RI 2024 H2 Y6 Prelims - Examiner's Report - Final

ECONOMICS Higher 2 Syllabus 9570 Examiner’s Report Year 6 PRELIMINARY EXAMINATION 2024 Raffles Institution Nurturing the Thinker, Leader & Pioneer TEL: 65 6419 9888 ● FAX: 65 6419 9898 http://www.ri.edu.sg ● One Raffles Institution Lane, SINGAPORE 575954

Y6/9570/Prelims/2024 2 © RI 2024 [Turn Over ECONOMICS Y6 H2 Preliminary Examination 2024 Paper 9570/02 Paper 1 & 2 Case Study 1: Oral Health Situation in Indonesia and Brazil (a) With reference to Tables 1 and 2 and using a relevant elasticity of demand concept, explain the change in sugar consumption in Indonesia between 2013 and 2017. Correct identification of trend: • There has been an increased consumption of sugar [per capita] along with an increase in GDP per capita. [1m] Explanation of trend using YED concept: • It may be inferred that YED for sugar is positive and sugar is a normal good. As income increases as inferred from the increase in GDP per capita, the demand for sugar increases, ceteris paribus, the quantity of sugar consumed increases [1m] Examiners’ comments: • Generally, well done. Some candidates have identified that sugar is a necessity. This is awarded full credit as it is supported by the data. • However, some candidates incorrectly stated that sugar is a luxury good which is not supported by the data in Tables 1 and 2. [2] (b) Using a demand and supply diagram, explain how growing awareness towards oral care has led to the sharp increase in price of private dental care. • Accurate diagram: Rightward shift of DD curve, price inelastic SS curve [1m] • Correct explanation that DD increases [1m] • Brief explanation of price adjustment process [1m] • Use of PES concept to explain the sharp increase in price[1m] Explain demand factor: • As awareness regarding oral care has grown, more people are seeking routine check -ups and preventive care. • Change of taste and preferences towards seeking preventive oral care, this increases the demand for dental services. Briefly explain the price adjustment process: [4]

Y6/9570/Prelims/2024 3 © RI 2024 [Turn Over • Given the increase in DD, shifting DD curve from DD0 to DD1 at the prevailing price level, P0, a shortage is created as Q d less than Qs  upward pressure on price to clear the shortage and restore equilibrium at price P1 DD/SS diagram to illustrate: Apply PES concept: • However, SS is likely to be price inelastic, due to the long-time period needed to train dental staff in the provision of dental care services. • Evidence: [Ext 1, para 2] “ specialised dental procedures that require additional training for dental staff often take a longer time” OR [Ext 2, para 2] “This is challenging given that the process of becoming a dentist involves extensive education and training” • Suggests that quantity supplied of oral health services less responsive to price increases  sharp increase in price needed to eliminate the shortage Examiners’ Comments: • Generally, well attempted. Best responses were able to use taste and preferences as a demand factor to explain the increase in demand because of the growing awareness towards oral care. • Weaker responses included a leftward shift of the SS curve which was unnecessary. Often the use of relevant PES or PED concept was omitted, and the explanation of sharp price increase was thus missing. • A significant number of responses wrongly explained that the rise in price of factors of production such as dental materials would result in a low PES. • For the demand and supply diagram, candidates are reminded to draw a relatively steep SS curve that cuts the x -axis when illustrating supply that is price inelastic. For the price adjustment process, for completeness, shortage should be referenced to the prevailing price level. Most importantly, the diagram should clearly illustrate a sharp increase in price. • In terms of expression, when PES< 1, it should be worded as “supply is price inelastic” OR the PES value is low. It is incorrect to word it as “PES is price inelastic” or simply inelastic. (c) Explain one opportunity cost that a dental service provider may incur when upgrading to a new dental imaging technology. [2]

Y6/9570/Prelims/2024 4 © RI 2024 [Turn Over • Explanation of opportunity cost that shows application to context of dental service provider [2m] • Opportunity cost refers to the value/benefits of the next best alternative that is forgone when a decision is made. In this context, the dental service provider must consider what it is giving up by allocating resources (time, money, and effort) to the new technology. • Possible opportunity costs in upgrading to new dental imaging technology [Any 1 reason] o The money spent on new technology could have been used for other purposes, such as expanding the dental practice, hiring additional staff, or upgrading other existing dental equipment. This will allow the dental service provider to better serve existing and new customers. Evidence: [Ext 1] “specialised dental procedures ... equipment often come with a higher price tag”. OR o Upgrading to new technology often requires training staff to use the new equipment, which takes time and effort. The time and effort spent on training could have been used to serve more patients, improve other aspects of the practice, or enhance other skills. The provider must consider the potential revenue lost or other opportunities missed during this training period. Evidence: [Ext 1] “specialised dental procedures that require additional training which takes a longer time and equipment often come with a higher price tag,” Examiners’ Comments: • Responses were quite varied. Strong responses were able to frame their application of opportunity cost to the context of a dental service provider in terms of the value/benefits of the next best alternative forgone. These responses showed good understanding that when a choice is made, trade-off arises due to resource constraints. • It is important to make clear the value/benefits of the best alternative forgone. For example, it is incomplete to state that the opportunity cost is to expand the dental practice. Candidates must go on to clarify the benefits of expanding the dental practice which is to serve more customers which increases revenue. • Weaker responses on the other hand were confused between the direct negative consequences vs the issue of trade -offs. Explaining that the purchase of new dental technology raises cost of production, hence cost is passed on to the consumer is not a trade- off, but a negative consequence of the action taken to purchase the new dental technology. (d) Explain two possible conditions that may enable a dental service provider to engage in price discrimination. [4] Any 2 conditions explained: 2m each 1. Ability to set prices Dental service provider can set prices as it can product differentiate. In Ext 1, dental service provider can product differentiate by “quality of care, s pecialised services, location” and “patient experience”. This helps to cultivate unique value proposition to the consumer that other competitors are less able to match, hence allowing it to charge premium prices. 2. Ability to segment the market A dental practice may be able to segment the market according to different profiles of patients, e.g. patients in rural vs urban areas with different in PED [4]

Y6/9570/Prelims/2024 5 © RI 2024 [Turn Over • Urban patients have significantly higher income levels relative to rural patients. Dental services take up a relatively smaller proportion of income of urban patients. As such, they are relatively less price sensitive, possessing relatively lower PED for dental services. Hence, firms set higher prices forurban patients as an increase in price is likely to result in a less t