H2 Economics Flashcards

What is a 'merit good'?

Answer: A good that is underprovided by the market because its social benefits exceed private benefits, e.g., education, healthcare

Merit goods have positive externalities and are undervalued by consumers — people consume less than the socially optimal amount. Governments subsidise or directly provide merit goods like education and healthcare.

What is the 'balance of payments'?

Answer: A systematic record of all economic transactions between residents of one country and the rest of the world over a period

The Balance of Payments (BoP) is a comprehensive record of all economic transactions (trade, investment, transfers) between a country's residents and the rest of the world over a specific period.

What is the impact of automation on structural unemployment in Singapore?

Answer: Automation can create structural unemployment by displacing workers in routine jobs, requiring workforce retraining

Automation displaces workers in routine, repetitive tasks (structural unemployment). Singapore addresses this through schemes like SkillsFuture to retrain workers for higher-skilled jobs in a digital economy.

What does 'market failure' mean?

Answer: When the free market mechanism leads to an inefficient allocation of resources

Market failure occurs when free markets fail to achieve allocative efficiency — they either overproduce goods with negative externalities, underproduce goods with positive externalities, or fail to provide public goods.

What is the 'Singapore model' of development economics?

Answer: Export-oriented, FDI-attracting, skills-based, meritocratic, and pragmatic governance-driven development

Singapore's development model combines: export orientation, attraction of FDI, heavy investment in human capital, meritocracy, strong institutions, pragmatic governance, and strategic state enterprise intervention.

What happens to a firm's economic profit in long-run equilibrium under monopolistic competition?

Answer: Economic profit is zero as new firms enter, shifting demand curves of existing firms left

In the long run, positive economic profits attract new entrants with similar products. This shifts existing firms' demand curves left until only normal profit (zero economic profit) is earned.