SAJC H1 Econs 2008 Prelim Question Paper

ST ANDREW’S JUNIOR COLLEGE PRELIMINARY EXAMINATION - 2008 ECONOMICS 8816 Higher 1 10 September 2008 3 hours Additional Materials: Writing Paper READ THESE INSTRUCTIONS FIRST Write your Centre number, index number and name on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Section A Answer all questions. Section B Answer one question. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 8 printed pages. © SAJC 2008 [Turn Over

2 Section A Answer all questions in this section Question 1 Healthcare & Ageing Population Table 1: Total Health Expenditures Per Capita in US$ PPP, U.S. and Selected Countries, 1970, 1980, 1990, 2006 1970 1980 1990 2006 Canada 299 783 1,737 3,678 France 205 697 1,532 3,449 Switzerland 351 1,031 2,029 4,311 United Kingdom 163 480 987 2,760 United States 352 1,072 2,752 6,714 Source: OECD 2006 & 2007 Online Database; accessed on 30th July 2008 Table 2: Total Health Expenditures as a Share of GDP, U.S. and Selected Countries, 1970, 1980, 1990, 2006 1970 1980 1990 2006 Canada 7.0 7.1 9.0 10.0 France 5.3 7.0 8.4 11.1 Switzerland 5.5 7.4 8.3 11.3 United Kingdom 4.5 5.6 6.0 8.4 United States 7.0 8.8 11.9 15.3 Source: OECD 2006 & 2007 Online Database; accessed on 30th July 2008 Extract 1: Medical price inflation to blame? Price insensitivity on behalf of customers, lack of competition, technological complexity -- they all adds up to immense inflationary pressures on health-care costs. Technological advances go hand in hand with productivity gains in most industries, but in medicine, better technology almost always means higher expenses in most countries. The California Healthcare Foundation says medical price inflation, not increased use, drives 51% of the growth in health-care spending. The federal Agency for Healthcare Research & Quality [AHRQ] found that from 2000 to 2004, the mean cost of a hospital stay per patient rose 15%. Source: Adapted from BusinessWeek Website, 15th July 2008 @ S A J C 2 0 0 8 [Turn over

3 Extract 2: United Nations report on world ageing Population ageing is unprecedented, without parallel in the history of humanity. Increases in the proportions of older people, those 60 years or older, are accompanied by declines in the proportions of the young under the age of 15. The number of older people in the world will exceed the number of young in the near future. This historic reversal in relative proportions of young and old had already taken place by 1998 in the more developed regions of the world. Population ageing is pervasive, a global phenomenon affecting every man, woman and child. The steady increase of older age groups in national populations, both in absolute numbers and in relation to the working-age population, has profound consequences and implications for all facets of human life such as the economic area, social sphere and political arena. Globally the population of older people is growing by two per cent each year, considerably faster than the population as a whole. This will require far reaching economic and social adjustments in most countries. As the pace of population ageing is much faster in developing countries than in the developed world, they will have less time to adjust to the consequences. Population ageing in developing countries is also taking place at much lower levels of socio- economic development than was the case in the developed world. Source: Adapted from www.un.org; accessed on 30th July 2008 Extract 3 : Impact of an ageing global population An ageing global population will force governments worldwide to revisit the services they provide. By 2011, the first wave of the Baby Boom generation will reach retirement age meaning the dependency ratio (the ratio of working age people to children and elderly) will rise in most developed countries, demanding a new era for governments across the globe. While Japan, Germany, US and the European Union-14 countries are likely to be hardest hit, many other countries’ demographics indicate similar patterns towards a rising dependency ratio. The consequences of shifting demographics forc e governments to rethink how they will finance government services as there w ill be significant changes to tax revenue and government expenditure. In addition , gover nments will have to examine how the growing number of elderly will impact the design and mix of services they offer. The ageing population will also demand changes in the country's workplaces as strong biases remain in some businesses against older workers. Workplaces that are able to expand their thinking and adaptability towards flexibility and part-time work as well as tap into ways older and younger workers can cooperate and work together are likely to emerge as winners. @ S A J C 2 0 0 8 [Turn over

4 The higher burden from rising costs in the health, welfare and justice systems as a result of an ageing and longer living population means that much more thinking and collaboration, within government and with the private sector, will be needed. Source: Adapted from Delottie website, 1st August 2007 Questions (a) (i) With reference to Tables 1 and 2, compare the trends in healthcare expenditures among countries from 1970 to 2006. [2] (ii) Account for the changes in healthcare expenditures among countries. [4] (b) (i) Identify the sources of market failure in healthcare sector of a country. [2] (ii) Explain one source of market failure identified in (b) (i) [4] (c) Assess the measures that a government can adopt to correct the sources of market failure in healthcare sector of a country. [8] (d) Discuss the impact of an ageing population on US economy. [10] [30 marks] @ S A J C 2 0 0 8 [Turn over

5 Question 2 Contributions to Economic Growth Extract 4: Japan’s Economy If Japan’s economy has been pulled steadily out of the slough into which it had fallen for more than a decade, Japan's corporate sector has been doing almost all the pulling. Ever since the recovery that began in 2003 started to look solid, economists have predicted that households would soon take over the running, by starting to spend again after years of deflation and tightened belts. Yet every prediction of a consumption boom has proved premature, causing some to question the sustainability of the recovery as a whole. In February deflation, which last year had been declared vanquished, even made an unwelcome return. The corporate recovery has been remarkable. Companies have repaid huge amounts of debt incurred during the 1980s and 1990s. Demand for Japanese goods from overseas, notably China, gave the initial boost to company profits, which