2022 H2 Economics Paper 1 Case Study 2: Suggested Answers
The case study looks at innovation as a key to prosperity in an age of new technologies, drawing on the electric car transition, R&D and market power, Singapore's innovation culture, externalities in the transport market, and comparative advantage.
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A two mark question asking students to distinguish between a rise in total output and a rise in productivity.
A rise in total output is an increase in the overall level of production, which can come simply from using more inputs such as labour and capital.
A rise in productivity is an increase in output per unit of input. It is about efficiency, producing more output with the same or fewer inputs, rather than just producing more in total.
Define each clearly and draw the distinction between more output overall and more output per unit of input.
Tests: Economic growth
A two mark question asking for one reason why a firm with significant market power and long-run excess profits might choose to spend large sums on research and development.
A firm with significant market power and long-run excess profits might invest heavily in R&D to maintain its dominance and keep barriers to entry high in a contestable market. Such a market is open to potential entrants, so continuous innovation is needed to avoid being overtaken.
R&D can also yield new patents and technological advances that strengthen the firm's position and raise barriers to entry further, helping to sustain its market power and profitability.
One developed reason, such as protecting market power through innovation in a contestable market or raising barriers to entry via patents.
Tests: Barriers to entry, Monopoly
A two mark question asking, with reference to Extract 8, what might be the opportunity cost of the S$19 billion invested by the Singapore government to build the country into a global R&D hub.
The opportunity cost is the next best alternative use of the S$19 billion that is given up. The government could instead have spent the funds on other priorities such as healthcare facilities, schools or transport infrastructure.
Alternatively, the money could have been added to the national reserves to generate returns for future spending. Each foregone alternative is a benefit sacrificed in order to prioritise the R&D hub.
Define opportunity cost as the best foregone alternative and apply it to a named alternative use of the funds.
Tests: Opportunity cost
A six mark explanation of how the creation of an innovation culture in Singapore is likely to have benefited the Singapore economy.
- Identify the demand side channel through which an innovation culture raises a component of aggregate demand and so national income.
- Carry that through to the labour market effect on the relevant type of unemployment.
- Set out the supply side channel through which innovation affects productive efficiency and the economy's productive capacity.
- Link the supply side improvement to export competitiveness and the external balance.
- Draw the benefits together into an overall statement on growth, competitiveness and employment.
This part is gated. The full model answer with the worked ad and as analysis, 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.
An eight mark discussion of whether subsidising the purchase of electric cars would improve the efficiency of resource allocation in the market for transport in Singapore.
- Frame the existing inefficiency as a negative externality from petrol and diesel vehicles and set up the divergence between private and social cost.
- Explain how a subsidy on electric cars shifts the relevant curve and moves the market towards the socially optimal quantity.
- Identify the conditions that determine whether the subsidy actually reduces the externality, such as how the electricity is generated.
- Raise a remaining externality the subsidy does not address and a longer term concern about the transport policy mix.
- Reach an evaluative judgment on whether the subsidy improves allocative efficiency and what it depends on.
This part is gated. The full model answer with the worked externality diagram 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.
A ten mark discussion of the extent to which government policy can influence a country's comparative advantage in a good or service.
- Define comparative advantage in terms of opportunity cost and frame the question as how far policy can shift it.
- Develop the channels through which government policy can change comparative advantage, such as supply side investment, attracting investment, and protecting infant industries.
- Qualify the protectionist channel with the risk that protected industries fail to become genuinely competitive.
- Set out the non policy factors that also determine comparative advantage, such as factor endowments, demographics and developments abroad.
- Reach an evaluative judgment on the extent of policy influence and the conditions for it to be sustainable.
This part is gated. The full model answer with the worked 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.
Tests: Comparative advantage, Protectionism
Questions students ask
Where can I get the full worked answers to the 2022 H2 Economics paper 1 case study 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 2022 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 are these case study suggested answers structured?
The lower mark parts are answered in full. The higher mark parts are outlined here, with the full worked answers reserved for the ETG TYS Answers book and the TYS Crashcourse.
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