H1 Paper 1 tmjcprelim2024 CSQ1 ans

JC2 H1 Economics 8843 2024 Prelim Suggested Answers & Markers Report 1 Tampines Meridian Junior College 2024 JC2 Prelim H1 Economics 8843 Paper 1 Question 1: Education in ASEAN and Switzerland Suggested Answers (a) Explain one positive externality that could arise from education in ASEAN. [2] Extract 1: “education leads to better health outcomes, higher social capital, peaceful and gender -equal societies, decent work opportunities and economic growth.” In the case of education in ASEAN, having a highly educated workforce would mean increasing productivity of the entire economy → attract FDI → generate higher EG → higher tax revenue (monetise external benefit) collected by the government (3rd party), without compensation. Markers’ Report Skills Strengths (+): What are the required skills that were well - demonstrated? Areas for improvement ( -): What are the skills that were lacking/ not well-demonstrated? Aha moment! (-) Some students merely focus on the positive outcomes for education without giving clear examples of external benefits. Content Strengths (+): What are some concepts that were well - explained with clear linkages made? Areas for improvement (-): What are some concept gaps / conceptual errors? Aha moment! (-) Some students were unable to point out clearly who are the 3rd parties. (-) Some students were unable to monetise the external benefits. (b) Extract 1 states ‘It was revealed that in 2022, only one in two young Southeast Asians perceives the need to improve their basic digital skills through education’.

JC2 H1 Economics 8843 2024 Prelim Suggested Answers & Markers Report 2 Tampines Meridian Junior College 2024 JC2 Prelim H1 Economics 8843 Paper 1 Explain why this might be a case of information failure and how this could lead to an inefficient outcome in the market for digital skills. [5] Explain why improving basic digital skills might be a case of information failure: [2] Consumers might not fully recognise the long-term private benefits of improving their digital skills which “would improve their ability to learn better and improve other skills” (Extract 1) leading to increased employability and higher wages they can earn in the future . As all these only happen in the future , they underestimate the true private benefits of improving their basic digital literacy. The imperfect information results in divergence between MPBactual and MPBperceived, where MPBactual > MPBperceived. Explain how this would lead to an inefficient outcome in the market for digital skills: [3] In the free market, consumers being rational and self -interested will seek to maximise their utility. They consider only their private costs and benefits. Marginal private benefits (MPB) of consuming basic digital skills is the increased employability and higher income earned by the consumer. Marginal private costs (MPC) is the additional cost of associated with acquiring digital skills, such as enrolling in courses . This means that the private output, occurs where MPBperceived = MPC, at Q. However, the socially optimal level of consumption is at Q* where MSB=MPBactual intersects the MSC (assuming no externalities) . Hence with no government intervention, there is an underconsumption of QQ* units of basic digital skills services. This results in the under-allocation of resources to the consumption and hence production of basic digital skills services. Therefore, there is welfare loss represented by area ABC , which arises from imperfect information as the benefit forgone exceeds the costs in not consuming QQ* units

JC2 H1 Economics 8843 2024 Prelim Suggested Answers & Markers Report 3 Tampines Meridian Junior College 2024 JC2 Prelim H1 Economics 8843 Paper 1 of basic digital skills services. Hence, the net benefit forgone from the underconsumption of basic digital skills services leads to allocative inefficiency, hence market failure and inefficient outcome. Markers’ Report Skills Strengths (+): What are the required skills that were well - demonstrated? Areas for improvement ( -): What are the skills that were lacking/ not well-demonstrated? Aha moment! (+/-) Correctly drawn cost-benefit diagram was used quite effectively to explain market failure in the digital skills market. Some drew MPBactual and MPB perceived to be upward sloping. (+) Majority of the students were able to explain how imperfect information could lead to market failure in the market for digital skills. Elements of P.D.S.A.D. were evident in most answers. (-) Students merely quote evidence directly from case material and did not explain how the evidence shows there is underestimation of private benefits in the consumption of digital skills. Content Strengths (+): What are some concepts that were well- explained with clear linkages made? Areas for improvement (-): What are some concept gaps / conceptual errors? Aha moment! (+) Majority of the students were able to explain the conditions for Q and Q* as well as how welfare loss occurs. (-) Although the elements of P.D.S.A.D. were evident in most answers, some gaps in explanation still existed. One significant gap was the explanation causing the divergence between MPB perceived and MPB actual which varied in quality. Better answers were able to bring out that improving their digital skills which “would improve their ability to learn better and improve other skills” (Extract 1) leads to increased employability and higher wages they can earn in the future. Weaker answers showed confusion between private and external benefits. They brought in external benefits such as higher productivity

JC2 H1 Economics 8843 2024 Prelim Suggested Answers & Markers Report 4 Tampines Meridian Junior College 2024 JC2 Prelim H1 Economics 8843 Paper 1 benefiting the firms and economy when explaining the actual private benefit. Do note that the explanation for the divergence between MPB perceived and MPB actual is not equivalent to the explanation for marginal external benefit. (c) Comment on the extent to which remote learning possesses the characteristics of non-rivalry and non-excludability. [6] [Definition] Non-rivalry means the consumption of the good or sevice by one additional person does not diminish another person’s ability to consume it. [Application to context] In theory, remote learning can be non-rivalrous because when a student accesses digital education resources such as online lecture s or educational materials, it does not reduce the availability of that recorded lecture or material for others. Multiple students can watch the same recorded lecture without affecting each other’s learning experience. [Definition] Non-excludability means it is either not feasible or not technically possible for producers to exclude someone from enjoying the benefits of the good or service once it is provided. This means that it is not possible to assign property rights to only those who pay for the good. [Application to context] Remote learning is excludable, remote learning service provider can prevent non -payers from accessing the service through password only available to payers. Address comment: Comment on: However, the extent to which remote learning possesses the characteristic of non -rivalry depends on the quality of the internet infrastructure of which the remote learning is hosted . If there is limited / insufficient internet bandwidth/server from the remote learning service provider , it will lead to slower speed / reduced access, the experience can become rivalrous as the quality of access falls wh