2024 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 the fixed costs of owning a car in Singapore exceed the variable costs and why this can raise car use, then asks whether road pricing is the most appropriate policy to reduce the environmental damage from car use.
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Explain why the fixed costs of owning a new car in Singapore are considerably higher than the variable costs and why this is likely to lead to greater car use.
Why fixed costs exceed variable costs. Fixed costs do not change with usage. For car ownership in Singapore they include the Certificate of Entitlement (COE) under the Vehicle Quota System and the Additional Registration Fee (ARF). The COE has averaged around $100,000 in 2023 to 2024 and is required to own a car for 10 years, reflecting policy to control the vehicle population. The ARF is a one time charge set as a percentage of the Open Market Value, ranging from 100 per cent to 320 per cent. Both are paid at purchase and do not vary with distance driven.
By contrast, variable costs such as fuel, parking and routine maintenance rise with usage and are relatively small next to these large upfront fixed costs. The disproportionate burden of fixed costs is a direct result of the Vehicle Quota System and ARF, which are designed to manage congestion and limit environmental externalities by discouraging car ownership.
Why this is likely to raise car use. The sunk cost fallacy explains the effect. Sunk costs are past, irrecoverable expenditures that, rationally, should not affect current decisions. Yet owners who have paid large sums for the COE and ARF often feel compelled to use the car heavily to justify the spending. A household that has spent around $200,000 on fixed costs may drive frequently rather than take public transport, even when transit would be cheaper or more convenient. Because the upfront cost in Singapore can be far higher than elsewhere, this mindset is especially strong, leading to overutilisation of vehicles, more congestion and more emissions, the opposite of what the policies intended.
Define fixed and variable costs, evidence the Singapore specific fixed charges, and use the sunk cost fallacy to link high fixed costs to greater use.
Tests: Rational decision making, Indirect taxes and subsidies
Discuss whether road pricing is the most appropriate policy choice for a government that seeks to reduce the environmental damage caused by car use.
- Frame the environmental damage from car use as a negative externality and define the welfare problem.
- Explain how road pricing works in principle and the channel through which it could reduce the externality.
- Identify the limitations of road pricing for the specific objective of environmental damage, distinguishing the externality it best targets.
- Introduce at least one alternative policy and explain its mechanism and its drawbacks.
- Compare the policies on how well they target the environmental externality.
- Reach a supported judgment on whether road pricing is the most appropriate choice.
This part is gated. The full model answer with the negative externality 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.
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Where can I get the full worked answers to the 2024 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 2024 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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