MJC 2014 Question 1

Issues in Early Childhood Education

Extract 1: Tackling Singapores rising costs of early childhood education

Keen competition among operators for space has pushed up rental rates to as much
as $40,000 from $20,000 five years ago. "We find it hard to expand because of the
lack of suitable sites and trained teachers," said Ms Lurvin Lee, director of a
preschool chain. Meanwhile, demand for early childhood education (ECE) services
has almost doubled in the past eight years, as more working parents enrol their
children in preschools.
The rising cost has led to concerns about quality childcare getting out of reach for
the average Singaporean family. Currently, the two anchor operators - NTUC's My
First Skool and the PAP Community Foundation - get government help, such as
rental subsidies and priority in securing HDB premises for new centres. In exchange,
they have to keep fees below the industry median.
Under a new scheme which allows private entities to be anchor operators, they will
also be entitled to such goodies but will be required to keep fees below $720 a
month for full-day childcare and maintain quality in their curriculum. "By introducing
more competition among the big players, the good-quality programmes are more
accessible to the masses. This means greater diversity and more choices for
parents," said Dr Khoo, who runs the Preschool for Multiple Intelligences.
But one key concern stands in the way of the Government's efforts to grow the ECE
sector: a shortage of good teachers. The low pay and the lack of opportunities for
career progression has long been a bugbear in attracting and retaining talent in the
industry. "Training teachers, especially good ones, will take much longer than
building centres, said Ms Lee.
Source: The Straits Times, 16 Oct 2013
Table 1: Statistics on Childcare Services in Singapore
Total enrolment in childcare centres
Average full-day fees (in S$))

2009
2010
2011
2012
67,980 77,792 85,790 92,779
739
776
809
850

Source: Early Childhood Development Agency, 1 December 2013

Extract 2: Many in favour of government taking over preschool sector
Mrs Denise Lai has been in the early childhood education business for over 15
years. She is one of the many child education experts who, in recent years, have
called for the government to take charge of preschool education and offer it free to
all children.
However some experts such as Ms Ho Yin Fong, academic director of the National
Trades Union Congress-run Seed Institute, says the government could provide good

preschools for the majority of children. But it could also subsidize and support private
operators who have a proven record of providing high-quality education.
There was also a strong call for the Ministry of Education (MOE) to raise the quality
of teachers by recruiting and training preschool teachers the way it does for
mainstream school teachers through the National Institute of Education (NIE).
But where would that leave current preschool teachers, many of whom are not
degree holders? Serene Lim, 48, who switched to preschool teaching a few years
ago, said: 'It would be difficult for me to switch careers at my age. I will be out of a
job.'
Source: The Straits Times, 28 July 2012
Extract 3: Plans to increase UKs childcare ratios
The UK government has plans to relax the staff to child ratios for certain age groups,
despite concerns that this would affect the quality of childcare. The government has
proposed allowing the ratio of staff to children aged two to three to be raised from
one to four, to one to six, enabling providers to reduce their costs. Given that around
70% of costs relate to staff wages, providers should be jumping for joy at the
prospect of increasing revenue.
But the government also said the changes are not compulsory and that the flexible
ratios would only be more possible where there are highly qualified staff. A
spokesman said: "We are reforming the childcare system so that providers have
more flexibility when they have highly qualified staff. High quality providers will be
able to expand and this will mean parents have more affordable childcare.
Source: BBC News, 3 March 2013
Extract 4: Benchmarking early education across the world
Preschool education can ensure that all children get a strong start in life, especially
those from low-income or disadvantaged households. Through extensive research,
we know that high quality programmes improve childrens readiness for school and
life in future. Early childhood contributes to creating the kinds of workforces needed
in the twenty-first century which bolsters economic growth, explains Sharon Kagan,
a professor of early childhood and family policy at Columbia University in the US.
In an Economist Intelligence Unit (EIU) research programme, preschool
environments in 45 countries were ranked based on a weighted index that takes into
account quality and inclusiveness of early childhood education* (ECE). The Nordic
countries - Finland, Sweden and Norway top this Starting Well Index, thanks to
sustained, long-term investments and prioritisation of early childhood development.
UK and Belgium rounded up the top five.
In Finland, preschool refers to a year of free half-day classes, which is
complemented with day care for the other half of the day. This builds on a
programme that gives parents access to full-day childcare from birth till the age of

