SAJC 2024_JC2 H2_Econs_Prelims_P2_Suggested Answers

St Andrew’s Junior College JC2 Preliminary Examinations H2 Economics – Paper 2 (9570/02) Suggested Answers

2 © SAJC 2024 9570/02/Sep/24 1 A severe shortage of vets has made it challenging for clinics to hire and retain talent, despite offering significantly higher salaries. It typically takes around 8 years to become a vet. To attract new blood, clinic s are working towards offering better work-life balance and mentorship opportunities. Since the COVID -19 pandemic, pet ownership has risen by about 30 per cent despite calls for more responsible pet ownership. Adapted from CNA, 22 January 2024 (a) Explain why a severe shortage of vets still exists despite clinics offering significantly higher salaries. [10] (b) Discuss possible strategies to reduce the severe shortage of vets. [15] Part (a) Suggested answers Introduction: • Prices are determined by the interaction of demand and supply forces. The price mechanism helps to achieve allocative efficiency by adjusting to resolve disequilibrium (either the case of shortage or surplus). • Shortages arise when the quantity demanded for a good or service exceeds the quantity supplied for it. When faced with a shortage, the price mechanism would adjust upwards to resolve the shortage. • However, as given in the preamble, despite clinics offering significantly higher salaries, the severe shortage of vets still exists. R1: Explain how the above factors have caused a shortage of vets in Singapore One reason why a shortage may still persist in spite of a rise in salaries for vets is that the salary increase may be insufficient to attain market equilibrium when faced with an increase in demand for vets. Due to a rise in pet ownership (change in tastes and preferences) → increase in demand for veterinary services → therefore an increase in derived demand for vets. Due to the long gestation period + no vet courses available in Singapore + significant costs of pursuing a vet degree → low supply of vets An increase in demand would cause the demand for vets to increase from D1 to D2. Together with a low supply of vets, this would result in a shortage of vets at the original wage, W 1, as quantity demanded exceeds quantity supplied of vets, causing an upward pressure on wages. Wages (price of labour) Quantity of vets 0 S D1 D2 W1 Q1 = Qss Qdd2 Qdd Qdd” shortage W2 Q2 D3

3 © SAJC 2024 9570/02/Sep/24 Figure 1: Impact of low supply with a rise in demand on a significant rise in wages of vets When faced with the upward pressur