Updated on Oct 2014

Hong Kong Diploma of Secondary Education Examination

Economics

Sample Data Response Question

In2019 HKDSE Examination, a data response question (DRQ) will be introduced in Paper 2, Section B. The following sample questionwasfirst introduced during the New Academic Structure Medium-term Review in 2014. An additional sample question wasdrafted in September 2016 for reference of teachers and students in preparation for the 2019 Exam. The marks of the DRQ may vary across years but the total number of marks in each section in Paper 2 is fixed.

The following table outlines the various components of the public assessment of Economics in 2019 HKDSE:

Component / Weighting / Duration
Paper1 / Multiple-choice questions will be set on the compulsory part of the curriculum. All questions are compulsory. / 30%
(45marks) / 1 hour
Paper2 / Section A: Short questions will be set on the compulsory part of the curriculum. All questions are compulsory. / 26%
(44 marks) / 2 hours 30 minutes
Section B: Structured/essay-type /data response questions will be set on the compulsory part of the curriculum. All questions are compulsory. / 35%
(60 marks)
Section C: Structured/essay-type questionswill be seton the elective parts of the curriculum. Candidates are only required to attempt the questions from one of the two elective parts. / 9%
(16 marks)
Total for paper 2 / 70%
(120 marks)

Sample question (26 marks) (effective from 2019 HKDSE onward)

Recommended time: 45 minutes

The housing problem has long become one of the most concerned socio-economic problems in Hong Kong. The drastic increase in property and rental prices is the major concern.

Source A:Extracted from the policy address 2014 about housing

… The public has also reached a consensus gradually on the measures proposed by the government to increase land supply. The Government has adopted a two-legged approach to increasing the supply, while at the same time reducing external, investment and speculative demands…

Source B: The following table summarizes theadditional stamp duties imposed on the transaction of residential flats.

Type / People liable / Additional tax charged / Date of implementation
Special stamp duty (SSD) / Any individual who transfers any residential flat within 36 months after purchase / (i) / 20% of the value of the flat if the property has been held for 6 months or less;
(ii) / 15% if the property has been held for more than six months but for 12 months or less;
(iii) / 10% if the property has been held for more than 12 months but for 36 months or less.
/ 2012 October 27
Buyer’s stamp duty
(BSD) / The buyer who is not a Hong Kong permanent resident / 15 % of the value of the flat / 2012 October 27
Double stamp duty (DSD) / The buyer (*except Hong Kong residents who do not own any residential flats at the time of purchase) / (i) / For the flat valued below HKD 2 million, the stamp duty is raised from HKD 200 to $1.5% of the value of the flat.
(ii) / For other flats, the rate of stamp duties is doubled.
/ 2013 February 23

Source C: A diagram showing the change of CCI* (Centa-City Index), an index reflecting the overall price change for second-hand residential flats


Source D: A quick survey on views about the huge street protest of over 20000 property agents against the additional stamp duties

a)With reference to Source A, use a supply-demand diagram to illustrate the government’s approach to reducing the prices of residential flats. (3 marks)

b)With reference to Source B, explain how would buyer’s stamp duty (BSD) affect “externaldemand” for residential flats. (3 marks)

c)A property agent claimed, “the special stamp duty (SSD) reduces both the demand for and the supply of the second-hand residential flats.” With reference to Source B, give reasons to support the above claim. (4 marks)

d)Use a supply-demand diagram to illustrate how the additional stamp duties would affect the price of second-hand residential flats as shown in Source C. (3 marks)

e)“The SSD will NOTresult in a drop in Hong Kong’s GDP.” With reference to source D, determine whether the statement is true or not and justify your answer. (3 marks)

f)Explain whether the introduction of additional stamp duties would necessarily increase the revenue of stamp duties. (2 marks)

g)With reference to the sources and your own knowledge, discuss whether the government should continue the policies mentioned in the sources to stablize the price of residential flats.(8 marks)

Suggested answer:

a)- D shifts to the left (1 mark)

-S shifts to the right (1 mark)

-Correct position of original P and new P (1 mark)

b)BSD increases the cost of buying flat (1 mark) for foreigners (1 mark) so the “external demand” for residential flats drops (1 mark).

c)Reason for reducing demand: SSD reduces the potential capital gain for property investors/ increase the risk of capital loss/ short term investors (speculators) will be switching away from buying residential flat. (2 marks)

Reason for reducing supply: some flat owners are less willing to put their flats for sale as once they buy a new flat, the newly purchased flat will be subjected to SSD. (2 marks)

d)D shifts to the left (1 mark), S shifts to the left (1 marks), P does not change much. (1 mark)

e)False, (1 marks) as the value added of the property agencies and other property related business will drop (2 marks).

f)The revenue may not increase (1 mark) as the property transaction will drop after the imposition of additional stamp duties (1 mark).

g)It should be aware that candidates may take a different approach, which, if appropriate, should be rewarded.

7-8 marks:

Shows an accurate understanding of economic concepts and theories.

Presents an in-depth analysis/application with reference to the source/data.

Supports synthesis/evaluation by appropriate theories and evidence.

Uses language that expresses ideas clearly and fluently.

Presents well-organised and coherent arguments.

4-6 marks:

Shows a fair understanding of economic concepts and theories.

Presents an analysis/application in moderate level with reference to the source/data.

Attempts to evaluate/synthase with some support of theories and evidence.

Uses language that conveys a clear message.

Presents arguments in an organised way.

1-3 marks

Shows a weak understanding of economic concepts and theories.

Presents little analysis/application.

Shows limited language ability.

Presents inconsistent arguments.

0 marks

The work by a candidate fails to meet the minimum requirement of the assessment standard.

Answers may include the following:

The analysis of the overall housing policy, such as

The two-legged approach by the government can address the housing problem both in short term (by reducing the demand of flats) and long term (by increasing the supply of flat).

Government should build more public housing/increase the supply of land for residential flat instead of disturbing the private housing market.

Reducing demand by stamp duties has more instant impact on the flat price than rising supply, which is constrained by elasticity of supply (institutional/political factors)

Increasing stamp duties is not effective to reduce the flat prices (refer to source C)

The analysis of individual policies affecting housing demand/supply, such as

Government uses the DSD to reduce the “speculative demand” for residential flat.

BSD is imposed to curb the increasing demand for residential flat from non-residents by increasing their cost of buying.

SSD is for discouraging the residents from buying more than one flat, thus reducing the “investment demand”.

Increasing DSD reduces both the demand for and supply of residential flats, thus it may not result in a drop in price.

The effects of the policies on different stakeholders, such as

Increasing flat price (caused by the increasing demand) may increase the wealth of the flat-holders and induce consumption and GDP growth so it is debatable if government should intervene in the market.

The quantity transacted in property market is largely reduced and GDP will be adversely affected as the valued added of property related industry will drop.

The property agents may suffer a lower income.

Asset-inflation will worsen the income inequality.

Any reasonable discussion that makes supported judgments/conclusions concerning the possible effects on the economy/ different stakeholders.

Students are expected to draw a conclusion supported by their arguments made in discussion.

(Note: Students may use some answers from part (a) to (f) in answering (g) as long as their arguments are organized and logically consistent with their stand.)

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