six, at minimal cost. To ensure quality, teachers have to attain high university
qualifications: at least a bachelors degree in education, while many complete a
masters degree. Wages are reasonably high and class ratios are an average of 11
pupils per teacher.
While wealth is a major factor in a countrys ability to deliver preschool services,
many high-income countries such as Singapore ranked poorly. Despite having a
lower per capita GDP, Chile (ranked 20 th) outperformed Singapore as a result of
concerted government efforts to improve access which includes free preschool
education by its public ECE providers. About 85% of four-year olds, and 90% of fiveyear olds, now attend a preschool.
Source: The Economist Intelligence Unit, June 2012
*Early childhood education terminology varies across regions. This may include kindergartens, playgroups,
preschool and childcare.

Questions
(a) Compare the change in total enrolment in childcare centres between
2009 and 2012 with the change in average full-day fees over the same
period.

[2]

(b) What can you conclude from the evidence in Extract 3 about the price
elasticity of demand for childcare in UK?

[2]

(c) (i)

Explain the likely value of the price elasticity of supply for early
childhood education in Singapore.

(ii) Explain the likely impact of the events in Extract 1 on the market for
early childhood education in Singapore.
(d) Using economic analysis, evaluate the appropriateness of government
offering preschool education free to address the market failure in Extract
4.

[2]
[6]

[8]

(e) Discuss the policy options available to the Singapore government to

keep childcare prices down and improve the quality of its early childhood
education.
[10]
[Total: 30]

Question 1 Tourism and Hospitality Industry

Table 1: Tourism Industry Performance for Singapore
2010
2011
2012
Total visitors (000)
11,641.7
13,171.3
14,496.1
Region (000)
Americas
524.8
563.7
616.4
Mainland China
1,171.5
1,577.5
2,034.2
Europe
1,373.5
1,401.5
1,537.3
Tourism Receipts ($m)
18,931
22,277
23,081
Number of Tourist Hotels
96
98
101
Standard Average Room Rate (S$)
217.9
247.1
261.7
Room Revenue (S$m)
2,091.0
2,643.5
2,818.4

2013
15,567.9
641.5
2,269.9
1,591.2
23,469
117
257.8
2,928.3

Source: http://www.singstat.gov.sg/statistics/

Extract 1: Singapore Tourism Board pushes for quality tourism

For the long-term sustainable growth of Singapores tourism industry, Singapore Tourism
Board (STB) is promoting high-quality tourism by embarking on a series of customised
marketing campaigns catered to different consumers, while it continues to strive to establish
industry competencies to help upgrade the skills of workers in the F&B and hotel industries.
In the meantime, Singapore pushes to restructure its economy by raising productivity and
reducing its reliance on foreign workers. Challenges to the tourism industry include higher
foreign worker levies, rising rentals and wages, coupled with an appreciating Singapore
dollar.
STBs target of 17m annual visitors by 2015 implies an increase of 6.6% per annum. While
emerging markets like Mainland China remain the top 3 on lists of visitor arrivals to
Singapore, visitors from China have dropped 27 percent in the five months through May
2013 from a year earlier, due to slower economic growth on the mainland and the impact of
a new Chinese law that clamps down on cut-price shopping tours. This is further
exacerbated by the continuing strengthening of the S$ exchange rate against the Yuan and
a sales tax that Chinese tourists dont encounter in neighbouring Hong Kong.
The STB aims to offer more innovative experiences to cater to the ever-changing needs of
the customers. The opening of the new cruise ship terminal Marina Bay Cruise Centre
Singapore (MBCCS) in October 2012 allows Singapore to tap into the increasing number of

