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Cambridge IGCSE®

ECONOMICS 0455/02Paper 2 Structured Questions For examination from 2020MARK SCHEME

Maximum Mark: 90

Specimen

PMT

0455/02 Cambridge IGCSE – Mark Scheme For examination SPECIMEN from 2020

of 16© UCLES 2017

Gen

eric

Mar

king

Prin

cipl

es

Thes

e ge

nera

l mar

king

prin

cipl

es m

ust b

e ap

plie

d by

all

exam

iner

s w

hen

mar

king

can

dida

te a

nsw

ers.

The

y sh

ould

be

appl

ied

alon

gsid

e th

e sp

ecifi

c co

nten

t of t

he m

ark

sche

me

or g

ener

ic le

vel d

escr

ipto

rs fo

r a q

uest

ion.

Eac

h qu

estio

n pa

per a

nd m

ark

sche

me

will

als

o co

mpl

y w

ith th

ese

mar

king

pr

inci

ples

.

GE

NE

RIC

MA

RK

ING

PR

INC

IPLE

1:

Mar

ks m

ust b

e aw

arde

d in

line

with

:

•th

e sp

ecifi

c co

nten

t of t

he m

ark

sche

me

or th

e ge

neric

leve

l des

crip

tors

for t

he q

uest

ion

•th

e sp

ecifi

c sk

ills

defin

ed in

the

mar

k sc

hem

e or

in th

e ge

neric

leve

l des

crip

tors

for t

he q

uest

ion

•th

e st

anda

rd o

f res

pons

e re

quire

d by

a c

andi

date

as

exem

plifi

ed b

y th

e st

anda

rdis

atio

n sc

ripts

.

GE

NE

RIC

MA

RK

ING

PR

INC

IPLE

2:

Mar

ks a

war

ded

are

alw

ays

who

le m

arks

(not

hal

f mar

ks, o

r oth

er fr

actio

ns).

GE

NE

RIC

MA

RK

ING

PR

INC

IPLE

3:

Mar

ks m

ust b

e aw

arde

d po

sitiv

ely:

•m

arks

are

aw

arde

d fo

r cor

rect

/val

id a

nsw

ers,

as

defin

ed in

the

mar

k sc

hem

e. H

owev

er, c

redi

t is

give

n fo

r val

id a

nsw

ers

whi

ch g

o be

yond

the

scop

e of

the

sylla

bus

and

mar

k sc

hem

e, re

ferr

ing

to y

our T

eam

Lea

der a

s ap

prop

riate

•m

arks

are

aw

arde

d w

hen

cand

idat

es c

lear

ly d

emon

stra

te w

hat t

hey

know

and

can

do

•m

arks

are

not

ded

ucte

d fo

r err

ors

•m

arks

are

not

ded

ucte

d fo

r om

issi

ons

•an

swer

s sh

ould

onl

y be

judg

ed o

n th

e qu

ality

of s

pelli

ng, p

unct

uatio

n an

d gr

amm

ar w

hen

thes

e fe

atur

es a

re s

peci

fical

ly a

sses

sed

by th

e qu

estio

n as

indi

cate

d by

the

mar

k sc

hem

e. T

he m

eani

ng, h

owev

er, s

houl

d be

una

mbi

guou

s.

GE

NE

RIC

MA

RK

ING

PR

INC

IPLE

4:

Rul

es m

ust b

e ap

plie

d co

nsis

tent

ly e

.g. i

n si

tuat

ions

whe

re c

andi

date

s ha

ve n

ot fo

llow

ed in

stru

ctio

ns o

r in

the

appl

icat

ion

of g

ener

ic le

vel

desc

ripto

rs.

GE

NE

RIC

MA

RK

ING

PR

INC

IPLE

5:

Mar

ks s

houl

d be

aw

arde

d us

ing

the

full

rang

e of

mar

ks d

efin

ed in

the

mar

k sc

hem

e fo

r the

que

stio

n (h

owev

er; t

he u

se o

f the

full

mar

k ra

nge

may

be

lim

ited

acco

rdin

g to

the

qual

ity o

f the

can

dida

te re

spon

ses

seen

).

PMT


of 16© UCLES 2017

GE

NE

RIC

MA

RK

ING

PR

INC

IPLE

6:

Mar

ks a

war

ded

are

base

d so

lely

on

the

requ

irem

ents

as

defin

ed in

the

mar

k sc

hem

e. M

arks

sho

uld

not b

e aw

arde

d w

ith g

rade

thre

shol

ds o

r gra

de

desc

ripto

rs in

min

d.

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

Sect

ion

A

1(a)

Cal

cula

te th

e nu

mbe

r of p

eopl

e un

empl

oyed

in K

enya

in 2

015.

1.8

mill

ion

(1).

1

1(b)

Iden

tify

two

reas

ons

why

the

tota

l am

ount

sav

ed in

Ken

ya is

like

ly to

hav

e in

crea

sed

in 2

015.

Hig

her i

ncom

e/re

al G

DP

per h

ead

(1) a

hig

her i

nter

est r

ate

(1).

2

1(c)

Expl

ain

the

effe

ct th

at a

rise

in th

e pr

ice

of fl

ower

s on

Wom

en’s

Day

in R

ussi

a w

ould

be

likel

y to

hav

e on

flow

er

prod

ucer

s’ re

venu

e.

