NYJC_H2_Economics_P1_Answers

Nanyang Junior College  2014 JC2 Prelim Examinations  H2 Economics Paper 1  Suggested answers:  Question 1:  (a) (i) Compare the trends in the percentage of population aged 60 and over for the developed and developing countries from 1950 to 2050. - There is a rising trend in the percentage of population aged 60 and over for both the developed and developing countries. (1) AND - The percentage of population aged 60 and over is higher for developed countries compared with developing countries for the period shown.(1) OR - developing countries are predicted to experience a faster rate of increase in percentage of those aged 60 and above of the total population over the forecasted period. OR - Over the recorded period, developed countries experienced a faster rate of increase of those 60 and above than developing countries. (maybe give % figures) [2] (ii) Account for the above demographic trends. 2 factors [1 for identifying 1 for explaining] x 2: (4m) - Longer life expectancy due to better healthcare services - Falling birth rates (fertility rates) due to higher opportunity costs in having children. - The percentage of population aged 60 and over for the developing countries is lower because of higher population growth rates. [4] (iii) With the use of a diagram, explain the likely effects of this demographic change on a product market. - Increase in demand for hospital beds, walking sticks, healthcare etc. - Rightward shift in the demand, c.p, upward pressure on price due to a shortage at the existing price  increase in P and Q. - Demand factor identified (1m) - Brief explanation of price mechanism – impact on P& Q (1m) - Diagram (1m) [3] (b) With reference to extract 4, explain a redistributive measure that the government could implement to reduce income inequality. - Government transfer money from its coffers (revenue collected from progressive taxes) to low income earners through transfer payme nts like workfare income supplement, the Special Employment Credit, conservancy charge rebates, subsidies for skills upgrading programme etc. - This will increase the disposable income of the low income earners and hence close the income gap Redistributive measure - (1m) - Explaining redistribution how income is redistributed from the rich to the poor. – (2m) [3]

- ‘measures’ that are not clearly redistributive eg . – “Skills training programme” Allowing lesser skilled workers to upgrade themselves and be able to command a higher wage thus narrowing the income gap. Measure - (1m) Explanation– (1m) (c) Discuss the impact of an ageing population on an economy. Negative impacts 1. Slow down economic growth 2. Fall in labour force participation rate  fall in labour supply, c.p,  increase in wage  increase in costs of production. 3. Fall in income of the older workers  fall in purchasing power  fall in consumption  fall in AD  fall in real NY 4. Increase i