people in Asia who are taking leisure trips on luxury vessels and allows Singapore to
become a cruise gateway to Asia. STB has extended its Cruise-Fly products to the MBCCS.
Together with the expansion of networks and partnerships with other airlines, more
passengers will be able to enjoy convenient, seamless transfers to and from Changi Airport.
The push for medical and education tourism continues as Asian economies continue to grow.
With the novelty effect of the integrated resorts wearing off, and Singapore facing stronger
competition from neighbouring economies, new tourist attractions such as the River Safari
and the National Art Gallery are being introduced. The opening of the MBCCS will also help
support regional cruises which are well received among South East Asian travellers, who
dislike long haul flights or have tighter budgets. Singapores travel and tourism landscape is
likely to remain positive.
Source: adapted from Bloomberg 2014 & other various sources

RI 2014 Extract 2: How competitive is Hong Kong against its competitors?

This demand elasticity analysis provides insights into Hong Kong's competitiveness as an
international tourist destination in comparison with its neighboring competitors: Macau,
Singapore and South Korea. The study recognizes that differences between markets should
be taken into consideration in evaluating a destination's competitiveness. Overall, this study
finds that Hong Kong has a competitive advantage over Macau. However, Singapore and
South Korea appear to be in a better competitive position than Hong Kong.
Source: www.elsevier.com Tourism Management

Table 2: Short-run own-price

elasticities by source market
Hong Kong

1.209

Macau

1.598

Singapore

0.876

South Korea

0.518

Source: How competitive is Hong

Kong against its competitors?

Table 3: Short-run cross-price

elasticities by source market
Hong Kong with respect to the
price of South Korea

0.560

South Korea with respect to the

price of Hong Kong

0.279

Source: How competitive is Hong Kong against

its competitors?

Extract 3: Mainlanders buoy Hong Kong GDP

Hong Kongs Gross Domestic Product (GDP) is likely to have grown above 3% year on year.
The number was helped by solid domestic demand, which contributes over two-thirds of
Hong Kongs GDP. Hong Kong has benefited from a wave of spending from mainland
Chinese who go there on vacation and to shop. Data shows the number of mainland tourists
grew by about 20% each year between 2008 and 2012. The share of mainland tourists
relative to all visitors rose to about 72% in 2012, up from 57% in 2008.
About a third of all retail spending, a major contributor to local demand, comes from visitors.
Last year, mainland Chinese made HK$119 billion (US$15.2 billion) of retail purchases, up
from HK$43 billion in 2008, according to data from the census department. In 2012, local
residents spent HK$287 billion.
Source: Adapted from Wall Street Journal 2013

Extract 4: Too much, too fast

Calls have been made to review Hong Kong's tourism policy. Tourism is not an industry per
se but a collection of interrelated industries, which sell products and services to tourists as
well as to a range of other customers: hotels, tour operators and travel agents, airlines, etc.
Until recently, all tourism was seen as beneficial. It is inevitable that large numbers of
outsiders have consequences beyond creating employment and income. Inbound tourism
contributed around 2% of Hong Kongs GDP in 2008, 4% in 2011 and 5% in 2012. About 50
million tourists come to Hong Kong every year. Hong Kongs resident population is 7.1million
and the sheer number of tourists is creating demand that has not been planned for. A
shortage of manpower during peak seasons like Chinese New Year has exacerbated the
problem.
Hong Kong is struggling to absorb the impact of these tourists. Shopping centres are
dominated by high-price goods that are no longer relevant to the daily needs of local people.
Prices of services, accommodation and property are being driven up by what the outsiders

