NYJC H2 Economics P1

J2 H2 Economics (9732/1) 1 PAPER 1 Thursday 4 September 2014 08:00 – 10:15 TIME : 2 hours 15 mins INSTRUCTIONS TO CANDIDATES Do not open this paper until you are told to do so. Write your name, class and name of economics tutor in the space provided on the writing paper. Answer all questions. The number of marks is given in the brackets at the end of each question. Write your answers on the writing papers provided. If you use more than one sheet of paper, fasten the sheets together. Submit the answers for both case study questions separately. You are advised to spend several minutes per question reading through the data and questions before you begin writing your answers. There are _8_ printed pages including this cover page PRELIMINARY EXAM 2014 Economics JC2 H2 (9732) NYJC

J2 H2 Economics (9732/1) 2 Answer all questions. Question 1 Ageing Population Extract 1: Economic opportunities in an ageing population The ageing population offers a myri ad of opportunities for businesses. Some 135 pharmaceutical and biotechnology companies are now developing 294 medicines aimed at diseases that disproportionately affect older people, like cancer, heart disease and stroke, according to study results that were released last week by the Pharmaceutical Research and Manufacturers of America, a trade group based in Washington. Pharmaceutical companies may be steadily losing the patent protection on their established drugs in the United States, but sa les from new medications that cater to an aging population could more than make up for any lost revenue. And there are plenty of these drugs in the pipeline. Source: http://www.globalaging.org/health/us/ph.htm Figure 1

J2 H2 Economics (9732/1) 3 Extract 2: A billion shades of grey The world is on the cusp of a staggering rise in the number of old people, and they will live longer than ever before. T he experience of the 20th cent ury, when greater longevity translated into more years in retirement ra ther than more years at work, has persuaded many observers that this shift will lead to slower economic growth and “secular stagnation”, while the swelling ranks of pensioners will bust government budgets. But the notion of a sharp division between the working young and the idle old misses a new trend, the growing gap bet ween the skilled and the unskilled. Employment rates are falling among younger unskilled people, whereas older skilled folk are working longer. The divide is most extreme in America, w here well-educated baby-boom ers are putting off retirement while many less-skilled younger people have dropped out of the workforce. Policy is partly responsible. Many European governments have abandoned policies that used to encourage people to retire early. Ris ing life expectancy, combined with the replacement of generous defined-benefit pension plans with stingier defined-contribution ones, means that even the better-off must work longer to have a comfortable retirement. But the changing nature of work also plays a big role. Pay has risen sharply for the highly educated, and those people conti nue to reap rich rewards into old age because these days the educated elderly are more productive than their predecessors. Technological change may well reinforce that shift: the skills that complement computers, from management expertise to creativity, do not necessarily decline with age. This trend will benefit not just fo rtunate oldies but also, in some ways, society as a whole. Growth will slow less dramat ically than expected; governm ent budgets will be in better shape, as high earners pay taxes for longer. Ric h countries with lots of well-educated older people will find the burden of ageing easier to bear than places like China, where half of all 50-to-64-year-olds did not complete primary-school education. Source: The Economist, April 2014 Extract 3: Synching healthcare for an ageing population Singapore’s population is ageing rapidly and the repercussions are being felt across the country. Nowhere is this more evident than in the healthcare system, where policymakers have to make decisions about hospitals, social services and manpower for which the benefits may not be seen for several years. DBS economist Irvin Seah, said that an ageing population will require a slight "reorientation" of the economy. This would involve a greater focus on developing medical services and attracting more workers to the se ctor, as well as increa sing productivity and the use of technology in jobs so that people can continue to work as they age. Keeping the system in sync as healthcare capacity is built up to respond to growing needs is a challenge of heroic proportions. Howe ver, the crucial question for Singapore policymakers is not simply how many hospitals to build, but how to decrease inflow and increase outflow of patients so that we do not need as many hospitals. Hospitals are wonderful for what they are especially good at: Urgent, high-intensity and specialty services. But they are also expens ive and hospital stays can be burdensome to patient and families, and are associated with risk, such as hospital-acquired infection.

J2 H2 Economics (9732/1) 4 In responding to this question of how to de crease inflow to and increase outflow from hospitals, Singapore is turning to innovations in outpatient and social care services. This means raising the capabilities of outpatient health services to accommodate the needs of an ageing population so fewer need hospitalisat ion, and increasing available long-term care services so people who no longer need acut e hospital services can be discharged to more appropriate sites and avoid readmission. This is, indeed, the strategy being pursued by Singapore: More clinic availability (including creating new service options such as comm unity-based care), mo re long-term care options (such as home services, better trai ned maids and more nursing home beds), and more community hospitals to allow patients to achieve a level of health and independence that may permit them to live at home with family. Source: Adapted from Today, May 2013 Extract 4: Mind the Gap In the past few years, the gov ernment has curbed the inflow of foreign labour, cajoled companies to invest in enhancing productivity, and expanded its skills training programme to "upgrade" workers. It is also redistributing significantly straight from government coffers to low-income and older workers to close the income gap. The effort to boost productivity should raise in comes, but "this does not mean that nothing else needs to be done because rising wages is only one part of the problem", says the chief executive of Centennial Asia Advisors, Mr Manu Bhaskaran. The retired, elderly poor, for example, will not benefit from higher wages - but will suffe r the inflation that comes in tandem, he notes. This group, who are both old and poor, will continue to grow in what Mr Tharman has said is a unique, local challenge. Due to Singapore's rapid development, unskilled workers are largely also ageing ones and of those who did not complete secondary school in the workforce, two-thirds are aged 50 and above. That Singapore is now on the ageing downswing overall has also made its inequality more visceral. Source: The Straits Times, Apr 6 2013

J2 H2 Economics (9732/1) 5 Questions (a) (i) Compare the trends in t he percentage of popul ation aged 60 and over for the developed and developing countries from 1950 to 2050. [2] (ii) Account for t he above demographic trends. [4] (iii) With the use of a diagram, explain the likely effects of this demographic change on a product market. [3] (b) With reference