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2015 A Levels Analysis & Comments:

Paper 2 SECTION A

Question 1 Comments:
Good question to attempt, but most were afraid of answering 1a due to lack of
exposure to a question like this (but it is not difficult to answer!)
Weve actually discussed university education extensively in the last few lessons
leading up to the A Levels. Weve discussed about how it was tested in 2012 paper (I
made the comment that even though its unlikely to be tested since it was already
tested in 2012, lets still discuss it anyway). We even did a CSQ with regards to
spending on university education. Thus my students, should actually be prepared for
Question 1.
We covered similar content in
o Simulated Essay Paper Question 2 (LAST Nov LESSON at Park Mall)
o RJC H1 CSQ on US vs SG Tertiary / Pri Education (27th Oct Lesson at Park Mall)

Question 1 Analysis:

1a

Needs to remember that the specific question is on university education and not
education
That means that diminishing returns can be brought in as a concept to explain that
when moving on from post-secondary education to university education, the costs
associated increases significantly but the benefits may not commensurate.
Essentially, if I were to attempt the paper, I would have been doing a cost-benefit
analysis
Costs discussed should not be just on actual monetary costs associated with
university education, the effort required to study depending on individuals
capability but also opportunity costs job and salary foregone to study. (could have
entered the workforce earlier if not for university education)
Benefits discussed should be including potential increased future earnings.
The costs & benefits for each student differs depending on their capability & the
type of university & course attended.

1b.
Again, identify that the discussion here is not on education but on university
education
Like education, university education is a merit good that possesses positive
externalities. Explain what such external benefits might be.
However, university education also sees marked increases in costs compared to its
external benefits
Compare university education vs pri/secondary education. The benefits of university
education are largely private rather than external.
Thus, in view of this, whether heavy subsidies to be given for university education
should be carefully considered

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Government cannot only see this from a microeconomics perspective but also
from a macroeconomics perspective
o In terms of impacts on the labour force & productivity
o In terms of budget position (whether significant subsidies would serve to
worsen the budget position)

Question 2 Comments:
Not a very difficult question to attempt, but probably quite hard to score well at it,
given that the fundamental concepts tested are very simple (it is really demand &
supply!)
We did not cover anything like this in our last few lessons, the concepts tested were
what we would have gone through early in our JC1 lessons. But all the same,
structure and answering skills, we covered them in various questions dealing with
demand / supply / elasticities
Most students would avoid this due to lack of confidence

Question 2 Analysis:
It is easy to give both demand & supply factors, I would say a total of 4-5 factors
would be good, and bring in a mixture of the following
o Taste & Preference
o Income levels
o Size of market
o Price of related goods
o Number of sellers
o Cost of raw materials
o Technological advancements
o Government policy
The second part on evaluating which is the most important factor is the key to
scoring.
If I were the one writing this essay, I would focus on the following factors as
important ones
o Lifestyle changes (the need to be connected)
o Rising affluence (ability to purchase has increased significantly)
o Technological advancements (which has pushed down cost significantly,
allowed mass production)

Question 3 Comments & Analysis:

I have specifically told you all in the last lesson to study Monopoly (in fact it was first on the
guess-list).
As such, I have also covered this extensively in the following:
o Simulated Essay Paper Question 2 (LAST Nov LESSON at Park Mall)
o 2 Essays discussing Monopoly in Micro Econs Workshop

What must be present in your answers?

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BTEs Market Dominance Inelastic demand

Profit Maximisation output (illustration)
Deadweight Loss & Comparison with PC
Government Policies and their limitations
o MC Pricing
o Nationalisation
o Regulation
o Introduce competition
Case of Natural Monopoly YAY!

Question 4 Comments & Analysis

4a

You have to make use of the preamble, and understand that the question was
directed to a specific year 2013, and the factors causing inflation in Singapore were
o Demand-pull inflation while being a cause was unlikely to be the most
significant one
Consumption growth was slowing (so there is still an increase in C!)
Manufacturing and trade-related could imply export-led growth
In other words, C & X were contributing factors towards growth in AD
which could cause demand pull inflation
o Increase in labour costs was also a key factor and the question was hinting at
2 reasons for it
That the economy was operating already at full employment level and
demand for goods and services (AD) continue to rises, causing
demand for labour to rise, this would cause firms to bid up the wages
of existing workers
Shortages in labour supply could be pin-pointed to the tightening of
foreign worker inflow
AD-AS analysis should be used in this question, with accompanying diagrams to
explain the above.

4b.

Explain how exchange rate policy in the form of a modest and gradual appreciation
of the exchange rate works
Explain how it arrests these various forms of inflation, when present in SG
o Demand-pull inflation caused by export-led growth
o Imported inflation caused by external supply side shocks
o Cost-push inflation caused by more costly imported raw materials
That it still has a place in dealing with inflation
But if we look at recent years (2009 2013), causes of inflation has increasingly
varying causes

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o Higher housing prices caused by both demand factors (due to low interest
rates, population, incomes)
o Higher car prices
o Foreign immigration policies which has affected labour costs
These are factors which cannot be solved with exchange rate policy,
Instead, other policies could be brought in to solve the varying causes of inflation
o Macro-prudential policies like cooling measures restricting loans, increasing
stamp duties to cool the property market
o Supply side policies with the aim of increasing productivity to mitigate labour
costs

Question 5 Comments & Analysis

Question is asking for a comparison between usage of expansionary monetary policy
vs expansionary fiscal policy
Points that we should see in your discussion
o Explanation of expansionary monetary policy & fiscal policy in a detailed
fashion
o Limitations of using expansionary monetary policy specifically
Liquidity trap
Pessimism / animal spirits
o Point out how these limitations actually affected EU / US during their recent
crisis period
o The fact that they have actually bypassed some of these limitations by using
an unconventional form of monetary policy ; quantitative easing (QE)
o Explain QE and its success / limitations
o Explain how expansionary fiscal policy could have been more direct in
stimulating the economy but subjected to the following limitations
Many countries provide social transfers in their fiscal stimulus
programmes which may tend not to be very helpful since in times of
recession, people tend to save rather than spend
That in the first place many countries today have a significant debt
problem which restricts their hand in the ability to carry out fiscal
stimulus
My comments:
We have covered this extremely extensively during the following lessons
o Economics Essence Workshop
o During our Extra Lessons programme on the lesson covering policies and
also during the lesson where we gave you the statistics of 4 major economies
and asked you to come out with solutions!
o Also covered in our Simulated A Level paper in November!
ALL OF YOU should be more than adequately prepared to score in this question!

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Question 6 Comments & Analysis

6a.

A case study must be given. You can use countries like Singapore, China, U.S. etc,
those that you are familiar with
Explain the meaning and idea of comparative advantage
o Comes from the ability to produce a good at a lower opportunity cost
compared to another country
Thus in general, we would explain that there could have been changes in
o Labour market (population cost, quality, education levels)
o Technology
E.g. we could explain why we have moved from more labour intensive industries to
more knowledge intensive industries today

6b.

An open-ended question with wide range of policies that could be brought in

Fiscal policy with
o low and attractive corporate tax rates to attract investments
o low and attractive personal income tax rates to attract and retain talent
o spending on infrastructure boosting productivity and efficiency (high speed
broadband, good transport networks, Changi airport)
o focus on supply side
Supply side policies
o Incentives for firms to develop technology, boost productivity and innovation
Productivity and Innovation Credit
iSPRINT
Free Trade Agreements
o Abolishment of trade barriers help to keep exports competitive

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