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Economic & Public Affairs
Section A (1)
Fig.1 Private car
market
Quantity
As a result of the increase in the first registration tax, the supply curve of private cars will shift from S to S, as shown in Fig.1
representing a decrease in supply. This means that after the tax increase, the suppliers will be willingly to.
sell less quantity at each price than before
Fig. Private car.
Quantity
A decrease in the supply of private carS will increuse the price:
and reduce
from F to PBHO
quantity exchanged qygas.shown
the from: q
in Fig. 1, assuming that the demand for private cars was un- affected
(b) A rise in the price
of petrol due to the increase in petrol duty would cause
consumers
for leas. cars in the market. This is because petrol is complementary good. for cars tite
former is more expensive.the demand
for car. will
decrease
As shown in Fig. 2,
the demand curve for:
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private ears. will shift from D to D
representing a decrease in demand.
(c) Despite the increase in the first registra- tion tax on private: cars and in duty, on petrol, it is likely that in the long-term tuere vill still be an increase in the demand for private cars. The following four factors might. account for this:
It is expected that the real income of households will ine crease in the long run as economic
growth is in process. Therefore,
form.. gwill
eventually
increase.
It is obvious that private cara are an indispensable. transport in Hong Kong. Together with increasing population in the long run, it is likely that the demand for private cars will also in- crease.
As private cars are becoming popular, in
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Hong Kong, there will be more. people demanding. for them in future.
Ae more. new towns
are developed, the need for private cars emerges and in the long run the demand for privatë cars will increase.
is
a) Legal tender
defined as any form of payment accepted in law as means in" settling debts. Legal tender in Hong Kong is issued by the Hong Kong Government and the two note-issuing banks the Hongkong and Shanghai Banking Corporation and thie Chartered Bank,
(b) A gold certificate
cannot be a good "medium of exchange because it is not generally accepted by the public and the unit of its value is too large for common transactions.
A gold certificate can be a good store. of value, provided that the real
purchasing power of it in terms of its
日二月七年三八九一厝公年二十七國民華中有教僑華
price remains constant
or increases.
A gold certificate. cannot be a unit of account orga measurement of value. because the nominal value of it is loo large in value.
A gold certificate cannot be a good atandard for deferred. payments since the value of it -bot": stable and subject to the price fluctuations of hold..
(c) Banknotes are a
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3-841199
better form of money.
than gold because the former possesses the following properites:
The nominal value. of money varies
from: a small amount
to
母
great amount
they are: issued under the authorization of
the government.
they ar
Therefore, more generally accepted by the public than the gold.
The value of banknotes is not subject to the
price fluctuationa
of its value as a
commodity, However意 the value of gold
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is subject to the
price fluctuations
price
as a
commodity. Therefore, banknotes are better than gold in measuring the value of a
commodity, Also, AS banknotes are more ̇stable in value
than the gold, they can better fulfil the function of money as a standard for deferred payments.
(d) A commercial bank
provides the following services for an
import/export firm in Hong Kongs
providing loans for the purchase of machinery, plant, factory buildings, etc.;
issuing letters of credit" for local importing firms;
providing credit services for the bills of exchange; and
buying and selling
of foreign exchanges..
(TO BE CONTIN UGO)
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