Incr

ease

(1) a

s de

man

d is

pric

e-in

elas

tic (1

).

2

1(d)

Ana

lyse

the

evid

ence

that

sho

ws

the

mar

ket f

or fl

ower

s is

som

etim

es in

dis

equi

libriu

m.

Coh

eren

t ana

lysi

s w

hich

mig

ht in

clud

e:

Dem

and

exce

edin

g su

pply

/sho

rtage

s oc

curr

ing

(1) p

rice

bein

g to

o lo

w (1

) the

mar

ket n

ot c

lear

ing

(1).

Sup

ply

exce

edin

g de

man

d/su

rplu

s oc

curr

ing

(1) p

rice

bein

g to

o hi

gh (1

) the

mar

ket n

ot c

lear

ing

(1).

4

1(e)

Expl

ain

two

reas

ons

why

the

pric

e of

Ken

yan

flow

ers

may

hav

e fa

llen

in th

e U

S in

201

5.

Logi

cal e

xpla

natio

n w

hich

mig

ht in

clud

e:

Ris

e in

pro

duct

ivity

(1) t

his

coul

d ha

ve re

duce

d co

sts

of p

rodu

ctio

n (1

). D

epre

ciat

ion

of th

e ex

chan

ge ra

te (1

) wou

ld h

ave

low

ered

pric

e of

Ken

yan

expo

rts (1

).

4

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

1(f)

Ana

lyse

the

rela

tions

hip

betw

een

real

GD

P pe

r hea

d an

d th

e ad

ult l

itera

cy ra

te.

Coh

eren

t ana

lysi

s w

hich

mig

ht in

clud

e:

The

rela

tions

hip

show

n is

larg

ely

a po

sitiv

e on

e (1

) as

real

GD

P pe

r hea

d ris

es s

o do

es a

dult

liter

acy

(1) e

xam

ple

that

su

ppor

ts th

e re

latio

nshi

p (1

) Uga

nda

is a

n ex

cept

ion

(1).

Cou

ntrie

s w

ith a

hig

her a

dult

liter

acy

rate

are

like

ly to

hav

e m

ore

skill

ed w

orke

rs (1

) cap

able

of p

rodu

cing

a h

ighe

r out

put (

1).

Cou

ntrie

s w

ith a

hig

her r

eal G

DP

per h

ead

are

likel

y to

hav

e m

ore

fund

s to

spe

nd o

n ed

ucat

ion

(1) m

ore

and

high

er q

ualit

y ed

ucat

ion

is li

kely

to in

crea

se a

dult

liter

acy

(1).

5

1(g)

Dis

cuss

whe

ther

or n

ot a

n in

crea

se in

wag

es w

ill a

lway

s at

trac

t mor

e pe

ople

to w

ork

in K

enya

’s fl

ower

indu

stry

.

6 m

arks

max

imum

for t

he q

uest

ion.

Awar

d up

to 4

mar

ks fo

r log

ical

reas

ons

why

they

mig

ht, w

hich

mig

ht in

clud

e: •

Une

mpl

oym

ent m

ay re

mai

n hi

gh (1

) res

ultin

g in

peo

ple

sear

chin

g fo

r job

s (1

). •

Wag

es a

re a

key

influ

enci

ng fa

ctor

in th

e jo

bs th

at p

eopl

e se

lect

to d

o (1

) inc

reas

es in

wag

es c

an ra

ise

livin

g st

anda

rds

(1) e

nabl

ing

peop

le to

con

sum

e m

ore

good

s an

d se

rvic

es (1

). •

Hig

her w

ages

may

ena

ble

som

e pe

ople

to e

scap

e po

verty

(1) a

llow

ing

them

to a

fford

bas

ic e

ssen

tials

(1).

•P

opul

atio

n is

incr

easi

ng (1

) mor

e pe

ople

are

like

ly to

be

ente

ring

the

labo

ur fo

rce

(1).

Awar

d up

to 4

mar

ks fo

r log

ical

reas

ons

why

they

mig

ht n

ot, w

hich

mig

ht in

clud

e: •

Wag

es m

ay ri

se m

ore

in o

ther

indu

strie

s (1

) red

ucin

g th

e re

lativ

e pa

y in

the

cut f

low

er in

dust

ry (1

). •

Wag

es m

ay ri

se b

y le

ss th

an in

flatio

n (1

) red

ucin

g re

al w

ages

(1).

•W

orke

rs d

o no

t bas

e th

eir d

ecis

ions

just

on

wag

es/n

on-w

age

fact

ors

may

be

bette

r in

othe

r ind

ustri

es (1

) exa

mpl

es e

.g.

bette

r pro

mot

ion

oppo

rtuni

ties,

bet

ter w

orki

ng c

ondi

tions

, lon

ger h

olid

ays

(up

to 2

mar

ks ).

6

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

1(h)

Dis

cuss

whe

ther

or n

ot K

enya

sho

uld

cont

inue

to s

peci

alis

e in

pro

duci

ng fl

ower

s.

6 m

arks

max

imum

for t

he q

uest

ion.

