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Cost-Benefit Analysis for Building a New Hospital


Explain what is meant by cost benefit analysis and consider how it might be used by a government to decide whether a new hospital should be built.


Economic Growth and Development

CIE A Level October/November 2022

Preview Answer


⏩I. Introduction⏩
- Definition of cost-benefit analysis.
- Overview of its role in government decision-making.

⏩II. Understanding Cost-Benefit Analysis⏩
- Deep-dive into the concept of cost-benefit analysis.
- Positive and negative externalities.
- The importance of assigning a monetary value to these costs/benefits.

⏩III. Time and Cost-Benefit Analysis⏩
- The relevance of time and present value of benefits in cost-benefit analysis.

⏩IV. Application to Building a Hospital⏩
- How the principles of cost-benefit analysis can be applied to the decision to build a new hospital.
- Discussion on private costs, negative externalities, and positive externalities associated with building a hospital.

⏩V. Evaluating Cost-Benefit Analysis⏩
- The challenges and difficulties of implementing cost-benefit analysis.
- Evaluating the effectiveness of cost-benefit analysis.

⏩VI. Conclusion⏩
- Final thoughts on cost-benefit analysis, its strengths, and its weaknesses in decision-making processes.


1. ⏩Understand the concepts⏩⬅: Make sure you have a clear understanding of the key economic principles involved in the question. In this case, understanding what cost-benefit analysis involves is crucial.

2. ⏩Define terms⏩⬅: Start your essay by defining the key terms in the question. This helps to set the context of your answer and shows your understanding of the topic.

3. ⏩Provide examples⏩⬅: Applying the concept to real-life examples can make your argument more relatable and robust. In this essay, we used the example of building a hospital.

4. ⏩Analyse⏩⬅: Break the question down into parts and devote paragraphs to each aspect. Make sure you're covering all aspects of the question.

5. ⏩Evaluate⏩⬅: Discuss the strengths and weaknesses or pros and cons of the concept. This shows a deeper level of understanding and analysis.

6. ⏩Conclude⏩⬅: Summarise your key points in a conclusion that clearly answers the essay question. This should not introduce any new information but should be a concise wrap-up of your argument.

7. ⏩Proofread⏩⬅: Always go through your essay once you're done. This helps to catch any grammatical errors, and you can ensure that your argument flows well and makes sense.

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