AJC_H2_ECONS_P1_Answer

2018 JC2 H2 Economics Preliminary Examination – Sample Answers Anderson Junior College Economics Department Page 1 Anderson Junior College JC2 2018 H2 Economics Preliminary Examination Case Study Question 1 – Aging population: Burden or opportunity? a From Extract 1, Identify and explain a factor that could be responsible for the upward trend in Japan’s health spending shown in Figure 1. Aging population (Ext 1)  increase in demand  increase in P and Q  increase in spending [2] b With reference to data, discuss the likely effects of a shrinking workforce in Japan and technological advancement on the robotics market. Shrinking workforce (Ext 1)  fall in supply of labour  wages increase Thus demand for robotics which are substitute for labour will increase (Ext 4: funding development of elder care robots to help fill a projected shortfall of specialised workers)  shift DD curve to the right Tech advancement  fall in unit COP  more profitable  increase in SS  shift SS curve to the right P1: increase in DD > increase in SS  equilibrium P and Q increase It takes time to develop and create robotics suitable for different types of healthcare services, coupled with the aging population. It is likely that increase in demand will outweigh the increase in supply in the SR. Hence, equilibrium price and quantity will increase (Fig 1). P2: increase in DD < increase in SS  equilibrium P falls, Q increases Once the technology is fully developed, they may be able to produce more robotics. Hence it is likely that increase in supply will outweigh the increase in demand in the LR. Hence, equilibrium price will decrease while equilibrium quantity will increase (Fig 2). [8]

2018 JC2 H2 Economics Preliminary Examination – Sample Answers Anderson Junior College Economics Department Page 2 Evaluation Ext 2: With the rapidly aging population and, as the robotics are seen as a close substitute to the workers, demand for the robotics will increase significantly. However, given the exis ting technology, supply of robotics is unlikely to increase significantly. Hence the increase in demand is still likely to persist and outweigh the increase in supply. Hence, equilibrium price and quantity will increase. Level Knowledge, Application, Understanding and Analysis Marks L2 An answer that clearly discusses the different impact on the robotics market 4 – 6 L1 An answer that is descriptive without much economic framework linking the factors to the robotics market 1 – 3 Evaluative comment Up to 2 further marks for an evaluative appraisal of possibly which factor is the most significant and hence eventual impact on the market c Explain two possible changes that may occur to the demand curve of healthcare workers given the introduction of robots. Robots are deemed as substitutes for healthcare workers (Ext 4: development of elder care robots to help fill a projected shortfal