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 nominal GDP with the “GDP deflator” to obtain real GDP as the “deflator” uses GPL as a proxy. • If real GDP doubles, it does not necessarily mean that the average citizen is able to enjoy twice as many goods and services. The amount available to the average person requires the real GDP to be divided across the population size. A more relevant measure of improvement in material SOL would be real GDP per capita growth rates. • A rise in real GDP per capita may also indicate an improvement in non-material SOL. When a country experienced growth in national income, the government will be able to receive a higher income tax revenue. This allows them to provide better healthcare and education to the residents. This would lead to an improvement in non-material SOL which will be explained later in this essay. • An increase in real national income over time does not mean that all individuals benefit equally from economic growth. This is because the growth in real national income may be unevenly distributed within the population, leading to a larger disparity between the rich and poor. Thus, to make meaningful comparisons of material SOL over a period of time, we have to use the Gini coefficient and monitor how it changes over time. • The Gini coefficient is an indicator to reflect income distribution. It measures the extent to which the distribution of income or consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution. A low Gini coefficient coupled with high real GDP per capita growth rates would therefore serve as a better indicator that the SOL of an average citizen has improved. R2: Composite indicators such as the human development index (HDI) provides a greater insight into a country’s SOL. • A rise in real GDP per capita may not indicate an improvement in non- material SOL. For example, in a developed country like Singapore, rising income may be tied to longer working hours and higher levels of stress to workers causing heal th problems which affects non-material SOL. • The quality of and access to education and healthcare are also important aspects of non- material SOL. However, national income statistics do not reveal the standards of education or healthcare of a country. While some countries may experience a rise in real national income over time, many residents still have little access to education and healthcare. This is especially so for developing countries or for rural parts of certain large countries. • The HDI is a composite measure designed by the United Nations to consider a broader view of standard of living. The HDI is a summary measure that provides greater insight into the progress of the key dimensions of human development: a decent material standard of living based on income (GNI per capita), and non-material standard of living related indicators such as number of schooling years as well as life expectancy that inform of the level of literacy as well as the access to quality healthcare respectively. • Having better education and good health will result in an improvement in non- material SOL as citizens are now able to live a fulfilling and enjoyable life without any worries.

3 Conclusion • Both real GDP per capita growth rates (taking into consideration the Gini coefficient) and HDI can be used to measure the improvement in the SOL of a country. • The HDI was created to emphasize that expanding human choices should be the ultimate criteria for assessing development results, which will affect both material and non-material standard of living. Economic growth is a means to that process but is not an end. Hence, there is a need to use a composite indicator to measure improvement in standard of living. Mark Scheme Level Knowledge, Understanding, Application, Analysis Marks L3 Full display of AO1, AO2 and AO3 skills: For an answer that shows well-developed explanation of how various KEI can be used to measure the improvement of BOTH material and non-material SOL of a country over time. Explanation of a composite indicator such as HDI is a requirement. 8-10 L2 Uneven display of AO1, AO2 and AO3 skills: For an answer that shows under -developed explanation of how various KEI can be used to measure the improvement of BOTH material and/or non- material SOL of a country over time. • L acks depth of analysis (i.e., limited explanation of why real GDP data or per capita data needs to be used) • Use of a composite indicator not well explained 5-7 L1 Limited display of AO1 and AO2 skills: For an answer that shows limited knowledge of how various KEI can be used to measure the improvement of BOTH material and/or non-material SOL of a country over time. • listing of points, unexplained statements, or descriptive response • many conceptual errors • irrelevant response • smattering of points • m ere definition of relevant concepts 1-4

4 (b) Di