Economy

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CONFIDENTIAL

BM/JUN 2012/ECO415

UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION

COURSE COURSE CODE EXAMINATION TIME

ECONOMICS EC0415 JUNE 2012 3 HOURS

INSTRUCTIONS TO CANDIDATES 1. This question paper consists of two (2) parts PART A (2 Questions) PART B (4 Questions)

Answer ALL questions from PART A and three (3) questions from PART B in the Answer Booklet. Start each answer on a new page. Do not bring any material into the examination room unless permission is given by the invigilator. Please check to make sure that this examination pack consists of: i) ii) the Question Paper an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
This examination paper consists of 4 printed pages
© Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

CONFIDENTIAL

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BM/JUN 2012/ECO415

PART A

QUESTION 1

Sarawak Plywood Prices Firm Up Again KUCHING: Sarawak's plywood prices firm up again as Japanese importers have continued buying for construction activities after March's earthquake and tsunami. Sarawak Timber Association Panel Producers' Committee chairman Wong Kai Song said new orders from Japanese plywood importers had continued to come in. According to Wong, the demand from Japan will continue to improve. He said the average plywood prices had dropped by 10 percent to between US$560 and US$580 per cubic metre in December compared with US$600 and US$630 per cubic metre in the third quarter of 2011. The price of plywood was at an average of US$400 per cubic metre. Most Japanese importers have stopped new orders or slowed down buying due to high inventories following aggressive buying in the previous months. Wong said there was adequate supply of raw materials to the plywood mills, which were hit by an acute shortage of logs due to low production earlier 2011 because of extremely wet weather. The shortage had disrupted the mills production. Adapted from The Star, December 12, 2011

a)

Using a diagram, explain how price is determined in a market based economy? (4 marks)

b)

Based on the statement in paragraph 1, state the factor that has caused the price of plywood to increase. Explain graphically the effect of this factor on the price and quantity of plywood. (5 marks) Elaborate three (3) other factors not mentioned in the article that would increase the demand for plywood. (6 marks)

c)

d)

Based on paragraph 3, what has caused the shortage of logs to produce plywood? (2 marks) What has happened to the price of plywood in the month of December 2011 ? Briefly explain the factor that has lead to the price change. (3 marks)

e)

© Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

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BM/JUN 2012/ECO415

QUESTION 2

January CPI Up 2.7% PETALING JAYA: Judging from how consumer prices moved early this year, the chances of interest rates being lowered seem impossible. January's inflation as measured by the consumer price index (CPI) rose 2.7% compared with a year ago due to rising cost of production spurred by increases in the prices of food and non-alcoholic beverages. Data from the Statistics Department showed prices of food and nonalcoholic beverages has increased by 0.3% in January. Whereas the prices of non-food items remained unchanged. Besides food and non-alcoholic beverages, other contributors to price increases on a year-to-year basis were housing, water, electricity, gas and other fuels (1.8%) and transport (1.6%). The prices of communication, as well as clothing and footwear, declined 0.6% and 0.5% respectively. Although economists have different opinions whether they would be an easier monetary policy adopted by Bank Negara this year, the possibility of a cut in the benchmark overnight policy rate (OPR), which stands at 3%, would now be unlikely. Manokaran Mottain told StarBiz that the rate of inflation was now lower than the OPR for the first time in 12 months. Adapted from The Star, February 23, 2012

a)...
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