1. Define trade in goods balance.
Value of exports of goods / revenue earned from exports minus value of imports of goods / expenditure on imports of goods (2).
Exports minus imports (1) of goods / visible items (1).
2. Explain two benefits producers may gain from free trade.
Logical explanation which might include:
Availability of larger/global market (1) may increase revenue/profit (1).
Ability to produce on a larger scale / higher output (1) take advantage of economies of scale (1) specialise (1).
Access to cheaper / better quality raw materials / raw materials without tariffs imposed on them (1) lowering costs of production/raising quality of products produced/lowering price (1).
Access to advanced technology/ideas from abroad (1) resulting in improved methods of production/new products (1).
Increased competitive pressure (1) which may raise efficiency (1).
3. Analyse, using a production possibility curve (PPC) diagram, the effect of an increase in unemployment on an economy.
Up to 4 marks for the diagram:
Axes correctly labelled (1).
Curve drawn as a curve or downward sloping line to the axes (1).
Two production points shown – one on or to left of PPC and the other further to the left of the PPC (1).
Movement of the production point inwards indicated by arrow or lettering (1).
Up to 2 marks for coherent analysis which might include:
Unemployment means resources are not used (1) there is inefficiency (1) reduces output/GDP / causes a recession (1).
For analysis, only accept a PPC shifted inwards if logical justification is given i.e. an increase in unemployment may cause some workers to leave the labour force- “unemployment causing unemployment”.
4. Discuss whether or not an increase in the rate of income tax will reduce inflation.
In assessing each answer, use the table opposite.
Why it might:
- reduce disposable income/purchasing power
- consumer expenditure likely to fall
- investment may fall
- total (aggregate) demand may fall
- demand-pull inflation may decrease
- higher government revenue may increase government spending on supply-side policy measures.
Why it might not:
- workers may seek higher wages
- higher wages may increase costs of production
- cost-push inflation/wage – price spiral may occur
- higher tax revenue may increase government spending
- higher government spending may offset lower consumer expenditure leaving total (aggregate) demand unchanged
- people may be very confident about the future so they cut back on savings rather than spending.
5. Define demerit good.
A product which is more harmful to consumers than they realise / the government considers is more harmful (2).
It is over-consumed / overproduced (1) it creates external costs (1).
A product that is harmful (1).
6. Explain the difference between an extension in demand and an increase in demand.
Logical explanation which might include:
An extension in demand is caused by a change in the price of the product (1) rise in quantity demanded (1) it is shown by a movement along the demand curve (1).
An increase in demand is caused by a change in an influence on demand other than a change in the price of the product / means more is demanded at each and every price (1) example of a cause of an increase in demand e.g. rise in incomes (1) it is shown by a shift in the demand curve (1).
7. Analyse the effects on income distribution and tax revenue of an increase in indirect taxes.
Coherent analysis which might include:
Income is likely to become less evenly distributed (1) indirect taxes are usually regressive (1) taking a larger percentage of income of the poor (1).
Tax revenue likely to rise (1) will rise more on goods with inelastic demand (1) e.g. food (1) may fall if demand falls significantly (1).
If any extra tax revenue is spent on lower income groups (1) e.g. welfare benefits (1) the effect on income distribution is less certain / income may be more evenly distributed (1).
Tax evasion and avoidance is less common in the case of indirect taxes (1) though there may be informal markets (1).
8. Discuss whether or not a government should impose a maximum price on food.
In assessing each answer, use the table opposite.
Why it should:
- may influence price and quantity purchased
- if set below the equilibrium level, will reduce price
- some people will be able to purchase food at a lower price
- may reduce poverty – food is a basic necessity
- may stop monopoly food producers setting high prices.
Why it should not:
- if set above the equilibrium, it will have no effect
- it set below the equilibrium, will result in shortages
- some additional measure will have to be introduced to ration out food
- some foods may be harmful to health and their consumption should be discouraged
- may result in firms making losses and so reducing quality of food or employment of workers
- free market forces may result in a more efficient allocation of resources.
9. State two functions of a commercial bank.
Two from:
- lending
- Accepting deposits
- Allowing customers to make payments
- looking after valuables
- giving financial advice
- Providing insurance
- Exchanging foreign currency
10. Explain two reasons why emigration from a country may increase.
Logical explanation which might include:
Rise in unemployment (1) people move abroad in search of jobs (1).
Fall in income (1) seek higher wages abroad (1).
Lower living standards (1) e.g. healthcare may be better abroad / less pollution (1).
Relaxation on immigration controls (1) making it easier to move abroad (1).
Greater social unrest / outbreak of war (1) seek greater security (1).
High inflation at home (1) seek lower cost of living (1).
11. Analyse the possible causes of a rise in the wages of bank workers.
Coherent analysis which might include:
Demand for bank workers may increase (1) due to higher demand for banking / this may result from more people opening bank accounts/using the services of banks (1) may also result from a rise in the productivity of workers (1) more banks competing for the services of bank workers / more competition for workers (1) higher wages paid to retain bank workers (1).
Supply of bank workers may fall (1) qualifications may have been increased (1) skills may have increased / may need to be more skilled as working with more advanced technology (1).
Bank workers may use trade union power (1) collective bargaining and/or industrial action (1).
Banks may have earned large profits (1) may have rewarded workers with bonuses (1) bonuses / high pay may be used to motivate workers (1).
A higher national minimum wage (1) forcing banks to pay some of their staff more (1).
Bank workers may work longer hours / may work overtime (1).
Bank workers may be more experienced (1) more productive / more skilled (1).
Inflation / higher income tax (1) purchasing power will fall unless wages increased (1).