pay, rather than "real" demand. Famous local shops and eateries are being turfed out due to
higher rentals for chain stores that cater mainly to monied tourists. This is driving out small
businesses, narrowing job opportunities, while benefiting mainly landlords, big retailers and
seasonal workers.
The effect is now being felt beyond the shopping centres, with tourists swamping campsites,
Repulse Bay and country parks, dominating areas that are also places for local recreation.
Any tourism incurs costs, whether it is in the allocation of resources such as land, the
disposal of waste, traffic congestion or general pollution.
Benefits from tourism must be sustainable and seen in the context of what is good for the
lifestyle of Hong Kong residents. Hong Kong cannot keep building new attractions to keep its
visitors keen and happy. An example is the huge area of land set aside for tourism activities
and hotel development at Kai Tak, 6 hectares of land to be developed along the waterfront;
and the proposal to build a border shopping town for tourists who just want to shop. A
rational reassessment of the best use of such land is needed. Setting aside the land for
community use or as open space would improve the quality of life for local residents.
The contribution of tourism to the Hong Kong economy, at about 5 per cent of gross
domestic product, is actually quite small. Hong Kong should develop its other sectors,
instead of tourism. Calls to avoid low-quality, low-yield mass tourism and more focus on
medical and eco-tourism may be a solution. Meanwhile, there are calls for the government to
curb the influx and limit the number of tourists.
Source: Adapted from South China Morning Post, accessed 20 April 2013

Questions
(a)

Compare the trends in the number of visitors from the different regions to Singapore
between 2010 and 2013.

[2]

(b)

Using Extract 1, comment on the possible relationships between air travel and the
cruise industry.

[4]

(c)

To what extent would a hotel owner in Singapore benefit from developments in

Singapores travel and tourism sector?

[8]

(d)

(i)

With reference to Table 2, explain why all the own price elasticities are
negative.

[2]

(a

(ii)

Explain one possible reason why the demand for South Korea as a holiday
destination is less price elastic than that for Macau.

[2]

(e)
0(a

Using Table 3, explain the values shown in the table for the cross price elasticities for
Hong Kong and South Korea.

[2]

(f)

Discuss the view that Hong Kong should avoid low-quality, low yield mass tourism and
focus on medical and eco-tourism.

[10]

RVHS 2014 Question 1

Distortions in the energy markets
Extract 1: Wind farm subsidies to top 1billion this year

According to an analysis of official figures by the think-tank Renewable Energy

Foundation (REF), the total annual subsidy for onshore and offshore wind farms in the
UK has topped 1bn. The disclosure comes ahead of a long-awaited government
announcement to cut the size of the subsidy which has benefited the big energy
companies but is added on to household electricity bills as a levy.

The subsidies were introduced by the Labour government to encourage green energy
projects, including wind farms. However, it is now generally accepted that the subsidies
are too generous due to advances in technologies. REF estimates that on current
renewable energy targets, and with only modest cuts, the energy companies will have
received 100 billion in subsidies by 2030. REF said it expects 10 companies, between
them, to pocket 800million through subsidies over the next 12 months.

Out of the top 10, only two of the companies are British-owned. The remaining energy
companies that make money out of British wind farms and British consumers are
based in Germany, Norway, Spain and Italy.

Source: The Telegraph, 14 Jul 2012

Extract 2: Wind power still gets lower public subsidies than fossil fuel
Public subsidies for the development of wind power in the UK are far less than the tax
breaks given to fossil fuels. Financial support for fledgling renewable energy industries
has increasingly come under attack in recent months, but the new data shows that the
older industries benefit to a far greater extent.
The UK's greater subsidies for fossil fuels mirrors the global situation, with the
International Energy Agency (IEA) recently showing that in the 37 countries it
analysed, oil, gas and coal received $409bn (261bn) in 2010 compared with $66bn
for renewable energy.

Almost 90% of the fossil fuel subsidy in UK comes from the reduced rate of VAT paid
by households. In the UK, VAT on gas and electricity is 5% rather than 20% charged
on most other goods. If such price cuts were intended to reduce energy costs for
poorer households, they were a very blunt tool.

.
The former chief executive of British Petroleum (BP), has backed wind power
subsidies. "People forget the government supported the oil and gas supply chain in its
early days: with generous tax incentives, training programmes, strategic infrastructure
and supportive regulation," he said in 2011. "The result today is a world leading
industry, creating jobs in manufacturing and engineering across the UK.".

