The strength of the Malaysian ringgit could also continue to limit exports of palm oil. Indonesia, the world's largest producer of palm oil, will keep its export tax for palm oil at 9%, while Malaysia has decided to keep a more competitive export duty of 4.5%.(a) Analyse, with the aid of diagrams, the impact of an increase in demand for palm oil on the markets for palm oil and palm kernel cake. [5 marks](b) Relate how could the concept of elasticity be used to measure the economic relationship between palm oil and soya oil and what would the measurement show? [3 marks](c) Discuss one demand factor that might explain the change shown in Table 1 in the value of Malaysia's palm oil exports in 2012 compared with 2009. [6 marks](d) Discuss two policies that the Malaysian government might adopt to reduce the problems associated with a falling price of palm oil and justify which of the two policies you would recommend. [6 marks]

Palm Oil Production Palm oil is used in the production of many goods, including cooking oil, margarine, ice cream, soap, shampoo and more recently fuel for vehicles. It competes with other vegetable oils, made from soya beans, rapeseed, sunowers and groundnuts. While palm oil production takes up 6%of the land used for vegetable oil plants across the world, it produces 38% of the total output of vegetable oil globally and accounts for 60% of world exports of vegetable oil. Palm oil is produced from the esh of the palm fruit and, at the same time, palm kernel oil is produced from the kernel or seed. After the extraction of the oils the waste is turned into palm kernel cake that is then sold for animal feed. In Malaysia the palm oil industry employs 570 000 people of which 405 000 are engaged in cultivation. nunwuamtnmmmmm M wuulyt Malaysian palm oil production could hit a new record high by the end of 2013. Palm oil stocks rose to a peak in September 2013 as strong seasonal output outweighed rising export demand, lowering prices that had already fallen by about 5% this year. Forecasts of growing Southeast Asian output alongside rising supply of competing global oilseeds dragged the price of palm oil down by 3.5% in September. Prices may fall further if the soya crop in South America is as good as expected. A lower price of soya beans for crushing into rival soya oil could take demand away from palm oil