12. Discuss whether or not demand for cars will become more price-elastic in the future.
Why it might:
- may be closer substitutes. Price of public transport and /or quality of public transport may fall making them closer substitutes
- may take up a larger proportion of income. Incomes may fall
- price may rise. Demand becomes more price elastic as price rises
- the number of firms producing certain types of cars may increase
- time will give consumers more opportunity to search out lower prices.
Why it might not:
- may become more of a necessity. People may work further from where they live
- may become easier to postpone purchase. If cars last longer, consumers may be able to delay buying replacements
- people may have become used to driving – habit forming. May be reluctant not to own and drive a car
- price of complements may rise, so that even if price of cars fall, people may not buy more cars.
13. Define wages
A payment/reward (1) to labour/workers (1).
14. Explain two reasons, other than methods of protection, why a country’s exports may fall.
Logical explanation which might include:
Lower incomes abroad (1) reduce the ability of foreigners to buy the country’s exports / lower demand (1).
Rise in the foreign exchange rate (1) will make exports more expensive (1).
Quality may fall (1) e.g. educational standards may have declined (1).
Price may rise (1) due to inflation/higher costs of production/lower productivity/making exports less competitive (1).
Domestic demand may rise (1) products may be switched from the export to the home market (1).
Lower output (1) reduce the ability of firms to export as many goods and services / result of fewer resources (1).
15. Analyse how a rise in investment could increase a country’s economic growth rate.
Coherent analysis which might include:
More investment will increase total (aggregate) demand (1 there will be more capital goods (1) these may be more efficient / embody advanced technology (1) productive capacity will increase / productivity rise (1) costs of production may fall (1) prices may fall (1) quality may rise (1) more products may be demanded by domestic consumers (1) foreign buyers / more exports (1) output may increase (1).
Higher investment may increase employment (1) raise income (1).
Investment in human capital/education/healthcare (1) can raise productivity (1).
16. Discuss whether or not a country should switch from a fixed foreign exchange rate system to a floating foreign exchange rate system.
Why it should:
- the government will not have to devote time and attention to maintaining the exchange rate and so may use policy measures to e.g. reduce inflation
- fewer foreign exchange reserves would have to be kept to maintain the exchange rate. These could be used to stimulate economic activity
- exchange rate may be lower which may increase economic growth, lower unemployment and improve the current account position.
Why it should not:
- a lower exchange rate may cause inflation
- fluctuations in the exchange rate may create uncertainty. This may discourage investment and reduce economic growth
- may discourage MNCs from setting up in the country
- a higher exchange rate could reduce economic growth, employment and harm the current account position.
17. State two components of the current account.
Any two from:
- trade in goods
- trade in services
- primary income
- secondary income
18. Explain why inflation may fall even if there is an increase in total demand.
Logical explanation which might include:
There may have been an increase in total supply (1) which may be greater than the increase in total demand (1).
There could be an improvement in productivity (1) better technology / capital (1).
Costs of production could have gone down (1) e.g. lower taxes / lower costs of raw material, stronger exchange rates (1).
19. Analyse how a country’s current account deficit might be reduced if its firms become internationally competitive.
Coherent analysis which might include:
Being internationally competitive e.g. high productivity, low inflation, low exchange rates (max 2) increases production (1) reduces cost of production (1) decreases price of exports (1) increases quality of exports (1) increases demand for exports (1) increases value of exports / net exports (1).
Imports relatively more expensive / other countries products more expensive (1) lower relative quality of imports (1) decreases imports (1).
20. Discuss whether or not lower taxes on firms will be beneficial for an economy.
Why it might be beneficial:
- will increase after tax profits
- increase ability and incentive to invest
- firms may expand output leading to higher employment and economic growth
- higher investment may increase innovation and productivity which may improve the current account
- will reduce cost of production. This may reduce inflation
Why it might not be beneficial:
- firms might not invest more and just keep the profits to themselves
- government will get less revenue from firms, reducing ability to spend to improve the economy
- may attract MNCs which may replace domestic firms
- capital goods may replace labour, causing unemployment
- higher output may result in external costs e.g. pollution.
21. State two sectors, other than the primary sector, in an economy.
Secondary sector (1)
Tertiary sector (1)
22. Explain two possible reasons for a fall in the price of a product such as natural rubber.
Logical explanation which might include:
Decrease in demand for natural rubber (1) emergence of substitutes (1) decrease in future expected price or any other relevant examples (1).
Increase in supply of natural rubber (1) due to increase in number of producers / good yield / relevant example (1).
23. Analyse the influences on spending.
Income (1) higher income increases the ability to spend / increases purchasing power (1).
The rate of interest (1) a change in the rate of interest influences the proportion of income that is spent and saved (1) and affects borrowing (1).
Confidence (1) people spend more when they are optimistic (1) about future income / job security (1).
Wealth (1) people can spend some of their wealth (1) e.g. sell shares (1) use it as collateral to borrow (1).
Inflation (1) spending may fall if prices rise more than money wages (1) spending may rise as people seek to buy products before they increase in price even further (1).
Expansionary fiscal / monetary policy may increase spending (1).
24. Discuss whether or not the growth of the primary sector is beneficial to a country.
Why it is beneficial:
- can increase total output of the economy, increasing economic growth
- can provide employment opportunities that are accessible to all / requires low skill / requires low technology
- could increase standards of living in rural areas
- provide raw materials for secondary sector
- could ensure that country has food security, reduce imports of necessities, if prices of primary sector products are high e.g. high oil price which this could bring huge export revenue to the country. This could reduce current account deficit.
Why it is not beneficial:
- productivity may be low in the primary sector, very low value added
- may be low wages and poor working conditions
- over dependence on primary sector may restrict growth of secondary and tertiary sectors
- some primary industries may be disrupted by weather conditions and natural disasters
- supply and demand are inelastic so there may be considerable price fluctuations
- natural resources e.g. copper may be depleted.
