2024 ASRJC H3 Econs Prelim Paper QP

1 © ASRJC Economics Department 9809/01/JC2 Prelim/2024 [Turn Over ECONOMICS 9809/01 Paper 1 23 September 2024 No Additional Materials are required. 3 hours 15 mins READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer booklet s, ask the invigilator for a continuation booklet. Section A Answer all questions. Section B Answer two questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 7 printed pages and 1 blank page. ANDERSON SERANGOON JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATION Higher 3

2 © ASRJC Economics Department 9809/01/JC2 Prelim/2024 [Turn Over Section A Answer all questions in this section. 1 Health and Wellness Extract 1: Singapore’s Healthy Living Master Plan In Singapore the city parks and park connectors can be identified as the key active ageing urban features. The physical foundation for this urban health policy was laid out in the first comprehensive city plan for an independent Singapore in the late 1960s. Embedding health-supportive public facilities and green spaces for sports and exercise into the city’s rapidly developing urban landscape has since been one of the key elements of the government’s centralized urban planning strategy. This has helped residents to enjoy easy access to green spaces and a built environment that is conducive for physical activity. Over the years the Singapore government has continued to expand the infrastructure and green space for active ageing across the entire city-state as part of the National Public Health Promotion. Source: https://sportifycities.com/active-ageing-singapore/ Extract 2: Exercise Habits Obesity – and its related illnesses – endangers the lives of millions across the world. Increasingly sedentary lifestyles of many adults partially explain the increase in obesity over recent years. The typical American spends many hours in front of a computer or TV screen, failing to exercise – all in spite of the health benefits of doing so. Exercise is known to significantly improve cardiovascular health, blood pressure, and cholesterol and to reduce the risk of developing diseases such as diabetes and osteoporosis. For most people, failure to exercise is unlikely to be due to ignorance or lack of interest. It is more likely the result of difficulties in translating initial motivation to exercise into sustained behavioural change. In other words, it is hard to form an exercise habit. A key problem is the difficulty of translating current motivation into long-term behavioural change. While for many people, the prospect of exercising for three months and improving their health may seem attractive today, the daily decision to actually exercise when that time comes and to commit to the daily discipline is a much more difficult one. One approach to overcoming this problem is for me to sign a contract with myself now that states that if I do not do what I commit to now, I will pay a monetary penalty. This type of contracting with one’s self to sustain current actions in the future is a called a “commitment contract”. Such commitment contracts have been used successfully to help people quit smoking. Another approach is the use of financial incentives to increase exercise, which has also been shown to increase exercise beyond the period in which incentives have been given. Source: https://cepr.org/voxeu/columns/exercise-habits Extract 3: The Principal-Agent Problem in the Healthcare Market At the heart of the principal-agent relationship is the issue of information. As Arrow (1963) pointed out, the health care market is characterized by a high degree of uncertainty. In some circumstances, neither the doctor nor the patient is certain about the disease and the optimal treatment required. However, in most other scenarios, the doctor has a greater knowledge of the patient’s condition than the patient has. This could give rise to certain problems.

3 © ASRJC Economics Department 9809/01/JC2 Prelim/2024 [Turn Over The most often cited principal-agent problem is an induced demand by the doctor. This dynamic occurs when the doctor influences the patient’s demand for care against the best interest of the patient. This induced demand implies persuasive activity to shift the patient’s demand curve according to the doctor’s self-interest. As in any agency problems, the degree of this induced demand depends on the information asymmetry between the doctor and the patient. As the patient becomes more empowered and informed about his or her health conditions and possible treatment alternatives, the doctor is less able to apply this sort of influence over the patient. One major economic challenge in healthcare is to align the incentives of the three key players. They are: the payer, which can be the government or insurance companies; the provider, namely hospitals, doctors and clinics; and the patient, who receives healthcare services. To illustrate, insurance companies as the payer want to keep cost under control. They may resort to denying claims for procedures that can be beneficial, hence harming patients’ interests. Doctors are often funded by fee for service. In other words, they are paid based on workload, so they may order more tests, procedures and surgeries than necessary to get more money, which is against the payers’ interest and the healthcare system at large. Patients are supposed to keep themselves healthy, but since healthcare costs are paid for, there is little incentive to do so, which is against everyone’s interest. Source: Speech by Mr Ong Ye Kung, Minister of Health at Singapore Economic Policy Forum, 31 October 2023 Extract 4: Singapore’s 3M Healthcare is kept affordable for Singaporeans through heavy government subsidies, supplemented by the Medisave, MediShield, Medifund. Medisave is a national medical savings scheme which helps individuals put aside part of their income into their Medisave Accounts to meet their future personal or immediate family members' hospitalisation, day surgery and certain outpatient expenses. MediShield is an affordable catastrophic medical insurance scheme which helps Medisave account holders, and their dependents meet the cost of treatment for serious or prolonged illnesses. Singaporeans can use Medisave to pay the premiums of MediShield or Medisave-approved private insurance schemes. Lastly, Medifund is an endowment fund set up by the Government as a safety net to help needy Singapore citizens who are not able to pay for their medical care at restructured hospitals. In recent years, there have been concerns over rising healthcare costs and the impact of these on the sustainability and affordability of health insurance premiums. In particular, the initial zero co-payment policy required under Integrated MediShield Plans (IPs) have contributed to the over-consumption, over-servicing and over-charging by doctors and policyholders which in turn impacts healthcare costs. In response, MOH introduced a minimum five per cent co-payment for new IP riders sold from April 1, 201 9. The Government hopes that this co-payment together with other efforts such as the publication of fee benchmarks will encourage prudent use of healthcare services and keep healthcare costs sustainable for all Singaporeans. Sources: https://www.moh.gov.sg, accessed on 8 May 2024 and https://www.straitstimes.com/singapore/health/moh-welcomes-measures-by-insurers-to- adjust-terms-for-full-rider-ips-and-require-co, accessed on 15 May 2024

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