IB DIPLOMA PROGRAMME PROGRAMME DU DIPLÔME DU BI PROGRAMA DEL DIPLOMA DEL BI
ECONOMICS HIGHER LEVEL PAPER 3 Tuesday 9 May 2006 (morning)
INSTRUCTIONS TO CANDIDATES Do not open this examination paper until instructed to do so. Answer three questions. Use fully labelled diagrams and real-world examples where appropriate.
–2– Answer three questions. Each question is worth [20 marks]. 1. Study the extract below and answer the questions that follow.
Drug companies bring hope for HIV/AIDS sufferers “Industry puts the average cost of developing a new drug at around ...view middle of the document...
Thankfully, the chance of this problem happening was reduced last week, when the South African government announced a serious, well-funded and long-term plan for treating its sick citizens with HIV/AIDS drugs. If the plan is competently implemented, HIV positive parents should survive long enough to put their children through school, and South Africa should pull back from the brink of catastrophe.
[Source: adapted from Lancet 7 April 2001, Issue 9262 and Time 2 February 2004 Vol 163 Issue 5, Science 17 March 2000, Vol 287, Issue 5460, Lancet, 7 April 2001, Vol 357, Issue 9262, The Economist 29 November 2003 p. 11, Time 2 February 2004, Vol 163 Issue 5 p. 44]
(This question continues on the following page)
–3– (Question 1 continued) (a) Define the following terms indicated in bold in the text: (i) (ii) (b) price discrimination (paragraph ) multinational corporations (paragraph ).
[2 marks] [2 marks]
Explain, using the text and your knowledge of economics, the conditions necessary for pharmaceutical companies to successfully employ “differential pricing schemes” (paragraph ). Using a production possibility curve diagram, explain the impact on economic growth of any delay in dealing with the HIV/AIDS epidemic in countries such as South Africa. Using information from the text and your knowledge of economics, evaluate the role of a multinational corporation in assisting the economic development of a less developed economy.
Study the extract and table below and answer the questions that follow.
Singapore inflation creeps upward Prices have risen in Singapore for the first time in five months, which is an encouraging sign that the island state could avoid the threat of deflation. According to the Singapore Department of Statistics, increases in the cost of food, clothing and housing has resulted in the consumer price index rising by 0.2 % in November, the first upward movement since June. Economists have predicted further falls in the inflation rate, and still believe weak consumer confidence means this current inflationary increase will not last long. The increase in inflation is welcome as the Singapore government last week warned that the state of the world economy means that Singapore’s economic growth would be at a low 2.0 to 2.5 %, and the unemployment rate would still continue to increase. While these price rises may not look good for consumers, the low level of economic growth has put policy makers in fear of deflation. There already is excess productive capacity in Singapore’s economy, which is dependent on trade. The disappointing state of the American (US) economy will push Singapore into the slump phase of a business/trade cycle again, especially as trade has fallen 30 % from the previous year. In Singapore, the price-conscious...