25. Define tariffs.
Tariffs are a tax (1) on imports/exports (1) which increase the price of imported/exported goods (1).
26. Explain two non-tariff methods of protection.
Logical explanation which might include:
Quotas (1) quantitative restriction on the amount of imports that can enter a country (1).
Subsidies (1) grants given to domestic firms to reduce domestic cost of production and reduce demand for imported goods (1).
Embargoes (1) total restriction on a certain product from a certain country (1).
27. Analyse, using a production possibility curve (PPC) diagram, the beneficial effects for a country of the growth of its small and medium-sized firms.
Up to 4 marks for the diagram:
Axes correctly labelled (1).
Initial curve drawn as a curve or downward sloping line to the axes (1).
New curve drawn as a curve or downward sloping line to the axes (1).
Shift to the right indicated by arrow or lettering (1).
Up to 2 marks for coherent analysis which might include:
The growth of its small and medium-sized firms will lead to an increase in the number of firms in the economy (1) this will increase productive potential / increase productive capacity / cause economic growth (1).
28. Discuss whether or not increased international trade can promote economic growth.
- increase size of the market for domestically produced goods, increase exports, increase total demand
- firms can specialise and achieve economies of scale, decrease cost of production, increase demand for goods and services produced domestically
- increase competitive pressure (1) making firms more efficient (1)
- increase access to products not available domestically, e.g. raw materials to produce other goods, increase output of an economy (1).
Why it may not:
- Increase amount of imports, decrease total demand of the economy
- domestic firms may not be able to compete causing less revenue, less profits, more unemployment,
- may result in shortages of e.g. rice in the domestic market
- make the economy more subject to sudden changes in demand and supply.
29. State the rewards for labour and capital.
Wages (1) for labour
Interest (1) for capital
30. Explain the two types of poverty.
Logical explanation which might include:
Absolute poverty (1) is when someone cannot afford the basic necessities of life (1) less than $1.90 per day at PPP (1).
Relative poverty (1) is when someone earns less than is needed to participate in the normal activities of society (1) when there is inequality (1).
31. Analyse how firms can benefit from specialisation.
Coherent analysis which might include:
Improve skills of workers (1) save time (1) lead to invention of new technology (1) increase productivity (1) raise quality (1) decrease average cost of production (1) decrease prices (1) increase demand (1) enable advantage to be taken of economies of scale (1) increase profits (1).
32. Discuss whether or not supply-side policy measures can reduce unemployment.
- decrease corporation / profit tax, more profits, more investments, more demand for labour, reduction in cyclical unemployment
- decrease interest rates, more borrowing, more investment, more demand for labour, reduction in cyclical unemployment
- decrease income tax, increase disposable income, more spending/ demand for goods and services, more production, increase demand for labour
- government subsidies can encourage firms to expand and take on more workers, reduce cyclical unemployment
- increase spending on education and training, increase skills / productivity of labour, increase demand for labour, decrease structural unemployment
- provide more information on jobs / job centres, easier for workers to find jobs, decrease frictional unemployment
- reduce unemployment benefit to reduce the time workers are between jobs, decrease frictional unemployment.
Why they cannot:
- may be a time lag
- more investments could lead to increased technological development, less demand for workers
- education programmes not according to market needs
privatisation could lead to firms cutting amount of workers
decrease in minimum wage could decrease incentive to work
- may be a lack of total demand.
33. Define microeconomics.
Study/analysis of or focus on individual markets / economic agents e.g. individuals, households, and firms (2).
Study of economics on a small scale, e.g. demand for cars (1).
Demand and supply for individual products/markets (1).
34. Explain two causes of differences in economic development between countries.
Logical explanation which might include:
Resources – land/labour/capital/enterprise (1) affect productive capacity of a country (1).
Income (1) enabling people to consume more goods and services (1).
Productivity (1) making better use of resources (1).
Higher international trade / exports (1) results in higher output (1)
Size of primary sector (1) larger primary sectors may mear lower incomes / hard working conditions (1).
Saving (1) which can influence the proportion of capital goods produced/the extent to which people have a safety net (1).
Investment (1) which may influence economic growth / make work less physically demanding (1).
Education / literacy rates (1) which influence choices/income/health (1).
Healthcare (1) which affects life expectancy / quality of life (1).
35. Analyse how a cut in the interest rate could reduce poverty.
Coherent analysis which might include:
Cost of borrowing will fall / reward from saving will decline (1) increase borrowing / demand for loans (1) consumer spending will increase (1) firms may invest more (1) output may rise (1) unemployed gain jobs / employment may increase (1) incomes may rise / reduction in absolute poverty (1).
The poor who have borrowed in the past (1) will have more money to spend on basic necessities (1) spend on education (1) improve skills (1) get better paid jobs (1) reducing relative poverty (1).
Housing may be cheaper (1) making shelter more accessible (1).
May enable some of the poor to borrow to start up small businesses (1) and earn a higher income (1).
Cheaper for government to borrow (1) enabling it to spend more on education/healthcare (1).
36. Discuss whether or not government intervention will correct the market failure caused by a demerit good.
Why it might:
- tax can be imposed/increased
- this will raise price
- consumers better informed about negative impact
- demand would be expected to contract
- a minimum price could be imposed
- this again would be expected to reduce demand
- restrictions could be imposed on the imports of demerit goods
Why it might not:
- demand may be price inelastic, some demerit goods are addictive
- the government may set a tax too high or too low
- the rich may not be dissuaded by the tax
- producers may not pass on the tax to consumers
- a minimum price set below the equilibrium level would have no effect
- a minimum price could result in a surplus which may put downward pressure on price, encourage producers to charge less than the minimum price
37. Define privatisation.
The sale of state-owned assets / state-owned enterprises / nationalised industries (1) to the private sector / individuals (1).