Awar

d up

to 4

mar

ks fo

r log

ical

reas

ons

why

it s

houl

d, w

hich

mig

ht in

clud

e:

•K

enya

has

sui

tabl

e fa

ctor

s of

pro

duct

ion

(1) e

.g. a

read

y su

pply

of l

abou

r (1)

. •

Pro

duct

ivity

has

bee

n in

crea

sing

(1) i

f thi

s co

ntin

ues

Ken

ya m

ay h

ave

a co

st a

dvan

tage

(1).

•Th

e co

untry

has

a g

ood

repu

tatio

n in

pro

duci

ng g

ood

qual

ity c

ut fl

ower

s (1

) thi

s m

ay in

crea

se d

eman

d fo

r its

cut

flow

ers

(1).

•C

ut fl

ower

s te

nd to

be

a lu

xury

goo

d (1

) as

inco

me

rises

, dem

and

may

incr

ease

(1).

Awar

d up

to 4

mar

ks fo

r log

ical

reas

ons

why

it s

houl

d no

t, w

hich

mig

ht in

clud

e: •

Sup

ply

is a

ffect

ed b

y w

eath

er c

ondi

tions

(1) t

his

can

lead

to in

stab

ility

of i

ncom

e (1

). •

The

exch

ange

rate

cou

ld ri

se (1

) mak

ing

expo

rts m

ore

expe

nsiv

e (1

) whi

ch c

ould

redu

ce e

arni

ngs

from

sel

ling

flow

ers

(1).

•C

ompe

titio

n fro

m o

ther

cou

ntrie

s m

ay in

crea

se (1

) red

ucin

g K

enya

’s s

hare

of t

he m

arke

t (1)

.

6

Que

stio

nA

nsw

erM

arks

Sect

ion

B

2(a)

Def

ine

budg

et d

efic

it.

Gov

ernm

ent s

pend

ing

exce

edin

g (1

) gov

ernm

ent (

tax)

reve

nue

(1).

2

2(b)

Expl

ain

two

reas

ons

why

a c

ount

ry m

ay e

xper

ienc

e a

decl

ine

in li

ving

sta

ndar

ds a

t the

sam

e tim

e as

an

incr

ease

in

real

GD

P pe

r hea

d.

Exp

lana

tions

whi

ch m

ight

incl

ude:

•In

com

e m

ay b

ecom

e m

ore

unev

enly

dis

tribu

ted

(1) r

esul

ting

in m

ost p

eopl

e’s

livin

g st

anda

rds

falli

ng (1

). •

Hig

her o

utpu

t may

incr

ease

pol

lutio

n (1

) thi

s m

ay c

ause

hea

lth c

are

prob

lem

s (1

). •

The

shad

ow e

cono

my

may

hav

e sh

runk

(1) r

educ

ing

outp

ut p

er h

ead

(1).

•W

orki

ng h

ours

may

hav

e in

crea

sed

(1) r

educ

ing

leis

ure

time

(1).

•W

orki

ng c

ondi

tions

may

hav

e de

clin

ed (1

) red

ucin

g th

e he

alth

of w

orke

rs (1

). •

Mor

e re

sour

ces

may

hav

e be

en d

evot

ed to

pro

duci

ng c

apita

l goo

ds (1

) whi

ch m

ay re

duce

the

avai

labi

lity

of c

onsu

mer

go

ods

in th

e sh

ort r

un (1

).

4

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

2(c)

Ana

lyse

how

a fa

ll in

une

mpl

oym

ent m

ay in

crea

se a

cou

ntry

’s in

flatio

n ra

te.

Coh

eren

t ana

lysi

s w

hich

mig

ht in

clud

e:

•A

fall

in u

nem

ploy

men

t may

incr

ease

inco

mes

(1) t

his

may

incr

ease

con

sum

er s

pend

ing

(1) i

ncre

asin

g to

tal (

aggr

egat

e)

dem

and

(1) c

ausi

ng d

eman

d-pu

ll in

flatio

n (1

). •

A fa

ll in

une

mpl

oym

ent m

ay re

sult

in a

sho

rtage

of w

orke

rs (1

) thi

s m

ay ra

ise

wag

es (1

) inc

reas

ing

firm

s’ c

osts

of

prod

uctio

n (1

) cau

sing

cos

t-pus

h in

flatio

n (1

).

6

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

2(d)

Dis

cuss

whe

ther

or n

ot a

cou

ntry

will

gai

n fr

om th

e em

igra

tion

of s

ome

of it

s pe

ople

.

In a

sses

sing

eac

h an

swer

, use

the

tabl

e be

low

.

Leve

lD

escr

iptio

nM

arks

3A

reas

oned

dis

cuss

ion

whi

ch a

ccur

atel

y ex

amin

es b

oth

side

s of

the

econ

omic

arg

umen

t, m

akin

g us

e of

eco

nom

ic in

form

atio

n an

d cl

ear a

nd lo

gica

l ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns.

One

sid

e of

the

argu

men

t may

hav

e m

ore

dept

h th

an th

e ot

her,

but o

vera

ll bo

th s

ides

of t

he a

rgum

ent

are

cons

ider

ed a

nd d

evel

oped

. The

re is

thou

ghtfu

l eva

luat

ion

of e

cono

mic

con

cept

s, te

rmin

olog

y,

info

rmat

ion

and/

or d

ata

appr

opria

te to

the

ques

tion.

