EJC Econs N2023 H2 EQ5 - students

1 2023 A-Level P2 Question 5 Residents in densely populated, rapidly growing cities expect annual improvements in standards of living but whether this is achievable or sustainable in the long term is uncertain. (a) Explain how improvements in a country’s material and non -material standard of living can be measured. [10] (b) Discuss whether increases in the living standards of residents in densely populated, rapidly growing cities are achievable and sustainable in the long term. [15] Part (a) - Question Analysis Approach Command Word Explain Question Type Key Economic Indicators (KEI) Start point KEI End Point Standard of Living (Material & Non-Material) over time Content and Context Content KEI, SOL Context Any Introduction • The concept of SOL includes both material and non-material aspects. • Material SOL refers to the quantity and quality of goods and services available for consumption by residents in a country. • Non-material SOL refers to qualitative and intangible aspects which enables residents in a country to live an enjoyable and fulfilling life. • KEI such as Real GDP per capita growth rates can be used to measure the improvement of a country’s material SOL and non-material SOL to a certain extent. • Composite indicators such as the human development index (HDI) provides a greater insight into a country’s SOL as its components look into both the material and non-material aspects of SOL. R1: Real GDP per capita growth rates can be used to measure the improvement of a country’s material SOL and non-material SOL to a certain extent. • Gross Domestic Product (GDP) is defined as the total market value of all final goods and services newly produced within the geographical boundaries of an economy in a given period (usually a year). • A rise in GDP indicates a rise in income as more factor income is paid to households due to a rise in the production of goods and services. Material SOL improves as residents may be able to buy more clothes, food, electronic gadgets, cars, etc due to a rise in purchasing power. Furthermore, with higher income, the quality of goods and services consumed also

2 increases, as residents can afford better quality clothes, more nutritious food, the latest model mobile phones, a bigger car, etc. • A rise in nominal GDP does not mean that purchasing power has increased as the increase may be due to changes in general price levels (GPL) and not output. In some cases, the rise in GPL may be higher than the rise in nominal income. Real GDP growth rate therefore is more useful to compare material SOL because it considers changes in general price level over time. One way is to adjust the