38. Explain two causes of a fall in the birth rate.
Logical explanation which might include:
Rise in the cost of having children (1) e.g. children staying in education for longer (1).
Rise in the education of women (1) may be more likely to enter employment/delay having children (1).
Rise in government provision of state pensions (1) less need for couples to have children to support them in old age (1).
Rise in access to contraceptives (1) making family planning more effective (1).
Improvement in healthcare (1) reducing infant mortality (1).
Increase in state provision of welfare payments (1) reducing the need to have children support parents in old age (1).
Reduction in infant mortality (1) people having fewer children in the expectation more will survive (1).
Ageing population (1) fewer people of child-bearing age (1).
Education (1) e.g. higher cost of having children (1) women may get married later (1).
More women working (1) may delay childbirth (1).
Government policy (1) e.g. placing a limit on number of children (1).
39. Analyse, using a production possibility curve (PPC) diagram, the effects of a decrease in the quantity of capital goods in an economy.
Up to 4 marks for the diagram:
Axes correctly labelled (1).
Initial curve drawn as a curve or downward sloping line to the axes (1).
New curve drawn as a curve or downward sloping line to the axes (1).
Shift to the left / pivot indicated by arrow or lettering (1).
Up to 2 marks for coherent analysis which might include:
Capital goods are a resource / investment used to produce other goods (1).
Fewer capital goods / factors of production reduce potential output / productive capacity (1).
Accept a PPC diagram that shows fewer capital goods and the same quantity of consumer goods.
Accept Good A / Good B labelling on axis.
Note: movement along the existing PPC is incorrect.
So potentially only 2 marks for correctly labelled axes and correct curve.
40. Discuss whether or not a government should allow monopolies.
Why it should:
- monopolies may be able to take advantage of economies of scale
- may be able to experience lower average costs and charge lower prices
- may earn high profits and so be able to spend on investment and research and development
- may be able to produce high quality products
- may be internationally competitive
- maybe nationalised monopolies with welfare objectives
Why it should not:
- maybe market failure/abuse market power
- may charge high prices
- may restrict output
- may become complacent
- may not improve quality
41. Define deregulation.
The removal of rules/regulation (2).
Less government intervention (1) to encourage competition (1).
Actions making it easier for businesses to enter / operate in an industry (1).
Supply-side policy (1) to increase competition (1).
42. Explain two benefits consumers may gain from a market economic system.
Logical explanation which might include:
Sovereignty (1) consumers decide what will be produced (1).
Choice (1) there may be a number of firms producing a product (1).
Low prices (1) competition may mean that firms have to charge low prices to keep their customers (1).
High quality (1) the profit incentive may encourage firms to raise quality to attract more consumers (1).
43. Analyse how education and subsidies can increase a country’s economic growth rate.
Education/training may increase qualifications/skills (1) raising the productivity of workers (1) increasing the mobility of workers (1) attracts MNCs (1) reduces unemployment (1) raising the quality (1) and quantity of output (1).
Subsidies will lower firms’ costs of production (1) encouraging firms to increase their production (1) increasing supply (1) lowering price (1) a higher output is likely to be bought and sold (1).
Subsidies for consumers e.g. education/health (1) may help in gaining skills/jobs and being more productive (1).
44. Discuss whether or not a reduction in a country’s trade protection will reduce its current account surplus.
Why it might:
- lower tariffs will reduce price of imports
- removal of quotas may result in more imports being purchased
- removal of a ban/embargo will permit imports of the product to enter the country
- import expenditure may rise
- higher import expenditure may reduce the gap between export revenue and import expenditure
Why it might not:
- foreign firms may not have the capacity to supply more products
- demand for imports may be price inelastic
- the quality of imports may have fallen
- other countries may also reduce their trade restrictions
- the exchange rate may fall, raising exports and reducing imports
- export revenue may rise to match the higher import expenditure
- may have large surplus on invisibles
45. State two functions, other than issuing banknotes and coins, of a central bank.
Two from:
- manages monetary policy / sets the rate of interest
- manages the national debt
- controls the banking system
- banker to commercial banks
- banker to the government
- lender of last resort
- looks after reserves of gold and foreign currency
46. Explain two reasons why workers in the tertiary sector may be paid more than workers in the primary sector.
Logical explanation which might include:
Higher demand (1) due to e.g. higher productivity / more profitable / expansion of tertiary industries (1).
Lower supply (1) due to e.g. higher qualifications/skills/education needed (1).
Stronger bargaining power (1) due to stronger trade unions / professional organisations (1). Primary sector workers strength is weak (1) a pital equipment (1) so bargaining More favoured by government policy (1) e.g. increased government spending on education/healthcare (1).
Tertiary sector workers are mainly found in developed countries where wages / cost of living is generally high (1) whereas primary sector workers are mainly found in undeveloped countries were wages / cost of living are generally low (1).
Lower value of goods and services being provided in primary sector (1) lower pay for primary sector workers (1).
47. Analyse the advantages for firms of using division of labour.
Coherent analysis which might include:
Division of labour involves workers specialising (1) this can increase output / increase productivity (1) costs of production may be reduced (1) e.g. lower costs of training (1) e.g. less equipment needed (1).
Specialisation can increase quality (1) lower costs can enable to charge lower prices (1) demand may rise (1) revenue/profits may increase (1).
48. Discuss whether or not deflation will benefit an economy.
Why it might:
- if due to lower costs of production, may be more internationally competitive
- improve the current account position
- may increase purchasing power if incomes do not fall
- may raise living standards
- may increase economic growth and employment
Why it might not:
- if due to lower total demand may result in a recession
- consumers may postpone purchases
- investment may fall
- firms may reduce output, reducing demand for raw materials
- unemployment may rise
49. Identify two reasons why people are living longer.
- better healthcare
- Improved nutrition
- better housing
- better living standards
- higher incomes
50. Explain two reasons why net immigration may increase the standard of living in a country.
May increase the size of the labour force (1) increase the number of goods and services available / increase output / increase GDP / economic growth (1).