The government acknowledged that investing in wind, marine, solar and other
renewable energy sources will help meet the nation's greenhouse gas emissions target,
as well as provide economic opportunities for the UK and a less volatile energy market.
It points to rising global gas prices as the major reason for the sharp rise in home energy
bills in recent years. Opponents argue that investing in renewables is unaffordable in
this economic climate.
Source: The Guardian, 27 February 2012

Extract 3: Fossil fuel subsidies

One of the most surprising and alarming issues in the climate and energy arena is the
fact that the fossil fuels causing global warming continue to receive substantial
government support. While government support given to environmentally beneficial
renewable power sources is subject to seemingly endless media and political scrutiny,
the 500% larger subsidies given to oil, gas and coal rarely get much attention.
The IEAs analysis focuses on the government policies designed directly to reduce the
price of fossil fuels. The bulk of these "consumption subsidies" are given out in
developing and transitional economies. One thing that is immediately striking here is
that consumption subsidies tend to be biggest in nations that export a lot of fossil fuels,
whether it is Saudi oil or Russian gas. In Egypt, subsidised low petrol prices were
sustainable while domestic oil production were high but as the oil industry has declined,
subsidies have become a huge burden. And Egypt is not alone, many countries in
Middle East, South East Asia, South America and Africa heavily subsidise petrol.
Source: The Guardian, 18 January 2012
Extract 4: Phasing out fossil fuel subsidies could provide half of global carbon
target

Eliminating subsidies for coal, gas and oil could save as much as Germany's
annual greenhouse gas emissions each year by 2015 and such a move could provide half of
the carbon savings needed to stop dangerous levels of climate change. While the G20 nations
pledged in 2009 to phase out such fossil fuel subsidies in the "medium term", the
hundreds of billions that governments spend each year rose in 2010. As such, this has
been undermining the competitiveness of renewables.
Most developed countries have already phased out policies that directly subsidise fossil
fuel consumption. But recent analysis by the OECD suggests that these nations continue
to prop up the oil, gas and coal industries in less obvious ways, such as providing tax
breaks or favourable access to land and infrastructure. These indirect mechanisms are
worth an estimated $4575bn. Coal, the most polluting of the three main fossil fuels,
currently receives 39% of this support, mostly as a result of governments in Europe, and
to a lesser extent Australia, Canada, Korea and the US, trying to ensure that changes to
their coal-mining industries happen gradually rather than overnight.
Source: The Guardian, 19 January 2012

Table 1: Own price elasticities of energy sources for selected countries

Country

Oil

Gas

Coal

Japan

-0.03

-0.00

-0.19

UK

-0.04

-0.13

-0.18

USA

-0.01

-0.00

-0.03

China

-0.01

n/a

-0.04

India

-0.00

n/a

-0.04

n/a = not available

Source: World Bank, 2010

Share of fossil fuel subsidies received by the

lowest 20% income group in surveyed economies, 2010

Gasoline
Diesel
Kerosene
LPG
Electricity
Natural Gas

Source: International Energy Agency, 2011

Figure 1

Questions
(a)

With reference to the data in Table 1,

(i) state how the own price elasticities of energy sources help to determine the nature of
the good.
[1]
(ii)

(b)

explain what determines the effectiveness of an increase in the price of oil in

reducing total energy consumption in the UK.
[4]

Explain how advances in technologies affect the level of subsidies given to encourage
green energy projects.
[3]

(c)
Explain how investing in renewable sources of energy can help to mitigate the rise in
home energy bills.
[2]

(d)

Using the concept of opportunity cost, explain whether there is justification for
consumption subsidies to be high in nations that export a lot of fossil fuels.
[2]

(e)

With reference to the data where appropriate, discuss the view that fossil fuel subsidy to
consumers are likely to bring about more costs than benefits.
[8]

(f)

Extract 4 states that eliminating subsidies for coal, gas and oil could provide half of the
carbon savings needed to stop dangerous levels of climate change. Using demand and supply

analysis, discuss the policy options available to governments in the fossil fuels and related
market to meet their carbon target.
[10]

[Total: 30]