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					                China’s selling Chop Sticks to Japan
From the noodle bars of Hiroshima to the sushi restaurants of Tokyo, a sharp Chinese tax
increase on disposable chopsticks is starting to bite. The use of disposable chopsticks surged in
the 1970s and 1980s. They were a symbol of national growth. Even during the tougher times of
the 1990s, the Japanese continued to throw away their chopsticks after using them only once.
Recession might have curbed the demand for other luxuries, but throwaway chopsticks have, until
now, experienced increasing demand.

About 93 per cent of those 25 billion pairs of chopsticks are produced in China, and the
Chinese government, worried about deforestation, has imposed a heavy tax on chopstick exports.

China is reportedly considering an end to all chopstick exports in 2008. Where Japan‟s
restaurants and convenience stores used to be able to source the chopsticks at about 0.5 pence
each, they are now approaching twice that.

                             With the economics of wooden chopsticks becoming more difficult to
                             sustain, and other sources such as Vietnam unable to match the old
                             prices, Japan is turning to plastic chopsticks.

                             Kokusai Kako, the Japanese company that makes plastic chopsticks,
                             has doubled production to two million pairs a year, and is anticipating
                             an increase in sales in future years.

                             Restaurant chains are looking for other ways to satisfy the
                             disposable chopstick addiction. Chopsticks made of domestically-
                             grown bamboo, and even recycled paper, are among the options
                             being considered.

                             Source: adapted from “Chopstick tussle adds bite to Orient‟s
                             diplomatic spat” by Leo Lewis, The Times, 3 June 2006



                             QUESTIONS
1. Using a demand and supply diagram, explain why the price of chopsticks has nearly doubled
   in recent years (Extract 1, Paragraph 4). (7)

2. Using the information provided, discuss the degree to which chopsticks may be considered a
   normal good. (4)

3. What can be learnt about the cross price elasticity between wooden chopstick and plastic
   ones? (5)

4. Discuss the likely impact of rising chopstick prices on restaurant owners in Japan. (10)

5. Assess the external consequences of introducing recycled chopsticks. (10)

6. Evaluate the effectiveness of the Chinese government policies to reduce deforestation. (12)

Total Marks Available = 48



From Jan 2008 paper
 Mark Scheme

 1. Using a demand and supply diagram, explain why the price of chopsticks has nearly
    doubled in recent years (Extract 1, Paragraph 4). (7)

DIAGRAM 4 marks
D & S curves with original equilibrium (1 mark)
Inward shift in S ( 1 mark)
New equilibrium price (increase) & qty (fallen) (1 mark)
Label the TAX size or shade the tax welfare loss (1 mark)

Explanation 3 marks
Identify that the tax will effect S because it increases the cost of production (1 mark)
The producers will pass this on as a higher price to consumers
Producers will not be able to make as much with increased costs
Consumers will not be willing to buy as many chopsticks
Consumer surplus, income substitution effect

 2. Using the information provided, discuss the degree to which chopsticks may be
    considered a normal good. (4)

   Clear definition of normal good (upto 2 marks) – the more income a consumer has, the more
   they will buy of normal goods and a fall in income will cause a fall in demand.

   Are chopsticks normal or luxuries (reference to case study)?


 3. What can be learnt about the cross price elasticity between wooden chopstick and
    plastic ones? (5)

   Clear definition of CPeD or formula (upto 2 mark)

   Written or numerical example of an increase in price of wooden chopsticks will increase the
   demand of plastic chopsticks (1 mark)

   They are close substitutes for each other – will have a positive(1 mark) and elastic (1 mark)
   elasticity number

 4. Discuss the likely impact of rising chopstick prices on restaurant owners in Japan. (10)

 They will have three choices to decide on
 a) Keep their traditional wooden chopsticks and face higher costs – so can either have a fall in
 profits (due to higher costs) or increase food prices to customers – depends on the PeD for food.
 b) substitute to plastic chopsticks – which might effect their level of demand – tastes!
 c) look at alternative „chopstick‟ options – force restaurant owners to

 5. Assess the external consequences of introducing recycled chopsticks. (10)

 External costs of production – will there be more problems through the production of alternative
 chopsticks compared to the deforestation option for wooden chopsticks? Pollution, noise and
 transportation issues.

 External costs of consumption – of recycled chopsticks – I don‟t think so…EVALUATION POINT
 being that there will be more EXTERNAL BENEFITS!


 From Jan 2008 paper
6. Evaluate the effectiveness of the Chinese government policies to reduce deforestation.
     (12)
Political failure…..
Self interest – for political gain
Is it a short term quick fix?
Could it create a black market?
What problems will it cause if they ban exports of wooden chopsticks on the whole economy?
Is the tax & ban based on imperfect information – to what extent does chopsticks cause the
deforestation – or is this caused by other issues?
What are the costs of the tax policy/ alternative chopstick options?


Total Marks Available = 48




From Jan 2008 paper

				
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