May bring in new skills (1) raise productivity (1) increase the quality of products produced (1).
Fill jobs that local workers do not want to do (1) reduce shortages (1).
Fill jobs that local workers do not have the qualifications to do (1) reduce shortages (1).
Increase total (aggregate) demand (1) which will encourage firms to increase their output (1).
Make better use of other resources (1) if the country lacks labour / is underpopulated (1).
Increase tax revenue (1) enabling government to spend more on e.g. education (1).
Immigrants may set up firms (1) creating jobs / reducing unemployment (1) / purchasing power (1).
May lower costs of production (1) make products more affordable (1).
51. Analyse how fiscal policy could be used to stop a recession
The government could cut taxes (1) this could raise disposable income / purchasing power (1) which may increase consumer spending (1) cuts in corporate tax may provide more funds for firms (1) raise investment (1) encourage firms to expand their output (1) increase employment / reduce unemployment (1).
A government could increase its own spending (1) example e.g. healthcare (1) this would increase total (aggregate) demand (1) encouraging an increase in output (1).
Spending on infrastructure (1) may reduce firms costs and so encourage higher output (1).
52. Discuss whether or not low-income countries have a faster rate of population growth than high-income countries.
Up to 5 marks for why some do:
Some have a high birth rate (1) reasons e.g. low number of women working, (1) need for children to support parents in old age (1) lack of education (1) falling death rate (1) natural increase (1) due to improved healthcare (1) rise in incomes (1).
Up to 5 marks for why some do not:
Some high-income countries experience a high rate of net immigration (1) factors attracting immigrants e.g. job opportunities, high income (2).
Some low-income countries experience net emigration (1).
Some low-income countries experience natural disasters and wars (1) poor health care (1) which increase the death rate (1).
Some high-income countries are experiencing a fall in the death rate (1) causes e.g. improved living standards, advances in medicines (2) although birth rates falling (1) governments may provide incentives to try to raise the birth rate (1) including financial aid / free child care (1).
53. Identify two ways a government could encourage saving.
- raise the rate of interest
- introduce tax-free saving schemes
- provide information / education about the benefits of saving
- introduce compulsory saving schemes
- government measure that can increase income e.g. lower taxes
54. Explain two reasons why productivity may increase.
Improvements in education and training (1) would increase the skills of workers (1).
More capital equipment / investment (1) which may increase the speed / accuracy at which workers work / more efficient machinery (1).
Increase in wages (1) which will motivate workers (1).
Lower working hours (1) workers less tired (1).
Better working conditions (1) less stressed (1).
Better weather / improvements in the type of crops grown / better feed for animals (1) which can increase agricultural output / which may result from research and development (1).
Immigration of workers (1) with better skills (1).
Better healthcare (1) workers fitter (1).
Successful supply-side policy measure (1) e.g. spending on infrastructure (1).
Specialisation (1) workers concentrating on particular tasks may produce products more quickly / efficiently (1).
55. Analyse how an increase in investment could influence inflation.
Higher investment will mean higher spending on capital goods (1) it could increase total (aggregate) demand (1) this could increase demand-pull inflation (1) if total (aggregate) demand exceeds total (aggregate) supply (1).
May increase demand for imported capital goods / raw materials (1) causing imported / cost-push inflation (1).
Higher total (aggregate) demand could increase employment / decrease unemployment (1) which could increase total (aggregate) demand further (1).
In short run may raise costs of production (purchase of machines) (1) causing cost-push inflation (1).
In the long run it could increase output (1) may introduce advances in technology (1) increase efficiency / productivity (1) it could reduce costs of production (1) reducing cost-push inflation (1).
Investment in human capital (1) raising workers’ skills (1).
56. Discuss whether or not older workers are paid more than young workers.
Up to 5 marks for why they might be:
They have more experience (1) they are likely to have received more training (1) they may have higher productivity (1) more skilled (1) more reliable / make fewer mistakes (1) in higher demand (1) lower supply (1).
They may have been with the same employer for some time (1) and may have been promoted (1).
Some older workers may be rewarded for staying with the same employer / young workers may be at start of career (1) be paid a loyalty bonus(1).
In some countries, the minimum wage may rise with age (1).
Up to 5 marks for why they might not be:
Some older workers in jobs requiring physical strength (1) may be less fit / young workers may be fitter (1).
Older workers may be less occupationally mobile (1) geographically immobile (1) and so may not move to gain higher wages (1).
Young workers may be more up to date with advances in technology / new methods / new ideas (1) their skills may be in higher demand (1).
Young workers may be in expanding industries (1).
Young workers may work more hours (1) may be better educated / more qualified (1).
57. Identify two components of the HDI.
- GDP (GNI) per head / income per head / average income
- education
- life expectancy
58. Explain how the proportion of a country’s resources devoted to the primary, secondary and tertiary sectors change as its economy develops.
A smaller proportion of resources are likely to be devoted to the primary sector (1) increases in technology / productivity / education requires fewer resources / resources move to more financially rewarding uses / use of more machinery (1).
A greater proportion of resources are devoted to manufacturing at first (1) and then a smaller proportion (1) the manufacturing sector becomes more efficient (1).
The service sector continues to grow (1) in developed economies, most labour is employed in the service sector (1).
Some developing countries’ tertiary sector has grown faster than secondary sector – jumped a stage (1).
59. Analyse, using a demand and supply diagram, how a fall in the price of cotton would affect the market for cotton shirts.
Up to 4 marks for the diagram:
Axes correctly labelled – price and quantity or P and Q (1).
Demand and supply curves correctly labelled (1).
