NYJC 2023 H2 Economics 9570 P2 Answers

Question 1 1. Singapore recorded an increase in attrition rates among local and foreign nurses in the public sector in 2021, compared with 2020. The number of nurses now is 58,000 and Ministry of Health estimates that this will need to grow to 82,000 by 2030 as one in four Singaporeans will be aged 65 and above, u p from one in six today. The base salaries of public healthcare nurses were also increased between 5 and 14 per cent. Source: Adapted from 30 Nov 2022, CNA (a) Explain why a shortage of nurses might still exist even with the rise in the salaries of nurses. [10] (b) Other than increasing salaries of nurses, discuss possible measures Singapore government can adopt to overcome future shortages of nurses. [15] Suggested answer: (a) Explain why a shortage of nurses might still exist even with the rise in the salaries of nurses. [10] Introduction: • Define shortages: Shortages arise when the quantity demanded for nurses exceed the quantity supplied of nurses. • Approach to question: [can differ depending on the approach adopted by the students] The shortages might still exist due to inelastic demand and supply of nurses, and the increase in demand and/or fall in supply of nurses. R1: Shortages might still exist due to inelastic demand and supply of nurses • Define P(W)ED: Measures the responsiveness of quantity demanded for nurses with respect to a change in salary (wage) of nurses, ceteris paribus. • Inelastic P(W)ED: PED for nurses is inelastic as the role of nurses is essential in assisting doctors in treatments and provide critical services such as monitoring of patients’ medical conditions and treatments, and providing care and support patients recovery. Due to the role of nurses being a necessity in healthcare services, the increase in wage of nurses will lead to a less than proportionate fall in quantity demanded for nurses, making demand for nurses price inelastic. • Define P(W)ES: Measures the responsiveness of quantity supplied of nurses with respect to a change in wage of nurses, ceteris paribus. • Inelastic P(W)ES: PES of nurses is inelastic as nurses need to be trained and certified by the respective authorities before they can be employed by hospitals. The time needed for nurses training and certification could take from two to four years due to the specialised skills. At the same time, due to the harsh working conditions of nurses in terms of working environment and work schedule, the nursing profession has difficulty attracting people to join nursing. Hence, an increase in the wage of nurses will lead to a

less than proportionate increase in quantity supplied of nurses, making supply price inelastic. • Given the inelastic demand and supply of nurses, the current market wage of nurses is not high enough to meet the shortages. • With reference to the figure above, the current market wage of nurses is at W0. However, at this wage, the quantity demanded for nurses is at Q1 while the quantity supplied of nurses is at Q0 resulting in a shortage of Q0Q1. Even with the increase in wage rate, the quantity demand of nurses will only fall less than proportionately. At the same time, the higher wage rate only increases the quantity supplied of nurses less than proportionately as well. Hence, the shortage of nurses continues to persist unless a much higher wage rate is achieved in order to eliminate this shortage. R2: Shortages might still exist due to increase in demand and/or fall in supply of nurses • Increase in demand for nurses - There could be an increase in demand for nurses due to the aging population. - With the increase improvement in medical facilities and technologies, coupled with the increase in literacy rate, Singapore has experienced an increase in life expectancy. While the advancement in medical technology and new specialised medical facilities for treatments has provided better diagnostics and medical treatments to patients who are ill, higher level of literacy rate and greater awareness of illness prevention has increased the demand for health checks on a regular basis. With an aging population, there will be a greater demand for nurses to meet the increasing medical needs of the aged either due to more frequent occurrence of illnesses and/or diagnostics due to more frequent health checks. - This will lead to an increase in demand for nurses which is derived from the demand for medical services. - This increase in demand for nurses is represented by the rightward shift of the demand curve from D0 to D1. The shortage created at W0 will cause an upward pressure on the wage leading to an increase in wage rate of nurses. However, while the wage rate is rising to eliminate the shortage, further increase in

demand of nurses to D2 due to increasing number of the aged, will lead to further rightward shift of the demand curve causing the shortage to persist. • Fall in supply of nurses - The fall in supply of nurses could be due to increasing attrition rate of nurses in view of the poor working conditions and higher pay for nurses in other countries. - Long working hours and poor treatment of the nurses in public hospitals has severely affected the morale and mental wellbeing of the nurses in Singapore. This has resulted in a significant number of nurses leaving the nursing profession and switching to other careers. - Due to the global shortage of nurses, trained nurses are in high demand. With other countries offering attractive pay packages and better work conditions such as more regular and shorter working hours, many nurses in Singapore leave the local public hospitals to work in countries such as Australia and UK. - The fall in supply of nurses will lead to a leftward shift of supply curve from S0 to S1. This creates a shortage at W0 which exerts an upward pressure on the wage rate. While the wage rate is rising to eliminate the shortage, a further fall in supply due to continuous attrition of nurses in public hospitals will cause a persistent shortage in the market for nurses. Conclusion:

• The reasons for the existence of shortage of nurses are due to the inelastic demand and supply of nurses, coupled with the increasing demand and falling supply of nurses. • The acute shortage of nurses severely compromised the quality of medical services in Singapore. Hence, the Singapore government is concerned as it will adversely affect the standard of living of Singaporeans. [Alternative structure: R1: Increase in demand with inelastic PES of nurses to explain existence of shortage even with the increase in wage R2: Fall in supply with inelastic PED of nurses to explain existence of shortage even with the increase in wage Alternative approach: R1: Unanticipated (unexpected) large increase in demand for nurses R2: Unanticipated (unexpected) large fall in supply of nurses] Mark Scheme: Knowledge, Application, Understanding and Analysis L3 Answer is relevant to question requirements and covers sufficient breadth: o Use of demand, supply, PED and PES concepts to explain the existence of the shortage. Answer has sufficient depth: o rigorous and detailed economic analysis that demonstrate strong understanding of the use of demand , supply, inelastic PED and PES, to explain the existence of the shortage. o relevant and clearly-labelled DD-SS diagram(s) to support economic analysis o relevant to the context of Singapore or any other country, and information in the preamble. For answers that provide a good breadth to explain the existence of the shortage without the use of information in the preamble or apply any context – max 8m 8 – 10 L2 • Answer is mostly relevant to question requirements (e.g. An undeveloped explanation of the existence of the shortage due to an increase in demand and fall in supply or nurses (with the use of information in the preamble) – up to 7m • Theoretical use of demand and s