2019 H2 Economics Paper 2 Essay 3: 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 vaccinations against infectious diseases might be allocated undesirably if left to market forces, then asks whether a government subsidy is the best policy to ensure vaccinations are allocated desirably.
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Explain why vaccinations against infectious diseases, if left to market forces, might be allocated undesirably. [10]
Relying solely on market forces to allocate vaccinations can lead to suboptimal outcomes because of information failure and the presence of positive externalities, both of which influence individual decisions to vaccinate and so affect public health.
Information failure: perceived costs above actual costs. Misinformation, such as the debunked claim linking measles vaccination to autism, can lead people to believe vaccinations have severe side effects. Individuals then perceive the costs of vaccination to be higher than they actually are, leading to underconsumption as they avoid vaccines based on mistaken beliefs. When people base decisions on perceived rather than actual costs, the market quantity Qm falls short of the socially optimal level Qs. On a diagram, a perceived MPC lying above the actual MPC gives a market quantity Qm below Qs.
Information failure: actual benefits above perceived benefits. In poorer or rural areas with less access to education and health information, there may be little awareness of the benefits of vaccination. This causes individuals to underestimate the benefits and undervalue vaccines, leading again to underconsumption. On a diagram, a perceived MPB lying below the actual MPB gives a market quantity Qm below the social optimum Qs.
Positive externalities of vaccinations. Vaccinations benefit not only the recipient but also third parties, because vaccinated individuals are less likely to spread disease, contributing to public health and eventually herd immunity. Individuals weigh only their private costs and benefits and do not account for the marginal external benefit (MEB) their vaccination confers on society. The socially optimal level, where MSB equals MSC, is therefore higher than the privately chosen level where MPC equals MPB, so the free market underconsumes vaccinations. A positive externality diagram with MSB above MPB by the MEB shows Qm below Qs.
In conclusion, relying on market forces alone leads to underconsumption of vaccinations because of information failure and positive externalities, which is why interventions such as public education and government provision are needed.
Develop information failure on both the cost and benefit sides and the positive externality, each with the Qm versus Qs underconsumption result.
Tests: Externalities, Merit and demerit goods
Suppose the government decides to intervene in the market and subsidise vaccinations against infectious diseases. Discuss whether government subsidy is the best policy to ensure vaccinations are allocated desirably. [15]
- Explain the mechanism by which a subsidy raises consumption towards the social optimum.
- Identify the limitations of a subsidy, including the failures it does not address.
- Introduce alternative policies and explain the mechanism of each.
- Weigh the subsidy against the alternatives across the different causes of underconsumption.
- Reach a supported judgment on whether subsidy alone is the best policy.
This part is gated. The full model answer with the worked subsidy 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, Merit and demerit goods
Questions students ask
Where can I get the full worked answers to the 2019 H2 Economics paper 2 essay 3?
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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