The

dis

cuss

ion

may

als

o po

int o

ut th

e po

ssib

le

unce

rtain

ties

of a

ltern

ativ

e de

cisi

ons

and

outc

omes

.

6–8

2A

reas

oned

dis

cuss

ion

whi

ch m

akes

use

of e

cono

mic

info

rmat

ion

and

clea

r ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns. T

he a

nsw

er m

ay la

ck s

ome

dept

h an

d de

velo

pmen

t or m

ay b

e on

e-si

ded.

The

re is

rele

vant

use

of e

cono

mic

con

cept

s, te

rmin

olog

y, in

form

atio

n an

d da

ta a

ppro

pria

te to

the

ques

tion.

3–5

1Th

ere

is a

sim

ple

atte

mpt

at u

sing

eco

nom

ic d

efin

ition

s an

d te

rmin

olog

y. S

ome

refe

renc

e m

ay b

e m

ade

to e

cono

mic

theo

ry, w

ith o

ccas

iona

l und

erst

andi

ng.

1–2

0A

mar

k of

zer

o sh

ould

be

awar

ded

for n

o cr

edita

ble

cont

ent.

0

Why

it m

ight

gai

n: •

Em

igra

tion

of d

epen

dent

s, w

ould

redu

ce th

e bu

rden

on

the

wor

king

pop

ulat

ion,

wou

ld re

duce

gov

ernm

ent s

pend

ing

on

bene

fits/

pens

ions

, whi

ch m

eans

gov

ernm

ent s

pend

ing

on o

ther

item

s ca

n in

crea

se.

•If

ther

e is

ove

rpop

ulat

ion/

popu

latio

n ab

ove

the

optim

um le

vel,

outp

ut p

er h

ead

shou

ld ri

se/m

ore

effic

ient

use

can

be

mad

e of

reso

urce

s. •

Wor

kers

who

em

igra

te m

ay s

end

mon

ey b

ack

to re

lativ

es; t

his

may

incr

ease

livi

ng s

tand

ards

. •

Em

igra

nts

may

late

r ret

urn

to th

e co

untry

brin

ging

new

ski

lls w

ith th

em; t

his

may

rais

e th

e pr

oduc

tivity

of t

he la

bour

forc

e in

thei

r cou

ntry

of o

rigin

.

Why

it m

ight

not

gai

n: •

Ski

lled

wor

kers

may

em

igra

te. T

his

will

redu

ce th

e qu

ality

of t

he la

bour

forc

e, lo

wer

pro

duct

ivity

, and

dis

cour

age

MN

Cs

from

set

ting

up.

•If

peop

le o

f wor

king

age

em

igra

te, t

he d

epen

denc

y ra

tio w

ill in

crea

se.

•If

ther

e is

und

er-p

opul

atio

n/po

pula

tion

belo

w th

e op

timum

leve

l, ou

tput

per

hea

d w

ould

fall/

less

effi

cien

t use

can

be

mad

e of

reso

urce

s. •

With

low

er o

utpu

t les

s ad

vant

age

can

be ta

ken

of e

cono

mie

s of

sca

le.

8

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

3(a)

Def

ine

max

imum

pric

e.

A pr

ice

that

pro

duce

rs c

anno

t cha

rge

abov

e a

pric

e ce

iling

(1) s

et b

y th

e go

vern

men

t (1)

.

2

3(b)

Ex

plai

n tw

o re

ason

s w

hy th

e su

pply

of b

anan

as m

ay d

ecre

ase.

Logi

cal e

xpla

natio

ns w

hich

mig

ht in

clud

e:

•a

perio

d of

bad

wea

ther

/nat

ural

dis

aste

r (1)

this

wou

ld d

ecre

ase

the

crop

(1)

•a

rise

in c

osts

of p

rodu

ctio

n (1

) e.g

. hig

her w

ages

pai

d to

farm

wor

kers

wou

ld m

ake

it m

ore

expe

nsiv

e to

pro

duce

the

prod

uct (

1)

•a

gove

rnm

ent t

ax (1

) thi

s ac

ts a

s a

disi

ncen

tive/

is a

n ex

tra c

ost (

1) •

the

rem

oval

of a

sub

sidy

(1) w

ould

redu

ce th

e in

cent

ive

to p

rodu

ce th

e pr

oduc

t (1)

•a

chan

ge in

the

pric

e of

oth

er c

rops

(1) m

ay e

ncou

rage

a s

hift

of re

sour

ces

(1)

•ch

ange

in th

e av

aila

bilit

y of

land

(1) e

.g. f

lood

ing

may

redu

ce th

e su

pply

of l

and

(1).

4

3(c)

Ana

lyse

the

fact

ors

whi

ch le

ad a

n M

NC

to p

rodu

ce in

par

ticul

ar c

ount

ries.

