TJC_H1_ECONS_CSQ1_Ans

TJC Prelims 2017 CSQ Answers (H1) (a) (i) From Figure 1, describe the trend in Singapore’s r esidential property prices from 2010 to 2016. [2] Singapore’s residential property prices generally increased from 2010 to 2016. [1] Prices increased steadily from 2010 to reach a peak in late 2013 and have been on a gradual decline since. [1] (ii) Suggest two possible reasons for the trend identified in (i) [2] Explain reason for general trend - general increase in prices [1]: “Very low interest rate environment” (Extract 3) in dicates a low cost of borrowing, encouraging borrowing to buy big ticket items such as houses, thus boosting demand for property. OR “Continued income growth in Singapore” (Extract 3) leads to higher purchasing power and therefore higher demand for property. Higher demand for property thus explains the genera l price increase from 2010 to 2016. Explain reason for refinement - gradual decline since late 2013 [1]: The gradual decline in prices since late 2013 can b e attributed to government’s measures to “cool demand and expand supply, so as t o moderate the increase in housing prices” (Extract 3). Dampened demand and in creased supply thus led to prices slowing down after 2013. Note: 1 mark for explaining general increase and 1 mark for explaining gradual decline since 2013. (b) (i) Explain why public housing is not a public good. [4 ] A public good is a good which is both non-excludabl e and non-rivalrous, resulting in total market failure and non-provision of the good. Non-excludable means it is impossible to prevent a person who has not paid from consuming the good. [1] Public housing not a public good as it is excludabl e. An HDB flat-owner has to first purchase the flat befor e being given the key to his apartment. HDB can also evict those who fail to mak e payments for their apartments.[1] Non-rivalrous means consumption of the good by one individual does not diminish the quantity and quality enjoyed by others. [1] Pub lic housing is not a public good as it is rivalrous. When one HDB flat has been sold to a family, there is one less HDB flat available for other families. It is imposs ible to house the entire community in an HDB flat without creating intolerable overcrowding. [1] Hence, public housing is not a public good. (ii) Explain why the government provides subsidies for public housing in Singapore. [4 ]

The consumption of public housing generates positiv e externalities as home- ownership “promotes rootedness and a sense of belon ging among Singaporeans, thus contributing to the overall economic, social a nd political stability of Singapore”, benefitting other Singaporeans. [1] [1m for diagram] Figure 1 shows the market for public housing. Margi nal Social Benefit (MSB), which is the benefit derived by society, exceeds Ma rginal Private Benefit (MPB) by Marginal External Benefit (MEB), which represents the po