2023 ACJC H2 Prelims P1 Q1_Q2 _Ans

©ACJC 2023 Preliminary Exam 9570/01 Question 1: Global Healthcare Issues (a) With reference to Extract 1, explain how the rise of healthcare use could affect producer surplus in the market for healthcare . [2] Rise of healthcare use increase the price of healthcare. The gap between the price that producers are willing to receive and the actual price they receive, which is their producer surplus, increase. (b) ‘Overuse of care by insured members, as well as overtreatment or overprescribing by medical practitioners’ (Extract 1) contributes to the rise in healthcare cost. Explain how the issue of moral hazard could arise in the health insurance market. [3] In the case of insurance market, the insured individual has more informati on about their true risk profile or intention to engage in risky behavior, they can take advantage of this information by purchasing insurance policies at lower rates. However, this creates an issue of moral hazard because now they now have less incentive to avoid engaging in risky behavior or take necessary precautions, as they know that any losses or damages will be borne by the insurance company. In other words, they are protected from the potential healthcare cost of their actions. When individuals in health insurance that covers a significant portion of their medical expenses, they may be inclined to seek healthcare services excessively or for relatively minor issue. Consequently, there will be an overallocation of resources in the healthcare insurance market which can lead to higher costs for insurers and the overall healthcare system. (c) ‘There’s long-standing debate over whether so many local nurses should be allowed to leave’ (Extract 4). Using demand and supply analysis, explain the impact on the following when local nurses are allowed to leave the Philippines . (i) Wages of nurses in the Philippines [3] Supply of nurses in the Philippines would fall when local nurses are all owed to leave the country. Consequently, there will be a shortage of nurses at the prevailing market equilibrium wage as quantity demanded would be more than quantity supplied. The shortage exerts an upward pressure on wage; thus causing wages of nurses in the Philippines to increase (ii) Consumer expenditure on healthcare in the Philippines [4] The increase in wages of nurses in the Philippines would result in an increase in the cost of producing healthcare services. Market equilibrium price of healthcare would increase while market equilibrium price would decrease. Given PED inelastic given that healthcare is a necessity, an increase in price would lead to a less than proportionate increase in quantity demanded. Therefor