2016 H2 Economics Paper 2 Essay 2: Suggested Answers
How to use these essay answers. The responses below, including the part (a) answer, are structured guides to the requirements of the question, the content, analysis and evaluation a strong answer must cover, rather than full essay prose with a written introduction and conclusion. Use them to see what to include and how to build the argument, then write it up in your own continuous prose, adding your own introduction and conclusion.
This essay explains why a government intervenes in the provision of healthcare as a merit good, then asks how the opportunity cost of increased healthcare spending differs depending on whether individuals or the Singapore government finance it.
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Explain why a government intervenes in the provision of healthcare.
A government intervenes in healthcare because it is a merit good that the free market tends to underconsume, mainly because of positive externalities and imperfect information. Intervention aims to raise consumption towards the socially optimal level and improve welfare.
Positive externalities. When people consume healthcare they gain privately through better health, but society also gains, creating marginal external benefits. A healthier workforce raises national output, disease transmission falls, and the burden on hospitals during epidemics is lower. So the marginal social benefit exceeds the marginal private benefit. In a free market, individuals consume where MPB equals MPC at Qm, below the socially optimal Qs where MSB equals MSC. The resulting welfare loss justifies intervention through subsidies, public hospitals and insurance schemes. In Singapore the government subsidises public hospital care and funds schemes such as MediShield Life and CHAS to raise utilisation and protect citizens from catastrophic costs.
Imperfect information. People may not appreciate the long term benefits of preventive care such as screening and vaccination, or may underestimate the risks of neglecting their health. The perceived marginal private benefit then lies below the true benefit, so consumption falls short of the socially desirable level. The government corrects this through public health campaigns, mandatory vaccinations and reliable information. Singapore's Health Promotion Board runs campaigns on healthy living and regular check ups, which help correct the information failure and encourage earlier detection of disease.
Explain underconsumption from positive externalities (MSB above MPB) and from imperfect information, each with a Singapore example.
Discuss how the opportunity cost of increased healthcare expenditure differs, depending on whether it is financed by individuals or the Singapore government.
- Define opportunity cost and frame the question around who bears the cost of extra healthcare spending.
- Set out the trade offs when individuals finance their own care, including the efficiency argument and its equity drawback.
- Set out the trade offs when the government finances care, including the forgone public spending and the moral hazard concern.
- Bring in the wider effects of higher taxation on disposable income, investment and growth.
- Weigh the two financing methods on the scale and source of their opportunity cost.
- Reach an evaluative judgment, drawing on Singapore's mixed financing model.
This part is gated. The full model answer with the worked opportunity cost analysis and the evaluation, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
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Where can I get the full worked answers to the 2016 H2 Economics paper 2 essay 2?
The full model answers, with the diagrams and the higher mark evaluation, are in the ETG TYS Answers book published by SAP and sold at Popular, and are worked live in the TYS Crashcourse. Every ETG student also gets the AI TYS coach on our learning management system, which guides you through how to tackle every essay and every case study question from the last ten years.
Are these the official 2016 A Level Economics answers?
No. SEAB sets and marks the A Level paper. These are suggested answers by Mr Eugene Toh, author of the H1 and H2 A Level Economics TYS answer keys, published by SAP and sold at Popular.
How should I use these suggested essay answers?
Treat them as a guide to the requirements of the question, the content, analysis and evaluation a strong answer must cover, not as full essay prose. Write the essay up in your own continuous prose, with your own introduction and conclusion.
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