RI 2025 H2 Y6 Timed Practice - Examiner's Report

ECONOMICS Higher 2 Syllabus 9570 Examiner’s Report Year 6 Timed Practice 2025 R a f f l e sI n s t i t u t i o n N u r t u r i n g t h e T h i n k e r , L e a d e r & P i o n e e r TEL: 65 6419 9888 ● FAX: 65 6419 9898 http://www.ri.edu.sg ● One Raffles Institution Lane, SINGAPORE 575954

Y6/9570/TP/2025 2 © RI 2025 [Turn Over ECONOMICS Y6 H2 Timed Practice 2025 Paper 9570/01 Paper 1 Case Study (a) Explain a possible reason for the change in the Gini Index of Singapore in 2019. [2] Suggested Answer: - The Gini index decreased in 2019 indicating a fall in income inequality/improvement in income distribution. - Explain how income distribution improved. o Rise in progressive tax- Higher income earners are taxed based on a higher marginal tax rate compared to lower income earners → difference in disposable income falls → narrowing the income gap. o Higher cash transfers e.g. GST vouchers for lower income households. Since low-income households receive a higher amount of cash transfers → difference in disposable income falls → the income gap is narrowed. o Progressive wages. This initiative has increasingly broadened to include other new sectors. Low wage workers experience conditional wage increments which narrow the income gap. [No credit for stating higher taxes and subsidies without an explanation on how the income gap is narrowed.] Mark Scheme: - Correct interpretation of the Gini Index – 1m - Sound explanation for the change – 1m Examiners’ Comments: - Many students explained the increased expenditure on preschool education. While this might reduce inequality in the future, the timing for its effectiveness would not coincide with the time period in the question as the preschoolers would only enter the la bour force after their post - secondary/tertiary education. - Many students did not provide clear links between Gini coefficient and income inequality. Students just generally mentioned change in gini coefficient without linking to income gap. - Many answers listed reasons such as increased transfer payments without any further elaboration – these answers lacked depth. (b) Explain why preschool education should not be classified as a public good. [4] Suggested Answer: - Public goods are non-rival and non-excludable whereas preschool education is both rivalrous and excludable.

Y6/9570/TP/2025 3 © RI 2025 [Turn Over - Preschool education is excludable: o Only students who are enrolled and have paid fees will be admitted into the preschool. Outsiders can be denied entry at a low-cost e.g. through attendance taking or use of access pass at the school gates. - Preschool education is rivalrous: o As the class size increases, each student will get less attention from the teacher, i.e., the utility from preschool education diminishes as more students are admitted to a class (the marginal cost of providing for another user is not zero). Mark Scheme: - Identification and explanation of excludable nature of preschool - 2m - Identification and explanation of excludable nature of preschool - 2m Examiners’ Comments: - Lack of application e.g. why exclusion is feasible for a preschool. - There was also confusion between rivalry and excludability as well as between rejectability (by consumers) and excludability (by producers) - Some characteristics were described inaccurately e.g. exclusivity instead of excludability. (c) (i) Using the information in Extract 2, explain how asymmetric information might lead to a wrong choice in the market for preschool education. [2] Suggested Answer: A suboptimal choice of preschool education is made because the producers of preschool education have superior information compared to the consumers. Asymmetric information leads to moral hazard or adverse selection, which causes parents to make a wrong choice for preschool. (i) Moral hazard - Behaviour of the preschool administrators/teachers change after the transaction since it is difficult to monitor their behavior once the children are enrolled as seen from Ex. 2 “Kinderland, a private preschool …. made headlines for several cases of child mismanagement. It was found that the centre principal, did not exercise adequate supervision over her staff in their management of children.” - For example, a preschool might cut corners on staffing, curriculum quality, or safety procedures to save costs, knowing that parents may not easily detect these compromises, or teachers might not put in their full effort if their performance is not adequately monitored. - The tragic cases of child abuse or neglect in some preschools suffice as examples of how some parents had made the wrong choice to send their children to the preschool. OR (ii) Adverse selection - Preschool owners have more information about the quality of education/school experience than the parents and they take advantage of the situation by concealing the low quality of their service.

Y6/9570/TP/2025 4 © RI 2025 [Turn Over - Since parents cannot tell the quality from the price, some are misled into believing that a high price signals high quality. - However as seen in extract 2 “a higher price point does not automatically equate to a better quality, or safer, programme.” - Some parents could have made the wrong choice by paying higher school fees for low quality. - [In the longer -term, parents will be less willing to offer high prices. As a result, the high -quality providers exit the market and it becomes saturated with lower quality providers.] Mark Scheme: - 1 well explained reason – 2m Examiners’ Comments: - A small number of students approached this as an imperfect information problem and missed out on key ideas in asymmetric information. - Key concepts in the explanation of moral hazard or adverse selection were omitted from several answers. As a result, only partial credit was given. - There was also insufficient elaboration on what the wrong decision was. (c) (ii) Explain how the above problem could be corrected. [2] Suggested Answer: (i) Moral hazard - Improve monitoring. Installation of CCTV, Open classrooms etc. Can promote greater transparency within the preschool environment, as it is harder for individual teachers to isolate themselves or engage in misconduct unnoticed by colleagues or supervisors. - Legislation. Stiffer penalties for misconduct/negligence. Creates a strong deterrent against harmful or negligent behavior. Knowing that serious consequences (e.g., loss of license, criminal charges, being barred from the sector) await misconduct can signi ficantly reduce the incentive for moral hazard. (ii) Adverse selection - Legislation/Lemon law - Money back guarantees if parents are not satisfied with quality of care/education. - External Validation and Certification to Signal Quality or Quality Rating and Improvement Systems (QRIS) - These systems, often implemented at state or national levels (like Singapore's SPARK accreditation), establish a set of quality standards and assess preschools against them, providing a rating or certification. This helps parents make informed decisions by providing a clear, externally verified signal of quality. - Baseline Licensing Standards - Establishing and enforcing minimum licensing requirements to ensure basic health, safety, and operational standards are met. While not a quality signal itself, it prevents the entry of substandard programs. Mark Scheme: - 1 well explained solution to either moral hazard or adverse selection problem – 2m

Y6/9570/TP/2025 5 © RI 2025 [Turn Over Examiners’ Comments: - A majority of answers lacked details on how specific aspects of asymmetric information could be resolved. These generic responses e.g., educating par