Coh

eren

t ana

lysi

s w

hich

mig

ht in

clud

e:

•S

ize

of m

arke

t (1)

if d

eman

d fo

r the

pro

duct

/s p

rodu

ced

is h

igh

in th

e co

untry

(1) h

ighe

r rev

enue

may

be

earn

ed (1

). •

Cos

ts o

f pro

duct

ion

(1) e

.g. l

ow w

ages

/low

raw

mat

eria

l cos

ts m

ay a

ttrac

t mul

tinat

iona

l com

pani

es (M

NC

s) (1

). •

Avai

labi

lity

of ra

w m

ater

ials

(1) c

erta

in ra

w m

ater

ials

e.g

. cop

per m

ay b

e fo

und

in a

sm

all n

umbe

r of c

ount

ries

(1).

•Tr

ade

prot

ectio

n (1

) MN

Cs

may

set

up

in a

cou

ntry

to g

et ro

und

tarif

fs (1

). •

Gov

ernm

ent s

ubsi

dies

(1) f

inan

cial

hel

p m

ay b

e gi

ven

to c

ompa

nies

set

ting

up in

som

e co

untri

es (1

). •

Few

er g

over

nmen

t reg

ulat

ions

(1) M

NC

s m

ay s

et u

p in

cou

ntrie

s w

ith fe

wer

rule

s an

d la

ws

(1).

•S

kills

of w

orke

rs (1

) hig

hly

skill

ed w

orke

rs w

ill p

rodu

ce p

rodu

cts

of a

goo

d qu

ality

(1).

6

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

3(d)

D

iscu

ss w

heth

er o

r not

a g

over

nmen

t sub

sidy

giv

en to

frui

t pro

duce

rs w

ill b

enef

it co

nsum

ers.

In a

sses

sing

eac

h an

swer

, use

the

tabl

e be

low

.

Leve

lD

escr

iptio

nM

arks

3A

reas

oned

dis

cuss

ion

whi

ch a

ccur

atel

y ex

amin

es b

oth

side

s of

the

econ

omic

arg

umen

t, m

akin

g us

e of

eco

nom

ic in

form

atio

n an

d cl

ear a

nd lo

gica

l ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns.

One

sid

e of

the

argu

men

t may

hav

e m

ore

dept

h th

an th

e ot

her,

but o

vera

ll bo

th s

ides

of t

he a

rgum

ent

are

cons

ider

ed a

nd d

evel

oped

. The

re is

thou

ghtfu

l eva

luat

ion

of e

cono

mic

con

cept

s, te

rmin

olog

y,

info

rmat

ion

and/

or d

ata

appr

opria

te to

the

ques

tion.

The

dis

cuss

ion

may

als

o po

int o

ut th

e po

ssib

le

unce

rtain

ties

of a

ltern

ativ

e de

cisi

ons

and

outc

omes

.

6–8

2A

reas

oned

dis

cuss

ion

whi

ch m

akes

use

of e

cono

mic

info

rmat

ion

and

clea

r ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns. T

he a

nsw

er m

ay la

ck s

ome

dept

h an

d de

velo

pmen

t or m

ay b

e on

e-si

ded.

The

re is

rele

vant

use

of e

cono

mic

con

cept

s, te

rmin

olog

y, in

form

atio

n an

d da

ta a

ppro

pria

te to

the

ques

tion.

3–5

1Th

ere

is a

sim

ple

atte

mpt

at u

sing

eco

nom

ic d

efin

ition

s an

d te

rmin

olog

y. S

ome

refe

renc

e m

ay b

e m

ade

to e

cono

mic

theo

ry, w

ith o

ccas

iona

l und

erst

andi

ng.

1–2

0A

mar

k of

zer

o sh

ould

be

awar

ded

for n

o cr

edita

ble

cont

ent.

0

Why

it m

ight

ben

efit:

•It

may

pro

vide

a fi

nanc

ial i

ncen

tive

to p

rodu

cers

; effe

ctiv

ely

low

ers

cost

s of

pro

duct

ion;

like

ly to

incr

ease

sup

ply;

low

er

pric

es; e

nabl

ing

cons

umer

s to

buy

mor

e/ra

isin

g pu

rcha

sing

pow

er.

•It

may

impr

ove

the

qual

ity o

f fru

it; fa

rmer

s w

ill h

ave

mor

e m

oney

to in

vest

. •

Frui

t is

a m

erit

good

; con

sum

ers

unde

rest

imat

ing

the

priv

ate

bene

fit to

them

selv

es o

f con

sum

ing

fruit;

they

may

gai

n he

alth

ben

efits

from

eat

ing

mor

e fru

it.

Why

it m

ight

not

ben

efit:

•Th

e su

bsid

y m

ay n

ot b

e pa

ssed

on

to c

onsu

mer

s in

the

form

of l

ower

pric

es.

•P

rice

will

fall

by a

sm

alle

r am

ount

if d

eman

d is

ela

stic

; poo

rer c

onsu

mer

s m

ay s

till n

ot b

e ab

le to

affo

rd to

buy

frui

t. •

The

subs

idy

may

mak

e pr

oduc

ers

com

plac

ent;

may

low

er q

ualit

y in

the

long

run.

•P

rovi

ding

a s

ubsi

dy in

volv

es a

n op

portu

nity

cos

t; co

nsum

ers

mig

ht b

enef

it m

ore

from

oth

er p

rodu

cts

bein

g su

bsid

ised

.

