worked live in the TYS Crashcourse. Every ETG student also gets the AI TYS coach on our learning management system, which guides you through how to tackle every essay and every case study question from the last ten years.
Are these the official 2017 A Level Economics answers?
No. SEAB sets and marks the A Level paper. These are suggested answers by Mr Eugene Toh, author of the H1 and H2 A Level Economics TYS answer keys, published by SAP and sold at Popular.
How are these case study suggested answers structured?
The lower mark parts are answered in full. The higher mark parts are outlined here, with the full worked answers reserved for the ETG TYS Answers book and the TYS Crashcourse.
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