QUESTION 1

a. Mike, who just completed STPM, was chatting with Tim about his future. Mike told Tim he had 3 options. He could take a gap year, work full-time, or attend university. In the end, he decided to work full-time. Use the concept of opportunity cost to explain Mike's decision to work full-time.(1.5 marks)

b. Assume the number of soft drinks consumed in the pubs of Melbourne and the amount of rice eaten in Melbourne restaurants have both been increasing over the last 20 years. Use these two events to highlight the difference between the concepts of correlation and causation.(1 mark)

QUESTION 2

Ceteris paribus, explain with the use of demand and supply diagram(s) the effect of the following events on the market equilibrium price and quantity for electric cars in Malaysia.

a. A removal of tax on petrol-powered cars results in a large fall in the price of petrol-powered cars. (2.5 marks)

b. As a result of supply chain problems, the cost of producing electric cars increases substantially. (2.5 marks)

QUESTION 3

Assume, that due to the recent outbreak of bird flu in Malaysia, health officials engaged in the mass slaughter of chickens to control the spread, whilst at the same time, releasing an advertising campaign warning consumers against purchasing live chickens.

Use demand and supply analysis to graphically represent and explain the impact on the market equilibrium price and quantity for live chickens in Malaysia. (HINT: there are three possible outcomes to the changes in price and quantity).(4.5 marks)

QUESTION 4

a. Ceteris paribus, assume the Malaysian police have reduced the amount of illegal tobacco in the market with the arrest of a major illegal syndicate, which increased the price of illegal tobacco in the market.

If illegal tobacco has a price elasticity of demand of 1.5 (E_d = 1.5), interpret the elasticity value. What will be the impact on total revenue for illegal syndicates with the increase in the price of illegal tobacco in the market? Include a graph to support your discussion. (3 marks)

b. Assume illegal tobacco and vapes have a cross elasticity of 2 (E_c = 2). What is the relationship between the two goods? How will an increase in the price of illegal tobacco affect the demand for vapes? (2 marks)

QUESTION 5

Immunisation is considered a positive externality as it delivers a social benefit to society by reducing many communicable diseases such as chicken pox, polio, measles, and coronavirus.

a. Define positive externality and discuss one (1)measure the Malaysian government can implement to increase the demand for higher immunisation. (1 mark)

b. Explain, with the use of a demand and supply diagram, the impact of your suggested government measure on the market equilibrium price and quantity of immunisation in Malaysia. (2 marks)