Supply curve shifted to the right (1).
Equilibriums – shown by lines or e.g. E1 and E2 (1).
Up to 2 marks for written analysis:
A fall in the price of cotton will reduce the cost of producing cotton shirts (1) price will fall / quantity will rise (1).
Do not reward analysis marks for description of diagram e.g. quantity changes from Q1 to Q2.
60. Discuss whether or not an increase in the size of a country’s gold mining industry will benefit an economy.
Up to 5 marks for why it might:
It may provide more jobs (1) reduce unemployment (1).
It may increase output / cause economic growth (1) increase wages (1) increase living standards (1).
Some of the gold may be exported (1) improve the current account position (1).
The industry may experience (external) economies of scale (1) lower average cost (1) example of an external economy (1).
It will be more beneficial if world demand is increasing (1).
May attract multinational companies to set up in the country (1).
Tax revenue may increase (1) enabling government to spend more on e.g. infrastructure (1).
Up to 5 marks for why it might not:
A rise in the supply of gold may reduce its price (1) reduce revenue (1) reduce exports (1).
External costs may be created (1) damage to the natural environment / pollution (1).
The industry may experience (external) diseconomies of scale (1) higher average cost (1) example of an external economy (1).
Mining is a dangerous occupation (1) wages may be low as primary sector (1) jobs may be unskilled (1).
Resource of gold may be depleted (1) stopping future generations being able to take advantage of them (1).
It will be less beneficial if other gold producing countries are increasing their output (1).
61. Identify two examples of land used in growing agricultural crops.
- soil
- water
- natural fertiliser
- seeds
- weather
62. Explain why the concept of price elasticity of supply (PES) may be useful to a government in deciding whether to subsidise the production of a product.
A subsidy is aimed at increasing supply / lowering price (1).
If supply is elastic, supply will change by a greater (1) percentage (1) than price. Should subsidise production of the product (1).
If supply is inelastic, supply will change by a smaller (1) percentage (1) than price. Should not subsidise production of the product (1).
63. Analyse why the demand for a product may be higher in one country than in another country.
Incomes may be higher (1) allowing people to buy more of the product (1).
There may be a larger population (1) more potential buyers (1).
The product may be more to the taste of people in that country (1) example e.g. falafel is popular in the middle east (1).
The product may be more heavily advertised (1) which may increase the attractiveness of the product (1).
Price may be lower (1) due to lower costs of production / government subsidy / lower (indirect) taxes (1).
Price of substitutes may be higher (1) example (1).
Credit may be more available / interest rate lower (1) making it easier for people to borrow to buy the product (1).
64. Discuss whether or not the government should influence the production of basic food items, such as bread or rice.
Up to 5 marks for why it should:
The poor may spend a higher proportion of their income on food (1) a subsidy cn food (1) may reduce poverty (1) lower indirect tax may reduce poverty (1) lower price (1) basic food items / bread / rice may be regarded to be a basic necessity (1)
There may be market failure (1) bread may be overconsumed (1) this may cause obesity (1) a tax will raise price (1) this may discourage demand for basic food items / bread / rice (1) reduce obesity (1) it may also reduce wastage (1).
Regulatic may be needed (1) to ensure the basic food / bread / rice is produced under clean conditions / with safe ingredients (1).
Basic food items / bread / rice may be produced by a monopoly (1) which could use its power to restrict supply (1) push up price (1) regulation may be need to prevent this (1).
Demand for basic food items / bread / rice may be inelastic (1) firms may take advantage of this to push up price (1).
Up to 5 marks for why it should not:
Market forces may produce an efficient output (1) the profit motive (1) may encourage producers to respond to changes in consumer demand (1) surpluses and shortages will be eliminated by changes in prices (1).
There may be a high level of competition in the industry (1) encouraging producers to make basic food items / bread / rice of a high quality (1).
An indirect tax will be regressive (1) fall more heavily on the poor (1).
A subsidy will involve an opportunity cost (1) example (1).
Reducing an indirect tax will lower tax revenue (1) lowering government’s ability to spend on e.g. healthcare (1).
Government discouragement of production of basic items may result in more being imported (1) which will harm the balance of payments (1).
65. Identify the difference between an export and an import.
An export is sold to other countries / outflow of goods and services in exchange for money / credit item in the balance of payments (1) an import is purchased from other countries / inflow of goods and services in exchange for money / debit item in the balance of payments (1).
66. Explain how a rise in the income of its main trading partners may affect a country’s trade in goods balance.
A rise in income abroad will increase the countries’ ability to purchase products (1) demand for this country’s exports may rise (1) particularly luxury products / products without domestic substitutes (1) exports are a credit item in the trade in goods balance (1) the trade in goods balance may improve (1) may move from a deficit to a surplus / any deficit may be reduced / any surplus may be increased (1).
The rise in income may be the result of the countries selling more goods to this country (1) this may increase the country’s imports (1) imports are a debit term (1) the trade in goods balance may move from a surplus to deficit / any deficit may become larger / any surplus may get smaller (1).
67. Analyse how a rise in a country’s foreign exchange rate may affect its unemployment rate.
A rise in the exchange rate will make exports more expensive (1) imports cheaper (1) demand for exports may fall / export revenue may decrease(1) demand for imports may rise / import expenditure may rise (1) net exports may fall (1) total (aggregate) demand may fall (1) output may decline (1) demand for labour may fall (1) unemployment may rise (1) cyclical unemployment (1).
68. Discuss whether or not a government should subsidise its exports.
Up to 5 marks for why it should:
A subsidy would lower costs of production (1) lower the price of exports (1) this may make them more internationally competitive (1).
Some industries producing exports may be infant industries (1) may need support before advantage can bo taken of coonomios of scalo (1).
