Cambridge International AS & A Level

ECONOMICS 9708/23
Paper 2 AS Level Data Response and Essays May/June 2023

2 hours

You must answer on the enclosed answer booklet.

You will need: Answer booklet (enclosed)

INSTRUCTIONS
● Answer three questions in total:
Section A: answer Question 1.
Section B: answer one question.
Section C: answer one question.
● Follow the instructions on the front cover of the answer booklet. If you need additional answer paper,
ask the invigilator for a continuation booklet.
● You may use a calculator.
● You may answer with reference to any economy you have studied where relevant to the question.

INFORMATION
● The total mark for this paper is 60.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 4 pages.

DC (LK/CT) 321431/2
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 2

Section A

Answer all parts of Question 1.

1 Are doughnuts demerit goods?

Consumers love to eat doughnuts. In 2019, 10 billion of these deep-fried sugar-coated products
were consumed in the United States (US). Fig. 1.1 shows that the US market increased steadily
from 2011 to 2019. Doughnuts are widely available throughout the US. There are specialist shops
selling their branded products almost everywhere; local coffee shops invariably sell ‘hole in one’
doughnuts as a popular breakfast snack to tempt consumers on their way to work. The growing
number of shops selling doughnuts has been an important reason behind overall market growth.

8000

7000

6000

5000
Value of
doughnut sales 4000
(US$ million)
3000

2000

1000

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

* Data for 2021 is estimated

Source: ibisworld.com, March 2021

Fig. 1.1 Doughnut market size in the US, 2011 to 2021

The COVID-19 pandemic has had a varying impact on the US doughnut market. Despite having less
income, many consumers have continued to buy small luxuries such as doughnuts which remain
affordable and can provide some short-term relief from the stresses of the pandemic. Overall, sales of
doughnuts fell in 2020 and are forecast to remain below their 2019 peak into 2021. Reasons for this fall
in demand are that consumers are making fewer shopping trips and in cities, more people are working
from home and therefore not buying their daily coffee and doughnut snack.

In the United Kingdom (UK), more so than in the US, there are growing concerns about the increase
in sugar consumption amongst children. This increase comes from soft drinks, chocolate biscuits and
sweets (candy) as well as from jam-filled doughnuts, all of which are widely available in supermarkets
and local convenience stores. In 2021, it was estimated that a third of teenagers and two thirds of
adults in the UK were overweight. This has increased the pressure on the UK government to end
online advertising of a range of products including doughnuts. It has been estimated that viewing one
minute of advertising for products like doughnuts leads to a child consuming an additional 14.2 calories.
Moreover, a ban on advertising sugary foods would result in children consuming the equivalent of 62
million fewer doughnuts a year in the UK.

© UCLES 2023 9708/23/M/J/23

(a) Using the data in Fig. 1.1, calculate the percentage change in the value of sales of doughnuts
in the US from 2011 to 2019. [2]

(b) Explain one reason why the US market for doughnuts contracted in 2020. [2]

(c) Comment on whether the demand for doughnuts in the US is income elastic or income
inelastic. [2]

(d) Explain why a doughnut might be regarded as a demerit good. [2]

(e) With the help of a diagram, assess how the market for sugary foods in the UK might be
affected by a ban on online advertising. [6]

(f) Assess the likely effects on UK consumers and the UK government of a ban on online adverts
for sugary foods. [6]

Section B

Answer one question.

EITHER

2 (a) Explain, with the help of examples, the significance of the size and sign of the coefficient of
income elasticity of demand for the classification of a good and consider how confident you
are of this classification. [8]

(b) When the price of a product changes, it usually changes the consumer surplus in the market.

Assess how variations in price elasticity of demand for a product determine the extent of
changes in consumer surplus in a market. [12]

OR

3 (a) Explain why government intervention may be required to provide merit goods and consider
why such intervention may not always be successful. [8]

(b) Assess the effectiveness of government intervention through buffer stock schemes in
agricultural markets. [12]

© UCLES 2023 9708/23/M/J/23 [Turn over

Section C

Answer one question.

EITHER

4 (a) With the help of a circular flow of income diagram, explain how equilibrium is determined in
an open economy and consider whether a budget deficit or a trade deficit is more likely to
cause lasting disequilibrium. [8]

(b) Assess whether an increase in investment in new infrastructure projects will always have a
positive impact on the circular flow of income in an economy. [12]

OR

5 (a) Explain how monetary policy may be able to reduce the rate of inflation in an economy and
consider the likely success of this policy. [8]

(b) Assess how governments use macroeconomic intervention to achieve their macroeconomic
objectives. [12]

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