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. Therefore, the increase in CE due to increase in price is more than the decrease in CE due to a decrease in quantity. CE on healthcare in the Philippines increases.

©ACJC 2023 Preliminary Exam 9570/01 (d) Assess the impact of medical tourism on the standard of living in a country. [8] Requirement 1: Increase in real GDP per capita Medical tourism could boost India’s economic growth; thus, allow for material standard of living (SOL) to improve. Medical tourism contributes to India’s export revenue. An increase in export revenue would result in an increase in aggregate demand (AD) given AD = C + I + G + (X-M). Firms would experience an unplanned fall in inventory and would respond by raising production. The increase in domestic production translates to an increase in real GDP. Moreover, real GDP would further increase because of the multiplier effect. This is because inc ome derived from higher levels of domestic production would increase following the autonomous increase of export revenue; thereby inducing additional rounds of consumption expenditure. In turn, real GDP per capita would increase under the assumption that the increase in p roduction of final goods and services is more than any increase in population. Households are now able to afford more and better quality goods and services, thus indicating an improvement in material SOL. Requirement 2: Inequality Medical tourism could raise the price of healthcare services. Medic al tourism could raise the demand and create a shortage in the healthcare market. Moreover, the cost of production for healthcare services may also increase. This is because the derived demand for medical staff and equipment would also increase. Given higher cost of production, producers would be willing and able to provide fewer units of healthcare services. Consequently, sup ply would fall and there would be a further shortage in the healthcare market at the prevailing market equilibrium price. There would be a significant increase in price of healthcare given that the combined increase in demand and fall in supply would create a significant short age in the market. Low- income Indian households may be priced out of the market given that public healthcare services are already poorly funded (Extract 5). In other words, the government m ay not be able to provide sufficient subsidies to mitigate the increase in price. The market for healthcare services would be inequitable. Health outcomes for poorer households may deteriorate in the long term and this can be observed by a possible decline in HDI in the long-run, thus indicating an overall worsening of non-material SOL. Overall, the impact of medical tourism on the standard of living in a country is a nuanced issue. While it can bring economic benefits and technological advancements, it can al so exacerbate healthcare disparities and brain drain. It is crucial for governments to c arefully manage the implementation of medical tourism to ensure that it benefits the entire population and does not worsen social inequalities. Level Description Marks L2 A developed answer that takes into consideration:  Positive impact on material standard of living  Negative impact on non-material standard of living  Use of appropriate evidence from extract 4-6 L1 An underdeveloped answer that demonstrates basic knowledge 1-3 A further 2 marks is awarded for evaluation points on ways whether the subnormal profits will persist into the long run and how cinema operators can respond to the falling profits.

©ACJC 2023 Preliminary Exam 9570/01 (e) Discuss if supply-side policy is the most effective way to manage r ising prices in the market for healthcare. [10] Requirement 1: Supply-side Policy Supply-side policies focus on increasing the production of goods and services t o meet rising demand. In the context of healthcare, this would mean implementing measures aimed at increasing the supply of healthcare services, such as increasing the num ber of healthcare providers [Extract 3]. Increasing the number of healthcare providers could also promote competition. An increase in competition could encourage firms achieve productiv e efficient which could drive down prices by way of a fall in cost of production. All in all, producers would be willing and able to sell more units of healthcare services at each pr ice level. Supply of healthcare services would increase which would result in a surplus a t prevailing market equilibrium price. The surplus exerts a downward pressure on price; thus causing a fall in price in the market for healthcare. Evaluation: Expanding the supply of healthcare requires adequately trained and educated healthcare professionals. However, the global shortage of healthcare talent would m ake it challenging for a country to meet staffing