Suggested Answers of BT2 Revision Package - ASKnLearn

EvaluationE2For a reasoned judgement3-4E1For an unexplained judgement1-2(5) 2011 RI Prelim H1 Paper Q3As Indian economist Amartya Sen has said, “The invisible hand of the market has oftenrelied heavily on the visible hand of government.”(a) Explain how the invisible hand works in the allocation of resources. [10](b) Evaluate the view that a government such as that of Singapore should subsidize entry tomuseums and tickets to watch arts performances. [15]Suggested Answer Outline(a) Explain how the invisible hand works in the allocation of resources. [10]IntroductionDefine invisible hand– price mechanismooPlays an allocative function as it allocates resources to the production ofdifferent types of goods.It acts as a rationing mechanism by synchronizing decisions by buyers andsellers.As resources are scarce relative to the insatiable demands of human wants, economies areconcerned with basic questions of allocation:i. What and how much to produce?ii. How to produce?iii. For whom to produce?Development:i. What and how much to produce?Insufficient resources to produce enough goods and services to satisfy human wants