2019 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 how a firm's total expenditure on its workforce changes when labour demand rises and labour supply falls, then asks whether changing the foreign worker levy is the most effective way for the Singapore government to address labour shortages.
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With the aid of a diagram, explain how this firm's total expenditure on its workforce will have changed as a result. [10]
Demand for labour comes from the labour requirements of firms producing goods and services, while the supply of labour is contributed by available workers in the market. A firm's total expenditure on its workforce is the price of labour multiplied by the quantity of labour.
Increase in demand for labour. The firm's demand for labour is derived from the demand for the goods and services that labour produces. Since demand for the firm's output is rising, the firm needs more labour to increase production, raising its demand for labour. This is shown by a rightward shift of the labour demand curve from DD0 to DD1.
Decrease in supply of labour. The retirement of a large number of baby boomer workers reduces the number of available workers, a fall in the supply of labour. This is shown by a leftward shift of the labour supply curve from SS0 to SS1.
Changes in total expenditure on the workforce. Given that the firm's demand for labour is inelastic, and assuming the supply of labour is also relatively inelastic in the short term, since training new workers takes time, the overall effect of these shifts is a significant increase in wages. The wage rate rises from P0 to P1 and the quantity of labour changes from Q0 to Q1. Total expenditure on labour, the product of the wage rate and the quantity of labour, will increase. Even if the quantity hired does not change much because of demand inelasticity, the higher wage rate raises total expenditure on the workforce. A labour market diagram with demand shifting right from DD0 to DD1 and supply shifting left from SS0 to SS1, giving a higher wage at P1, would illustrate this.
In summary, the firm will likely experience an increase in its total expenditure on labour due to the combined effects of an increased demand for labour and a decreased supply of labour.
Show both the rightward demand shift and leftward supply shift, then use the inelasticity to conclude that wages and total expenditure rise.
Discuss whether making changes to the foreign worker levy is likely to be the most effective way the Singapore government can address the labour shortages experienced by such firms. [15]
- Frame the foreign worker levy as one policy tool among several for addressing labour shortages.
- Explain the mechanism by which raising the levy works and its intended longer term objective.
- Distinguish the short run from the long run effects of the policy.
- Introduce at least one alternative approach and explain its mechanism.
- Weigh the levy against the alternatives, noting what its effectiveness depends on.
- Reach a supported judgment, framed as a balanced policy mix.
This part is gated. The full model answer with the worked labour market diagram and the policy 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.
Tests: Government intervention in markets, The Singapore economy
Questions students ask
Where can I get the full worked answers to the 2019 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 2019 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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