2020 H2 Economics Paper 1 Case Study 1: Suggested Answers
The case study examines anti-competitive behaviour in Singapore, drawing on the CCCS infringement decisions against fresh chicken distributors and against Grab and Uber to test measures of competition, surplus and collusion, market structure, and whether fines are the best remedy.
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A two mark question asking for one measure economists use to assess the level of competition in an industry.
Four firm concentration ratio. This ratio represents the percentage of total industry sales accounted for by the four largest firms. A high ratio indicates a higher concentration and, consequently, less competition.
Alternatively, the market share held by the largest firm in the industry, measured as the percentage of total sales by this firm, is also used. A larger market share held by a single firm suggests lower competition, as it indicates a dominant market position.
Name one valid measure and explain how a higher value of it signals less competition.
A four mark question, using Table 1, asking for two possible changes in the market for pork that could account for the difference in pork consumption in 2018 compared to 2007.
Pork consumption rose from 114 thousand tons in 2007 to 134 thousand tons in 2018, an increase of about 17.5 per cent. Two possible changes in the market can account for this.
A rise in incomes. Higher incomes raise the purchasing power of consumers, which raises the demand for a normal good like pork. The demand curve shifts rightward from DD0 to DD1 along an upward sloping supply curve, so the consumption of pork rises from Q0 to Q1.
A growth in the number of pork sellers. An increase in the number of sellers in the market raises the supply of pork. The supply curve shifts rightward from SS0 to SS1 along a downward sloping demand curve, so the consumption of pork rises from Q0 to Q1.
Either factor may be substituted with another plausible change, such as a shift in tastes and preferences towards pork (raising demand) or an advance in agricultural technology that lowers costs (raising supply). Students should select any two.
Two distinct market changes, each linked through a demand or supply shift to the rise in equilibrium quantity of pork.
Tests: Demand and supply analysis
A two mark definition question asking what is meant by 'producer surplus' and 'consumer surplus'.
Consumer surplus is the difference between the price that the consumer is willing to pay and the price that the consumer actually pays.
Producer surplus is the difference between the price that the producer is willing to sell at and the price that the producer actually sells at.
Both terms defined as the gap between willingness and the actual price paid or received.
Tests: Demand and supply analysis
A four mark question, using a diagram, asking how collusion that restricts supply and raises price is likely to have affected producer surplus and consumer surplus in the market for fresh chicken products.
In a competitive market without collusion, firms independently set prices based on their costs and demand. At the competitive equilibrium where MC meets the demand curve at output Q0, consumer surplus (the area above price and below demand) and producer surplus (the area below price and above MC) are both maximised.
When the firms collude, they behave like a monopoly, restricting output to where MC equals MR and raising the price read off the demand curve above that output. As price rises above the competitive level and quantity falls, consumer surplus is reduced, as consumers now pay a higher price, while producer surplus rises, as producers gain from the higher price.
The key consequence is a deadweight loss (the welfare triangle between the restricted and competitive outputs), which represents the loss of welfare from the inefficient allocation of resources. This is the overall societal cost of collusion: reduced consumer welfare and a loss of allocative efficiency.
Contrast competitive and collusive outputs, state the direction of change for each surplus, and identify the deadweight welfare loss.
An eight mark discussion, using Extracts 3 and 4, of which market structure best describes the characteristics of the ride-hailing market in Singapore.
- Define the two candidate market structures and their distinguishing characteristics.
- Set out the pre-merger evidence and decide which structure it points to, naming the features.
- Set out the post-merger evidence and decide which structure it points to, naming the features.
- Reach a judgment on which structure best describes the market, framing it as a shift over time.
This part is gated. The full model answer matching the extract evidence to each market structure and the 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.
A ten mark discussion of whether the fines imposed by the CCCS are the best way to improve outcomes for consumers in both the chicken product market and the ride-hailing market.
- Frame fines as a deterrent and set up the consumer welfare objective in both markets.
- Build the case for fines through the deterrent mechanism, citing the evidence from each market.
- Build the counter case around what fines fail to do for consumers who were already harmed.
- Introduce at least one alternative remedy and weigh its feasibility against the fines.
- Reach an evaluative judgment, arguing for a combined approach rather than fines alone.
This part is gated. The full model answer weighing fines against alternative remedies and the conclusion, 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.
Questions students ask
Where can I get the full worked answers to the 2020 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 2020 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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