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Name:________________________ Index Number: ________________ Class:____________

PIONEER JUNIOR COLLEGE, SINGAPORE

JC1 END-OF-YEAR EXAMINATIONS 2016

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Higher 1

ECONOMICS

Paper 1 8819/01
16 September 2016
Additional Materials: Answer Paper
2 hours 10 minutes
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 on both sides of the paper.
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Section A and Section B: Answer all questions.

Please begin your answer to each question on a fresh piece of writing paper.

At the end of the examination, fasten your work for Questions 1and 2 separately.

The number of marks is given in brackets [ ] at the end of each question or part
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If there are part questions you did not attempt, please write the question number and
part in the margins before you submit your answers. (i.e. if you did not complete
question 1d, indicate 1d in the margin of the answer script that you submit for question
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This document consists of 4 printed pages and 2 blank pages.

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Section A

Question 1 Healthcare in China and Thailand

Table 1: Inflation and Growth in Real Gross Domestic Product (GDP), 2010-2014

Growth in Real GDP

Inflation
(% change per annum)
China Thailand China Thailand
2010 10.63 7.51 6.94 4.08
2011 9.48 0.83 8.14 3.75
2012 7.75 7.23 2.39 1.91
2013 7.68 2.70 2.23 1.73
2014 7.27 0.82 0.82 0.96

Source: World Bank, http://data.worldbank.org/

Extract 1: World Bank Urges China Healthcare Reform to Save 3% of GDP

Despite the Chinese healthcare system developing rapidly over the past few decades, it can’t
possibly move fast enough to keep up with the country’s social and economic changes. China’s per
capita GDP grew more than 25-fold from 1980 to 2014; its life expectancy rose by nine years; its
infant mortality rate quartered. By the end of last year, China's elderly comprised 14 percent of its
population. That figure is expected to grow to 25 percent by 2030. 

A series of structural changes to China’s current health-care system could save Asia’s largest
economy up to 3 percent of GDP, according to a study released Friday.

Changes include strengthening its primary care system and allowing private sector players fair
competition with the public sector. This also involves relaxing curbs on foreign investments in
hospitals.

"We’re confident that these reforms will help China build a strong foundation to create a healthier
population, which will be an engine for job creation and sustainable economic growth in China."
said the president of the World Bank Group.

Adapted from Bloomberg News, July 22, 2016

Table 2: Selected Social Indicators in China, 2010 – 2014

2010 2011 2012 2013 2014

Health expenditure per capita 220.08 279.48 328.66 375.14 419.73
(current US$)
Infant mortality rate 13.5 12.5 11.5 10.6 9.8
(per 1,000 live births) [1]

Notes:
[1]
‘Infant mortality rate’ is the number of infants dying before reaching one year of age, per 1,000
live births in a given year
Source: World Bank, http://data.worldbank.org/

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Extract 2: China healthcare reform to relax curbs on foreign investments in hospitals

China will ease curbs on foreign investment in joint-venture hospitals, as the government aims to
cut costs and spruce up overloaded public services. The move would increase the number of
locations where Hong Kong, Taiwan and Macau investors could set up wholly-owned medical
centres, and let overseas investors set up wholly-owned hospitals in designated areas such as the
Shanghai free trade zone.

Since 2009, China has spent 3 trillion yuan ($480 billion) on healthcare reform, but the system still
struggles with a scarcity of doctors, attacks by patients on medical staff and a fragmented drug
distribution and retail market. Nevertheless reforms are necessary as relying on a market system
of allocating resources to health care would fail to provide the optimum amount given the nature of
the good itself.

Adapted from AsiaOne, May 28, 2014

Extract 3: Healthcare in Thailand

Few problems in developing countries are as gut wrenching as high infant mortality — and yet it is
a problem that has solutions. A policy change in Thailand’s healthcare system has quickly led to
significantly lower infant mortality rates among less-wealthy citizens, as a study by MIT economists
shows.

Previously, about 30 percent of Thailand’s population had been enrolled in a modestly funded
healthcare program, the Medical Welfare Scheme (MWS), while another 50 percent of the
population was too well-off for MWS, but not well-off enough to afford healthcare.

A policies reform of the Thailand healthcare system sees the implementation of the 30 Baht
program. Under this program, every scheme participant may access registered health services for
a flat out-of-pocket fee of 30 Baht per consultation, the payment includes the medical care received
and the drugs that are prescribed. However, some costly procedures such as cosmetic care,
obstetric delivery beyond two pregnancies, organ transplant, chemotherapy, and renal dialysis are
not covered. The implementation of the 30 Baht program has led to a 13 percent drop in infant
mortality rate in a year. This decrease in infant mortality rate was a striking medical outcome
stemming from the greater access to hospitals where we see a sharp drop in infant deaths in rural
areas. This is because previously they might never have entered hospitals to seek care.

Nevertheless, this copayment scheme is made possible through subsidies given by the Thai
government to the hospitals. The annual budget allocated for healthcare provision cannot keep
pace with the needs of the Thais. As a result of the tight government budget, millions of Thais who
subscribed for the 30 Baht program face a reality of capacity constraints – a two-hour wait to see a
doctor for seven minutes.

Adapted from MIT News, April 30, 2014

Questions
1 (a) (i) Compare the real GDP growth of China and Thailand over the period 2010 to 2014. [2]

(ii) What is the difference between real GDP growth and nominal GDP growth? [1]

Pioneer Junior College 2016 8819/01/PJC EOY/2016

Name:________________________ Index Number: ________________ Class:____________

(iii) Identify the economy which has a lower growth in nominal GDP in 2012. [1]

(b) (i) Explain what is meant by the term ‘positive externality’. [2]

(ii) With reference to the data, explain how relying on a market system of allocating
resources to health care would fail to provide the optimum amount given the nature of
the good itself. [4]

(iii) Discuss the case for subsidising healthcare services by the Thai government through the
30 Baht program. [6]

(c) With the help of an AD and AS diagram, explain the impact in both the short and the long run
of China relaxing curbs on foreign investment in the healthcare market on her economic
growth. [6]

(d) Discuss whether the data provided are sufficient to conclude that the standard of living of
China has increased from 2010 to 2014. [8]

[Total: 30]

Section B

2 (a) Explain, using examples, what is meant by

i. a public good,

ii. a demerit good. [10]

(b) Explain and evaluate one method that a government might use to bring about a more efficient
allocation of resources in the market for demerit good. [15]

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