(2023) A Level H2 Econs Essay Q5 Suggested Answer by Mr Eugene Toh (A Level Economics Tutor)
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a.
Introduction
The material standard of living primarily focuses on the quantitative aspects of life, reflecting the abundance of goods and services available to a country's residents. It is a measure of the tangible economic resources and consumption capabilities within a society.
On the other hand, the non-material standard of living delves into the qualitative dimensions of life. This includes factors such as the accessibility and quality of education and healthcare, the overall stress levels experienced by individuals, and the degree of environmental pollution. These elements collectively contribute to the broader quality of life beyond mere economic wealth.
Measuring material standard of living over time
To evaluate improvements in a country's material standard of living, economists frequently turn to the measurement of real GDP per capita. This indicator offers a useful lens for understanding economic well-being on an individual level.
Real GDP, or Gross Domestic Product, represents the total economic output of a country, adjusted for inflation. By expressing this figure on a per capita (per person) basis, we gain insight into the average economic production attributed to each individual within the country. An increase in real GDP per capita generally signifies that individuals, on average, have higher incomes and an enhanced capacity to purchase goods and services. This improvement suggests an elevation in the material standard of living, as residents can afford a greater quantity and variety of material goods and amenities.
The term "real" in real GDP per capita is crucial, as it adjusts for changes in general price levels, or inflation. This adjustment means that the growth in GDP is not artificially inflated by rising prices; instead, it reflects a true increase in the volume of goods and services produced.
The "per capita" component is equally important. It ensures that the measurement accounts for population growth. Without this adjustment, total GDP could increase simply because there are more people, not necessarily because individuals are better off. By using GDP per capita, the measure becomes more reflective of the economic well-being of the average person.
Despite its usefulness, real GDP per capita has limitations, particularly concerning income inequality. This indicator provides an average and does not account for how income is distributed across the population. In countries with high income inequality, real GDP per capita might suggest an improvement in material standards of living, even though a significant portion of the population has not experienced real income growth.
To address this limitation, examining median income levels can be informative. Median income represents the income level at the middle of a country’s income distribution. This measure can provide a more accurate reflection of the typical individual’s economic situation, especially in societies with significant income disparities. An increase in median income indicates that the material standard of living is improving for the 'average' person, rather than just for those at the higher end of the income spectrum.
Measuring non-material standard of living over time
Non-material standard of living is about the qualitative aspects of life that contribute to overall well-being and satisfaction. This includes access to and quality of healthcare and education, as well as general happiness and contentment within the population.
Life expectancy is a primary measure for gauging healthcare improvements. It reflects the average number of years a person is expected to live based on current mortality trends. A rise in life expectancy typically indicates better healthcare access, improved medical treatments, and overall healthier living conditions. It's a strong signal that people are not only living longer but are also experiencing better health during their lives, which significantly impacts the non-material quality of life.
University Cohort Participation Rates: Participation rates in higher education, such as the proportion of a generation attending university, offer insights into educational improvements. Higher participation rates suggest increased access to education and potentially better future career and income prospects for individuals. This expansion of educational opportunities contributes to a more knowledgeable, skilled, and versatile workforce, which can enhance the overall intellectual and cultural richness of a society.
The number of working hours can serve as a proxy for assessing happiness or general well-being. It's often inversely related to leisure time; fewer working hours might indicate a better work-life balance, allowing individuals more time for personal pursuits, family, and relaxation. This balance is crucial for mental health and overall life satisfaction. However, this measure must be interpreted with caution, as fewer working hours could also reflect underemployment or economic downturns.
While these indicators provide valuable insights into different aspects of non-material standard of living, it's important to recognize that they only offer a general overview. Each indicator has its limitations and might not capture the full complexity of non-material well-being. For instance, higher life expectancy does not always mean healthier life years; university participation rates don't always ensure quality education or job market relevance; and working hours as a measure of happiness doesn't account for job satisfaction or income adequacy. Therefore, while these measures are helpful, they should be viewed as part of a larger mosaic of factors that collectively paint a picture of a country's non-material standard of living.
Note: You can also bring in any other reasonable indicators for this question. HDI can also be brought in as a composite measure.
5b.
Introduction
Sustainable economic growth refers to an increase in the real output of an economy over time, without causing significant long-term damage to the environment or severe unintended consequences.
Singapore serves as a quintessential example of a densely populated, rapidly growing city. Over the past few decades, it has transformed into a global financial hub with a high GDP per capita. This rapid growth has been accompanied by significant urbanization, technological advancement, and an increase in the material aspects of living standards, such as income levels and access to goods and services.
Why increases in the living in the living standards of densely populated, rapidly growing cities may be difficult
As Singapore's economy grew, so did its population, leading to increased vehicular traffic and congestion. The high density of cars and public transport usage, despite Singapore's efficient public transport system, illustrates the challenge of maintaining mobility and reducing commute times in a rapidly urbanizing space. Congestion can lead to lost productivity and increased stress levels, adversely impacting non-material aspects of living standards.
Industrial and urban growth often brings pollution, which Singapore has had to manage carefully. Air and water pollution, if not controlled, can lead to health problems and degrade the quality of life. While in recent years, we have been successful in managing this - this was not always the case (in Singapore’s early development, The Singapore River, for instance, was very polluted)
Rapid growth puts pressure on existing infrastructure. Housing, healthcare, education, and utilities need to keep pace with the growing population. In Singapore, this has meant constant upgrading and expansion of facilities. Without managing this properly, high property price inflation can occur.
While economic growth typically leads to improved material living standards through higher incomes and better access to goods and services, the associated challenges of congestion, pollution, and infrastructural strain can negatively impact the non-material aspects of living standards. Quality of life, which includes clean environment, accessible healthcare, and leisure time, can be compromised in the face of rapid development.
Why increases in the living in the living standards of densely populated, rapidly growing cities may be achievable and sustainable in the long term
Despite being a densely populated and rapidly growing city, Singapore has managed to enhance living standards by carefully balancing growth with environmental and social considerations.
To tackle congestion, Singapore implemented a Vehicle Quota System (VQS) and an Electronic Road Pricing (ERP) system. These measures limit the number of vehicles on the road and charge motorists for using busy roads during peak hours. Furthermore, substantial investments in public transportation, such as expanding the Mass Rapid Transit (MRT) network, have made public transit a more viable and attractive option. These policies have not only helped in managing traffic flow but also contributed to a higher standard of living by reducing commute times, lowering pollution levels, and enhancing the overall urban living experience.
In recent years, Singapore has intensified its focus on sustainable economic growth. Measures like implementing carbon taxes and promoting the adoption of electric vehicles are steps towards reducing environmental impact. The Singapore Green Plan outlines strategies for a sustainable future, encompassing various aspects like green buildings, renewable energy, and sustainable living. These initiatives contribute to improving living standards by fostering a cleaner, greener, and more livable city, enhancing the non-material aspects of life, such as health and environmental quality.
Singapore has also taken steps to manage the strain on its infrastructure due to rapid growth. Policies like increasing the foreign worker levy have been instrumental in controlling the growth of the foreign population. Simultaneously, the government has encouraged firms to focus on increasing productivity through retraining, upgrading, and automation, rather than relying solely on labor expansion. This approach not only eases the pressure on infrastructure like housing, healthcare, and education but also promotes a more sustainable economic model. As a result, residents experience improved living standards due to less overcrowded facilities, better access to services, and enhanced job opportunities due to a more skilled workforce.
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