DHS_H2_ECONS_P1(with Mark Scheme)

1    Name: Index Number: Class: DUNMAN HIGH SCHOOL Preliminary Examination Year 6 ECONOMICS 9732/1 (Higher 2) Paper 1 25 September 2015 2 hours 15 minutes Additional Materials: Writing Papers READ THESE INSTRUCTIONS FIRST Answer all questions. Write your name and class on all pieces of work handed in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. The number of marks is given in brackets [ ] at the end of each question or part question. At the end of the examination, fasten all your work securely into two separate bundles (one for Question 1 and one for Question 2). This document consists of 7 printed pages including this cover page. [Turn over

2    Answer all questions. Question 1 The US Pharmaceutical Industry Table 1: Healthcare and overall inflation rate in the US Year 2012 2013 2014 Healthcare Inflation (%) 3.5 3.3 2.1 Overall Inflation (%) 1.7 1.5 0.8 Source: www.ycharts.com, and www.usinflationcalculator.com Extract 1: How does growth in healthcare costs affect the US consumers? When the price of a gallon of gas or a pound of hamburger rises, consumers can anticipate how the increase will affect what they have left to spend on other goods. It is far less obvious to consumers how increases in healthcare costs hit their pockets due to the uncertainties of healthcare needs. In 2011 when US healthcare costs increased by 3.5 percent, US healthcare expenditure per capita increased by 3.1 percent. According to the November 2013 issue of the Journal of the American Medical Association, the primary reason for the rise in healthcare costs in 2011 accounting for 91 percent, was an increase in the price of drugs, medical devices, and hospital care. In 2013, when US healthcare costs increased by 3.3 percent; US healthcare expenditure per capita increased by 3.4 percent. Back in 2009, even when the US economy plunged into recession and millions lost their jobs, healthcare costs grew by 4 percent and healthcare expenditure per capita grew by 2.9 percent. Although these numbers are striking, they may not be easily translated into figures that are meaningful to individual Americans. Sources: Various Table 2: Top five US pharmaceutical companies: share of pharmaceutical industry Share of pharmaceutical industry (by value of US sales) 2012 (%) Novartis 20.0 Merck 19.8 Pfizer 18.2 AstraZeneca 17.3 Teva 16.3 Source: www.statista.com, 26 May 2014

3    Extract 2: Pricing strategies of US pharmaceutical companies Once drugs reach the mass market, they are often relatively inexpensive to produce. Therefore, selling these drugs at lower prices outside the US can still be good for business. However, these drugs could find their way back to the US market a