Exports may rise (1) this may improve the current account / trade in goods and services balance (1) raise GDP / increase economic growth (1) increase employment / lower unemployment (1).
Up to 5 marks for why it should not:
Some domestic firms may already be price competitive (1) and so do not need a subsidy (1).
The subsidy may encourage some domestic firms to become inefficient (1) not cutting their costs (1) and improving the quality of their output (1).
It may be regarded to be a form of trade protection (1) other countries may retaliate (1) so exports may not increase (1).
There will be an opportunity cost involved (1) example (1).
69. Identify two characteristics of perfect competition.
- many buyers
- many sellers
- no barriers to entry (and exit)
- (firms are) price takers
- Identical / homogeneous product
- no attachment between buyers and sellers
- perfect knowledge
70. Explain two goals a business organisation may have.
Profit maximisation (1) making as much profit as possible / Increasing the gap between revenue and cost / rewarding entrepreneurs (1).
Growth / expansion (1) increasing the size of the firm by e.g. merging / seeking to gain market power (1) to take advantage of economies of scale (1).
Survival (1) during difficult times such as recession / when a firm is first established the aim may just be to stay in the market (1).
Profit satisficing (1) achieving enough profit to keep shareholders’ happy while following other objectives (1).
Social welfare (1) business organisations operating in the public sector may e.g. be concerned about the environment / charging a low price to help the poor (1).
71. Analyse the main reasons for the differences in the size of firms.
Type of business organisation (1) state-owned enterprises and multinational companies operate on a larger scale than sole traders (1).
Size of market (1) the market for some products is large / expanding (1) example (1) while others are declining (1) example (1).
Some firms have more access to finance (1) public limited companies can sell shares (1) sole traders cannot (1).
Some firms grow through merging (1) type of merger e.g. horizontal merger (1).
Motives of owners (1) e.g. some prefer the firm to remain small so that they can retain control / ownership (1).
Some firms may be subsidised (1) which may encourage them to produce a higher output (1).
Some firms may be more profitable (1) can reinvest profits / internal growth (1).
Length of time in the market (1) longer there, more time to grow (1).
Some firms may be able to take advantage of economies of scale (1) example of an economy (1).
Some firms may experience diseconomies of scale (1) example (1).
Type of product / capital v. labour-intensive (1) e.g. aircraft have to be produced on a large scale (1).
72. Discuss whether or not the use of supply-side policy measures by a government will reduce firms’ average costs of production.
Up to 5 marks for why they might:
Education and training (1) should increase labour productivity (1) this could reduce labour costs (1).
A cut in income tax (1) may reduce upward pressure on wages (1).
A cut in indirect taxes (1).
Privatisation (1) may make firms more efficient (1) especially if there is competition in the market (1).
Deregulation (1) may reduce the cost of complying with rules and regulations (1).
Subsidies (1) may enable firms to buy more efficient machinery (1) train workers (1) may be able to take advantage of economies of scale (1).
Remove tariffs (1) enable firms to get raw materials at lower prices (1).
Spending on infrastructure (1) reducing transport costs (1).
Up to 5 marks for why they might not:
Education and training may not be in the areas in demand (1) may not increase workers’ skills (1) some workers who are educated / trained may emigrate (1).
Wages of workers may rise by more than productivity (1) increasing labour costs (1).
Privatised firms may become private sector monopolies (1) this will reduce pressure on them to keep costs down (1).
Subsidies may be given to reduce unemployment / maintain employment (1) additional workers may be less productive (1) may experience diseconomies (1).
There may be corruption (1).
73. Define industry.
Firms (1) that produce the same product (1) example (1)
74. Explain two types of integration (merger).
horizontal integration (1) firms from same industry and same level of production integrate (1)
vertical integration (1) firms from same industry but different levels of production integrate (1)
conglomerate integration (1) firms from different industries integrate (1)
75. Analyse the advantages that an MNC has over a firm which only produces domestically.
Set up in economies where labour costs are less (1) and raw material costs are cheaper (1) which can give them cost advantage in the international markets (1).
Greater market (1) easier access to foreign markets (1) greater profits (1) fewer trade barriers (1) production set up in countries which have lots of favourable trade agreements (1) bigger output (1) economies of scale (1).
Reduction in risk (1) diversified markets (1).
Locate operations near the potential market (1) which results in lower transportation cost (1).
Wider access to more skilled workers (1) more productive (1).
76. Discuss whether or not an economy benefits from firms which are monopolies.
Up to 5 marks for how it might:
Monopolies can gain more profits (1) they will be able to reinvest more (1) more choices from the company (1) total demand increases (1) economic growth (1) expand production (1) employ more workers (1) unemployment decreases (1) more R&D (1) more innovation (1) higher quality (1) more productivity (1) more exports (1) improved current account position (1).
Up to 5 marks for how it might not:
Lack of competition (1) complacency (1) less productivity (1) less innovation (1) price is higher (1) inflation (1) exploitation of consumers (1) less choice (1) lower quality (1).
77. Identify one example of a direct tax and one example of an indirect tax.
- to increase output (1) capital more efficient/productive (1)
- to reduce costs (1) labour costs becoming relatively higher than machines (1) increasing profits (1)
may be able to take advantage of technical economies of scale (1) specialist capital may become viable for a large firm (1)
78. Explain two reasons why a firm may become more capital intensive as it grows.
- to increase output (1) capital more efficient/productive (1)
- to reduce costs (1) labour costs becoming relatively higher than machines (1) increasing profits (1)
may be able to take advantage of technical economies of scale (1) specialist capital may become viable for a large firm (1)
79. Analyse, using a production possibility curve (PPC) diagram, the possible effects of faster internet speeds for economic growth.
