RAFFLES INSTITUTION

2013 YEAR 5 Promotion Examination

Higher 1

ECONOMICS 8819
Case Study / Essay Questions 26 September 2013

1 hour 55 minutes

Additional Materials: Answer Paper

READ THESE INSTRUCTIONS FIRST

Write your name, index number and civics class on all the work you hand in.
Write in dark blue or black pen on both sides of the paper.
You may use a soft pencil for diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.

Answer Question 1 from Section A and one question from Section B.

At the end of the examination, fasten all your work securely together.
Detach this cover page and secure it in front of your work.
The number of marks is given in brackets [ ] at the end of each question or part question.

Section Question Marks

Name: __________________________
A 1 /30
Civics Class: _____________________
_____________________
Economics Tutor: ________________ B /25
(write question attempted)

This document consists of 6 printed pages and 2 blank pages.

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Section A

Question 1

Figure 1: Price of a bottle of table wine in UK, 1996 -2011

Retail Price

Taxes

Cost of Production

Year
Source: HMRC, 'Alcohol Factsheet March 2012', in TAX & DUTY BULLETINS

Figure 2: Global Sales Volume

(millions of hectoliters)

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Figure 3: Impact of a minimum price on different groups of drinkers in UK

Extract 1: Little Snow, a New Challenger to the King of Beers

Without leaving home, an obscure Chinese beer is challenging Bud Light's position as the
world's top-selling brand of suds.

Market watchers say Snow Beer, the product of a joint venture between London-based
SABMiller and China Resources Enterprise Ltd., will overtake or has already overtaken
Anheuser-Busch Co.'s Bud Light in terms of consumption, depending on how the numbers
are crunched. China Resources said last week that the Snow brand's sales volume jumped
22% in the first half of this year compared with a year earlier, putting it on pace to unseat
Bud Light, which is consumed mostly in the slower-growing U.S. market.

Snow's production was less than one-tenth of its current level six years ago, when the
regional brewer started developing a now-extensive national distribution network and began
buying competing brewers in the fragmented Chinese market. That helped it tap China's
growing ranks of beer drinkers. "Success has largely been driven by the supply side," says
Ari Mervis, managing director for SABMiller's Asian and African operations.

But China's price-sensitive mass market produces thin profit margins compared with many
other countries. Chinese beer makers have profit margins of roughly $2 per hectoliter,
compared with $50 to $80 in Europe and the U.S. While Snow accounts for 30% of the
brewing giant's global sales volume, it contributes less than 5% to overall profits.

SABMiller and China Resources are now pushing a more upscale image and putting an
emphasis on quality to appeal to more-affluent consumers, a potentially big growth area that
both domestic and foreign brewers are chasing.

Higher-end offerings such as Snow Draft, Snow Super Premium are being promoted and a
beer marketed as "The Great Expedition," which is linked to an advertising campaign
focused on outdoor adventure sports such as whitewater rafting and mountaineering
targetting younger, higher-income customers. In addition, there are plans to update the look
of the product with smaller bottles similar to the kinds imported beers come in. "We are
moving from a supply-driven focus to more of a demand focus," says Mr. Mervis.
Source: Adapted from online.wsj.com

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Extract 2: Alcohol related Problems

The NHS bill for alcohol abuse is an estimated 2.7bn a year. The most recent figures show
hospital admissions linked to alcohol use have more than doubled in UK since 1995.

Alcohol was the main or secondary cause of 207,800 NHS admissions in 2006/7, compared
to 93,500 in 1995/96. The figures not only include hospital admissions for a specific alcohol-
related condition - such as liver disease, cancer, strokes and various heart diseases, but
also admissions where alcohol is a contributory factor - such as falls due to drunkenness. Of
hospital admissions in 2006/7 specifically due to an alcohol-related diagnosis, almost one in
10 were in under-18 year olds.

The number of alcohol-related deaths in UK has also doubled since the early 1990s to nearly
9,000 a year. The Office for National Statistics show there were 13.4 alcohol-related deaths
per 100,000 population in 2006 - up from 12.9 in 2005. The number is continuing to rise.
Source: Adapted from The Guardian, UK

Extract 3: Tougher line call

Sarah Matthews, of the British Liver Trust, said that a major part of the alcohol problem
facing UK was that alcohol was cheap, readily available and glamorised by celebrities.
According to the NHS Information Centre alcohol was 69% more affordable in 2007 than in
1980.

"The government desperately needs to take a tougher approach with the alcohol and retail
industry, clamping down on cheap promotions and irresponsible advertising, particularly
before the 9pm wartershed. Clear and effective health warnings on alcohol would also help
in raising awareness of the damage that alcohol can have.

Public Health Minister Dawn Primarolo said the government was launching a 10m
education campaign to raise awareness of alcohol and reviewing alcohol pricing and
promotion. It had also toughened enforcement of underage sales by retailers.

In line with the strong international evidence that tackling price as part of package of
measures, can help reduce alcohol consumption and related harm, plans for a minimum
price for alcohol are being discussed. Under the proposal, no drinks could be sold for less
than 50pence per unit of alcohol they contain. It would mean most bottles of wine could not
be sold for less than 4.50. The proposal will mostly affect cheap white ciders and value
spirits with high alcohol content which tend to be favoured by problem drinkers.

However, not everyone is in support of the plans. The Portman Group, set up by drink
manufacturers to promote sensible drinking, opposes the plan. Portman chief executive
David Poley said that such a plan would have marginal effect on harmful drinkers but force
hard working families to pay more for a drink.
Source: Adapted from various sources; www.scotland.gov.uk

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Questions

(a) Referring to Figure 1,

(i) Identify the trend in the retail price of table wine between 1996 to 2011. [2]

(ii) Explain a likely factor for the general trend observed above. Illustrate your
answer with an appropriate diagram. [4]

(b) (i) With reference to Figure 2, compare the trends in global sales volume
between Snow and Bud Light brands of beer. [2]

(ii) Comment on the usefulness of price elasticity of demand concept to the

managing director overseeing the operations for Snow Beer. [6]

(c) With the aid of relevant diagrams, explain why there is a need for the UK
government to intervene in the market for alcohol consumption. [8]

(d) To what extent will the policies implemented by the UK government be

effective in correcting this market failure? [8]

[30 marks]

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Section B

Answer one question from this section.

2. Technological advancement in home theatre systems has meant that watching movies at
home is as enjoyable as being in a cinema. Greater accessibility to cable television, with
its list of popular movies, has also increased the attractiveness of watching movies at
home.

(a) Explain with the help of examples the concepts of price elasticity of demand and price
elasticity of supply. [10]

(b) Examine the impact that technological advancement and greater accessibility to cable
television have on the market for home theatre systems and on the cinema market. [15]

3. Museums stimulate the mind and they nourish the soul. They foster a sense of belonging
with, and a pride in the community. Many countries thus subsidize entrance fees to
museums. Some even provide free entry.

(a) Explain whether museums should be considered public goods or merit goods. [10]

(b) Discuss the view that providing subsidies is the best policy to encourage more visits to
national museums. [15]

Copyright Acknowledgements:

Question 1 Extract 1 online.wsj.com

Question 1 Extract 2 The Guardian, UK
Question 1 Extract 3 www.scotland.gov.uk

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