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138 views4 pages

healthcare-ms

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alyasin.ics
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We take content rights seriously. If you suspect this is your content, claim it here.
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Merit goods, elasticity, production possibility curves (HL and

SL)
IB Examination style paper 2
Healthcare in the US

Markscheme answers
a. (i) Define the term merit good. (paragraph 2) [2]

A merit good is a product that governments believe people should consume because of its social
benefits.

(ii) Using a cost/benefit diagram, explain the positive externalities of individuals wearing masks.
(paragraph 2) [4]

If an individual wears a mask they are less


likely to pass on the Covid19 to third
parties who benefit from the use of
masks. This is shown by MSB being
greater than MPB in the diagram.

b. (i) Define the term price elasticity of supply. (paragraph 1) [2]

Price elasticity of supply is the responsiveness of quantity supplied of a good to a change in its price.

(ii) Explain two reasons why the supply of personal protection equipment (PPE) might have been
initially inelastic. (paragraph 1) [4]

PPE may be inelastic because:

• Supply is inelastic in the short run and it takes time for producers to increase their output of
PPE
• They might have limited stock of PPE
• There could be limits to the availability of factors of production to produce PPE.

© Alex Smith
InThinking www.thinkib.net/Economics 1
c. (i) Define the term subsidy. (paragraph 5) [2]

A subsidy is the money paid to the producers of a good by the government to reduce price and
increase market output.

(ii) Using a demand and supply diagram, explain the impact of a government subsidy on the
market price and quantity of hospital care in the US. (paragraph 5) [4]

The subsidy on hospital care paid by the


government causes the supply of hospital
care to shift from S to S1 which reduces
the price from P to P1 and quantity
increases from Q to Q1.

d. (i) Outline what a production possibility curve (PPC) shows. (paragraph 4) [2]

A PPC is a model of an economy that shows the different relative amounts of two goods that can be
produced with scarce resources.

(ii) State how efficient an economy operating inside the PPC is. (paragraph 4) [1]

Inefficient

(iii) Using a PPC diagram explain how an improvement in healthcare amongst the US population
might increase the country's potential output. (paragraph 4) [4]

As health improves in the US potential


output increases and PPC shifts to PPC1.
This is because a healthier labour force
that results from better healthcare can
become more productive.

© Alex Smith
InThinking www.thinkib.net/Economics 2
e. Using information from the text and your knowledge of economics, evaluate the view that
increased government spending on healthcare can only benefit the US population. [15]

Answers might include:

• Definition of government spending.

• Increased government spending on healthcare might lead to positive externalities that


increase welfare in the population (‘protects people a mask wearer comes into contact
with’).

• Increased government spending on healthcare might improve labour productivity and


increases potential output (‘more likely to take time off work and perform less well when
they are at work’).

• Increased government spending


on healthcare reduces income
inequality if healthcare spending
is aimed at households on low
incomes (‘Affordable Care Act
(ACA) that aimed to increase
healthcare coverage to the
whole of the US population’).
This is shown by the shift from LC
to LC1 in the diagram towards
the blue line perfect income
equality.

• Increased government spending on healthcare improves household health and this increases
their welfare and life expectancy.

• Evaluation might include discussion of the opportunity cost of increased government


expenditure on healthcare. Government spending on healthcare also means people on
higher incomes have to pay for the healthcare of people on lower incomes or people with
healthy lifestyles have to pay for those with unhealthy lifestyles (‘coverage of people on low
incomes means richer people would have to pay more’). This might be seen as unfair.
Government spending on healthcare is sometimes seen as inefficient and affected by
political factors.

© Alex Smith
InThinking www.thinkib.net/Economics 3
Marking Criteria for the 15 mark final question Mark
There is no answer to the question but some limited: 1-3
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is a vague answer to the question with limited: 4-6
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is an answer to the question with satisfactory: 7-9
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is a clear answer to the question with good: 10-12
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is a clear answer to the question with excellent: 13-15
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer

Total [40]

© Alex Smith
InThinking www.thinkib.net/Economics 4

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