8

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

4(a)

Iden

tify

two

char

acte

ristic

s of

mon

ey.

One

mar

k ea

ch fo

r any

two

from

:

•ge

nera

l acc

epta

bilit

y/lim

ited

in s

uppl

y •

porta

ble

•di

visi

ble

•re

cogn

isab

le •

hom

ogen

eous

2

4(b)

Expl

ain

why

gov

ernm

ents

pro

vide

pub

lic g

oods

.

Exp

lana

tions

whi

ch m

ight

incl

ude:

The

priv

ate

sect

or/m

arke

t for

ces

wou

ld n

ot p

rovi

de p

ublic

goo

ds (1

).P

ublic

goo

ds a

re n

on-e

xclu

dabl

e (1

) it i

s no

t pos

sibl

e to

exc

lude

non

-pay

ers

(1) s

o pe

ople

can

act

as

free

rider

s (1

). Th

is

mea

ns th

at p

rivat

e se

ctor

firm

s w

ould

hav

e no

fina

ncia

l inc

entiv

e to

pro

vide

pub

lic g

oods

(1) s

uch

as d

efen

ce (1

).

4

4(c)

Ana

lyse

how

a c

entr

al b

ank

mig

ht re

duce

hou

seho

ld b

orro

win

g.

Coh

eren

t ana

lysi

s w

hich

mig

ht in

clud

e:

It m

ight

incr

ease

the

rate

of i

nter

est (

1) th

is w

ould

incr

ease

the

cost

of b

orro

win

g (1

) thi

s m

ay d

isco

urag

e ho

useh

olds

from

bu

ying

item

s/en

cour

age

savi

ng (1

) tha

t wou

ld re

quire

them

to ta

ke o

ut a

loan

(1).

It m

ight

impo

se re

stric

tions

on

the

amou

nt th

at b

anks

can

lend

(1) t

hese

may

lim

it th

e si

ze o

f a lo

an a

hou

seho

ld c

an g

et (1

) or

incr

ease

the

cond

ition

s th

at h

ave

to b

e m

et b

efor

e a

loan

is g

iven

(1).

It m

ight

redu

ce th

e m

oney

sup

ply

(1) w

hich

may

redu

ce s

pend

ing

(1) a

nd s

o m

ay re

duce

dem

and

for l

oans

(1).

6

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

4(d)

Dis

cuss

whe

ther

or n

ot a

gov

ernm

ent s

houl

d im

pose

tarif

fs o

n its

cou

ntry

’s im

port

s.

In a

sses

sing

eac

h an

swer

, use

the

tabl

e be

low

.

Leve

lD

escr

iptio

nM

arks

3A

reas

oned

dis

cuss

ion

whi

ch a

ccur

atel

y ex

amin

es b

oth

side

s of

the

econ

omic

arg

umen

t, m

akin

g us

e of

eco

nom

ic in

form

atio

n an

d cl

ear a

nd lo

gica

l ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns.

One

sid

e of

the

argu

men

t may

hav

e m

ore

dept

h th

an th

e ot

her,

but o

vera

ll bo

th s

ides

of t

he a

rgum

ent

are

cons

ider

ed a

nd d

evel

oped

. The

re is

thou

ghtfu

l eva

luat

ion

of e

cono

mic

con

cept

s, te

rmin

olog

y,

info

rmat

ion

and/

or d

ata

appr

opria

te to

the

ques

tion.

The

dis

cuss

ion

may

als

o po

int o

ut th

e po

ssib

le

unce

rtain

ties

of a

ltern

ativ

e de

cisi

ons

and

outc

omes

.

6–8

2A

reas

oned

dis

cuss

ion

whi

ch m

akes

use

of e

cono

mic

info

rmat

ion

and

clea

r ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns. T

he a

nsw

er m

ay la

ck s

ome

dept

h an

d de

velo

pmen

t or m

ay b

e on

e-si

ded.

The

re is

rele

vant

use

of e

cono

mic

con

cept

s, te

rmin

olog

y, in

form

atio

n an

d da

ta a

ppro

pria

te to

the

ques

tion.

3–5

1Th

ere

is a

sim

ple

atte

mpt

at u

sing

eco

nom

ic d

efin

ition

s an

d te

rmin

olog

y. S

ome

refe

renc

e m

ay b

e m

ade

to e

cono

mic

theo

ry, w

ith o

ccas

iona

l und

erst

andi

ng.

1–2

0A

mar

k of

zer

o sh

ould

be

awar

ded

for n

o cr

edita

ble

cont

ent.

0

Why

they

mig

ht im

pose

tarif

fs:

•Th

is w

ill ra

ise

reve

nue

for t

he g

over

nmen

t; th

is c

ould

be

spen

t on

e.g.

hea

lthca

re/e

duca

tion.

•Th

is m

ay re

duce

dem

and

for i

mpo

rts; i

mpr

ove

the

trade

in g

oods

pos

ition

; and

so

impr

ove

the

curr

ent a

ccou

nt p

ositi

on.

•Th

is m

ay p

rote

ct in

fant

indu

strie

s; th

ese

may

gro

w a

nd ta

ke a

dvan

tage

of e

cono

mie

s of

sca

le; b

ecom

e in

tern

atio

nally

co

mpe

titiv

e; s

o cr

eate

out

put a

nd e

mpl

oym

ent.

