2020 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 shortage of water might still exist in Singapore after the rise in the price of water, then asks whether the policy of increasing the price of water is the only effective way to overcome future water shortages.
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Explain why a shortage of water might still exist after the rise in the price of water.
Water prices in Singapore are not set by market forces but by the government through the Public Utilities Board (PUB), which ensures a sustainable water supply. Because prices had remained unchanged since 2000, they did not reflect rising demand from population growth or the rising cost of water production. This created an implicit price ceiling, Pmax, set below the equilibrium market price. At this artificially low price the quantity of water demanded exceeded the quantity supplied, leading to a persistent shortage of QsQd. In Singapore's context this shortage is mitigated and paid for by PUB using state funds, equivalent to a subsidy.
Why the 30 per cent rise may not have been enough. The increase raised the price to P1, above the original ceiling Pmax, but P1 might still fall short of the true market equilibrium price Pe. At P1 the quantity demanded, Q2, can still exceed the quantity supplied, Q1, so a shortage Q1Q2 remains. On a price ceiling diagram this is shown by the controlled price lying below the equilibrium, with the horizontal gap between the demand and supply curves at that price measuring the shortage.
Why the shortage may persist or worsen. The demand and supply of water in Singapore are continually evolving. Population growth drives up the demand for water, shown by a rightward shift of demand from DD0 to DD1. At the same time the rising costs of water production, including technological investment and environmental considerations, can reduce supply, shown by a leftward shift from SS0 to SS1. This combination of rising demand and constrained supply can perpetuate, or even worsen, the shortage despite the higher price.
Identify the government price ceiling below equilibrium, show the residual shortage when the rise is insufficient, and bring in shifting demand and supply.
Tests: Demand and supply analysis, Government intervention in markets
Discuss whether the government policy of increasing the price of water is the only effective way to overcome future water shortages.
- Frame increasing the price as one option among several and signal that alternatives will be assessed.
- Explain how raising the price narrows the shortage, then note the limit that recurring demand and cost pressures impose.
- Set out a demand-reducing alternative and its mechanism, then state its drawback.
- Set out a supply-increasing alternative and its mechanism, then state its cost and opportunity cost.
- Consider letting price reach market equilibrium and the political constraint that water is a necessity.
- Conclude that a combined approach is likely more effective, balanced against affordability and access.
This part is gated. The full model answer with the worked price ceiling analysis and the comparison of remedies, 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, Demand and supply analysis
Questions students ask
Where can I get the full worked answers to the 2020 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 2020 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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