•Th

is m

ay p

rote

ct d

eclin

ing

indu

strie

s; p

reve

ntin

g un

empl

oym

ent.

•Th

is m

ay p

reve

nt d

umpi

ng; f

orei

gn fi

rms

selli

ng a

t bel

ow c

ost p

rice;

dom

estic

firm

s be

ing

driv

en o

ut o

f bus

ines

s. •

This

may

pro

tect

con

sum

ers

from

har

mfu

l pro

duct

s.

Why

they

mig

ht n

ot im

pose

tarif

fs:

•Th

is m

ay ra

ise

pric

es to

con

sum

ers;

con

sum

ers

may

not

hav

e do

mes

tic p

rodu

cts

to s

witc

h to

; any

dom

estic

sub

stitu

tes

may

be

of a

low

er q

ualit

y; s

o re

duce

s va

riety

for c

onsu

mer

s.

•Th

is m

ay ra

ise

cost

s of

impo

rted

raw

mat

eria

ls; r

aise

cos

ts o

f pro

duct

ion;

cau

se c

ost-p

ush

infla

tion.

•Th

is m

ay le

ad to

redu

ctio

n in

com

petit

ive

pres

sure

on

dom

estic

firm

s; s

o to

inef

ficie

ncy.

•Th

ere

may

be

reta

liatio

n; w

ith o

ther

cou

ntrie

s im

posi

ng ta

riffs

on

the

coun

try’s

exp

orts

. •

Ther

e m

ay n

ot b

e do

mes

tic s

ubst

itute

s fo

r im

ports

; con

sum

ers

may

not

sto

p bu

ying

impo

rts; b

ecau

se o

f ine

last

ic d

eman

d.

8

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

5(a)

Def

ine

econ

omic

goo

d.

Ther

e is

an

oppo

rtuni

ty c

ost i

nvol

ved

in p

rodu

cing

the

good

(1) a

s it

take

s no

reso

urce

s to

pro

duce

it (1

).

2

5(b)

Expl

ain

two

influ

ence

s on

wha

t fac

tors

of p

rodu

ctio

n a

firm

use

s.

Exp

lana

tions

whi

ch m

ight

incl

ude:

•th

e ty

pe o

f pro

duct

pro

duce

d/si

ze o

f the

firm

(1) f

or in

stan

ce, p

rodu

cing

nuc

lear

pow

er is

cap

ital-i

nten

sive

(1)

•th

e pr

oduc

tivity

of f

acto

rs o

f pro

duct

ion

(1) i

f, fo

r ins

tanc

e, la

bour

bec

omes

mor

e sk

illed

, a fi

rm m

ight

bec

ome

mor

e la

bour

-inte

nsiv

e (1

) •

the

avai

labi

lity

of fa

ctor

s of

pro

duct

ion

(1) i

n so

me

coun

tries

ther

e m

ay b

e sh

orta

ge o

f oil

or p

eopl

e of

wor

king

age

(1)

•th

e re

lativ

e co

st o

f fac

tors

of p

rodu

ctio

n (1

) if c

apita

l is

rela

tivel

y ex

pens

ive,

labo

ur-in

tens

ive

met

hods

of p

rodu

ctio

n m

ay

be u

sed

(1)

4

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

5(c)

Ana

lyse

, usi

ng a

pro

duct

ion

poss

ibili

ty c

urve

dia

gram

(PPC

), th

e ef

fect

of t

he d

estr

uctio

n of

som

e of

its

reso

urce

s on

an

econ

omy.

Up

to 4

mar

ks fo

r the

dia

gram

.

AB

A B

GO

OD

X

GO

OD

YO

•ax

es c

orre

ctly

labe

lled

(1)

•or

igin

al c

urve

/dow

nwar

d sl

opin

g lin

e to

axe

s (1

) •

new

cur

ve p

rese

nt (1

) •

shift

to th

e le

ft cl

early

indi

cate

d ei

ther

by

an a

rrow

or b

y la

belli

ng (1

)

Up

to 2

mar

ks fo

r coh

eren

t ana

lysi

s w

hich

mig

ht in

clud

e:

•th

e de

stru

ctio

n of

reso

urce

s w

ill re

duce

the

max

imum

out

put a

cou

ntry

can

pro

duce

(1)

•th

is w

ill m

ove

the

prod

uctio

n po

ssib

ility

cur

ve to

the

left/

clos

er to

the

orig

in (1

)

6

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

5(d)

Dis

cuss

whe

ther

or n

ot th

e av

erag

e co

st o

f pro

duct

ion

alw

ays

falls

whe

n a

firm

incr

ease

s its

sca

le o

f pro

duct

ion.

In a

sses

sing

eac

h an

swer

, use

the

tabl

e be

low

.

Leve

lD

escr

iptio

nM

arks

3A

reas

oned

dis

cuss

ion

whi

ch a

ccur

atel

y ex

amin

es b

oth

side

s of

the

econ

omic

arg

umen

t, m

akin

g us

e of

eco

nom

ic in

form

atio

n an

d cl

ear a

nd lo

gica

l ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns.

One

sid

e of

the

argu

men

t may

hav

e m

ore

dept

h th

an th

e ot

her,

but o

vera

ll bo

th s

ides

of t

he a

rgum

ent

are

cons

ider

ed a

nd d

evel

oped

. The

re is

thou

ghtfu

l eva

luat

ion

of e

cono

mic

con

cept

s, te

rmin

olog

y,

info

rmat

ion

and/

or d

ata

appr

opria

te to

the

ques

tion.

The

dis

cuss

ion

may

als

o po

int o

ut th

e po

ssib

le

unce

rtain

ties

of a

ltern

ativ

e de

cisi

ons

and

outc

omes

.

6–8

2A

reas

oned

dis

cuss

ion

whi

ch m

akes

use

of e

cono

mic

info

rmat

ion

and

clea

r ana

lysi

s to

eva

luat

e ec

onom

ic is

sues

and

situ

atio

ns. T

he a

nsw

er m

ay la

ck s

ome

dept

h an

d de

velo

pmen

t or m

ay b

e on

e-si

ded.

The

re is

rele

vant

use

of e

cono

mic

con

cept

s, te

rmin

olog

y, in

form

atio

n an

d da

ta a

ppro

pria

te to

the

ques

tion.

3–5

1Th

ere

is a

sim

ple

atte

mpt

at u

sing

eco

nom

ic d

efin

ition

s an

d te

rmin

olog

y. S

ome

refe

renc

e m

ay b

e m

ade

to e

cono

mic

theo

ry, w

ith o

ccas

iona

l und

erst

andi

ng.

1–2

0A

mar

k of

zer

o sh

ould

be

awar

ded

for n

o cr

edita

ble

cont

ent.

0

Why

it m

ight

fall:

•Th

e fir

m m

ay e

xper

ienc

e ec

onom

ies

of s

cale

; tot

al c

ost w

ill ri

se b

y le

ss th

an to

tal o

utpu

t (lo

ng ru

n av

erag

e co

st m

ay fa

ll as

out

put i

ncre

ases

). •

The

firm

may

exp

erie

nce

buyi

ng/p

urch

asin

g ec

onom

ies

of s

cale

; may

be

offe

red

a di

scou

nt p

rice

whe

n bu

ying

raw

m

ater

ials

in b

ulk.

•Th

e fir

m m

ay e

xper

ienc

e te

chni

cal e

cono

mie

s of

sca

le; l

arge

r, m

ore

cost

effi

cien

t tec

hnol

ogic

al e

quip

men

t may

be

purc

hase

d to

pro

duce

a h

ighe

r out

put.

•Th

e fir

m m

ay e

xper

ienc

e m

anag

eria

l eco

nom

ies

of s

cale

; spe

cial

ist s

taff

may

be

empl

oyed

whe

n ou

tput

is h

igh.

•Th

e fir

m m

ay e

xper

ienc

e fin

anci

al e

cono

mie

s of

sca

le; a

s ou

tput

incr

ease

s, it

may

be

able

to b

orro

w m

ore

chea

ply/

or s

ell

its s

hare

s at

a lo

wer

pric

e. •

The

firm

may

exp

erie

nce

R &

D e

cono

mie

s of

sca

le; t

he R

& D

exp

endi

ture

can

be

spre

ad o

ver a

hig

her o

utpu

t. •

The

indu

stry

may

als

o be

gro

win

g in

siz

e; e

nabl

ing

adva

ntag

e to

be

take

n of

ext

erna

l eco

nom

ies

of s

cale

.

8

PMT


of 16© UCLES 2017

Que

stio

nA

nsw

erM

arks

5(d)

Why

it m

ight

not

fall:

•Th

e fir

m m

ay e

xper

ienc

e di

seco

nom

ies

of s

cale

; tot

al c

ost m

ay ri

se b

y m

ore

than

tota

l out

put (

long

run

aver

age

cost

may

in

crea

se a

s ou

tput

incr

ease

s).

•Th

e fir

m m

ay e

xper

ienc

e di

seco

nom

ies

of s

cale

; thi

s m

ay m

ake

the

firm

slo

wer

to re

spon

d to

cha

ngin

g m

arke

t co

nditi

ons/

mor

e di

fficu

lt to

kee

p co

sts

dow

n. •

The

firm

may

exp

erie

nce

com

mun

icat

ion

prob

lem

s; id

eas

may

not

be

com

mun

icat

ed o

r may

be

mis

unde

rsto

od.

•Th

e fir

m m

ay e

xper

ienc

e po

or in

dust

rial r

elat

ions

; e.g

. pus

hing

up

the

cost

s of

pro

duct

ion.

•E

xter

nal d

isec

onom

ies

of s

cale

may

occ

ur; e

.g. p

ushi

ng u

p th

e co

sts

of p

rodu

ctio

n.

Allo

w u

p to

2 m

arks

for a

cor

rect

ly la

belle

d av

erag

e co

st d

iagr

am w

hich

sho

ws

econ

omie

s an

d di

seco

nom

ies

of s

cale

as

an

alte

rnat

ive

to d

escr

ibin

g av

erag

e co

sts

risin

g/fa

lling

as

outp

ut in

crea

ses.

PMT

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