Up to 4 marks for the diagram:
- axes correctly labelled in terms of two different products or types of products (1)
- the curve or downward sloping line is drawn to the axes (1)
- second curve or downward sloping line is drawn to the axes (1)
- an indication either by labelling or an arrow that the curve has shifted outwards / right (1)
Up to 2 marks for written analysis:
Faster internet speed increases productive capacity / the maximum quantity of products that can be produced within a certain time period (1) better communication infrastructure (1) e.g. labour can work faster, capital is better (1) lower costs of production (1) encourage more investments therefore increase financial capital (1) increased productive capacity results in (potential) economic growth / cause economic growth (1).
80. Discuss whether or not an economy would benefit from less government regulation.
Up to 5 marks why it might:
More freedom (1) less red tape / bureaucracy (1) easier to set up new firms (1) more competition (1) decrease cost of production (1) decrease price (1) including exports (1) increase quantity demanded (1) increase total revenue (1) increase profits (1) more investments (1) increase demand for labour (1) less unemployment (1) decrease current account deficit (1) increase aggregate demand (1) increase economic growth (1).
More control over prices (1) resulting from removal of e.g. a maximum price (1).
Up to 5 marks why it might not:
Less labour regulations would reduce job security (1) more exploitation of workers (1) e.g lower wages / longer working hours (1) more inequality (1).
Less environmental regulations would increase pollution (1) e.g. air pollution / water pollution (1) health standards of society reduces (1)
Less antitrust/anticompetitive regulations will create monopolies (1) small firms can’t compete (1) higher prices (1).
Less protection of domestic firms from e.g. embargo (1) domestic firms may go out of business (1).
Discourage consumption of harmful products (1) e.g. smoking ban (1).
External costs may be ignored (1) e.g. air pollution, noise (1).
It may mean that there is less consumption of beneficial (merit) goods (1) e.g compulsory state education (1)
81. Identify two non-wage factors that could affect an individual’s choice of occupation.
- opportunity for promotion
- job security
- satisfactory work
- varied work
- pleasant working conditions
- fringe benefits
- location
- danger
82. Explain two causes of inflation.
- demand-pull inflation (1) increase in total demand/ lower interest rate / increase business confidence / increase consumer confidence / depreciation of the currency / lower income tax / lower cost of borrowing / increase disposable income / increase exports (1) increase in money supply (1)
- cost-push / increase in costs (1) increase price of commodities / increase cost of production / depreciation of the currency / increase indirect taxes (1)
83. Analyse the impact of strikes on an economy.
Disrupted production (1) loss of output (1) decreased productivity (1) less economic growth (1) increased cost of firms (1) reduced profits (1) rising prices / inflation (1) unemployment (1).
Better working conditions of the workers (1) higher wages (1).
Exports decreasing (1) increase current account deficit / decrease current account surplus (1).
Less investment by MNCs (1).
There may be capital investment to replace workers (1).
84. Discuss whether or not an increase in wages will reduce a firm’s profit.
Up to 5 marks for why it might:
Higher wages will mean a higher wage bill (1) if output does not increase by more than wages, labour costs per unit will increase (1) costs of production will increase (1) profit is revenue minus costs(1) with higher costs and the same revenue, profit will fall (1).
Prices will rise(1) if demand is elastic, revenue will fall(1).
Up to 5 marks for why it might not:
Paying higher wages may prevent strikes (1) this can reduce costs of production (1).
Higher wages may motivate workers (1) this can increase productivity (1) reduce costs of production (1).
Higher wages may make it easier to recruit skilled workers (1) this will raise productivity (1) reduce costs of production (1) increase profits (1)
Other costs may be falling (1) e.g. rent, corporation tax (1).
Demand for the firm’s products may be increasing (1) this will raise revenue (1).
Higher wages may be paid to a smaller labour force (1) reducing the wage bill (1).
Replace workers with machines (1) may leave costs unchanged (1).
85. Define monetary policy
Policy to control the supply of money / demand-side policy (1) by changing interest rates / influencing the price of money (1) exchange rates / Quantitative Easing (1).
86. Explain two functions of money
- medium of exchange (1) avoids double coincidence of wants needed in barter/enables people to buy and sell products (1)
- unit of account / measure of value (1) easy to compare value of products / putting a value on products (1)
store of value (1) for savings / future consumption / will not lose value (1)
standard of deferred payment (1) credit / instalments/enable people to borrow and lend (1)
87. Analyse the consequences of an appreciating currency on the current account of the balance of payments of a country
An appreciation in the exchange rate means a rise in the value of the currency (1) higher export prices (1) lower import prices (1) increase quantity demand for imports (1) decrease quantity demand for exports (1) increase value of imports (1) decrease value of exports (1) may reduce net exports (1) current account deficit increases / current account surplus decreases (1).
88. Discuss whether or not a reduction in taxes is beneficial for an economy.
Up to 5 marks for why it is:
Reduction in taxes will attract investments (1) this creates new jobs (1) this could also improve the productivity of the economy (1) as there might be investments in R&D / technology (1) creating economic growth (1)
Cut in income tax will increase disposable income (1) increase total demand (1) lower unemployment (1)
Cut in corporation tax/indirect tax (1) may reduce costs of production (1) inflation decreases (1).
Cut in tariffs will increase competition (1) improve e.g. product quality (1).
Up to 5 marks for why it is not:
Decreased government revenue (1) budget deficit (1) government can’t spend on e.g. infrastructure (1) opportunity cost (1) foreign investment might increase the value of the currency further (1) exports become uncompetitive (1).
Reduction in indirect tax (1) may increase consumption of harmful products/example (1) may reduce people’s health (1).
Reduction in tariffs may e.g. cause infant industries to go out of business (1) increasing unemployment (1).
An increase in total (aggregate) demand may cause inflation (1)
89. Define Gross Domestic Product.
GDP measures the (total) output/income/expenditure (1) of a country/economy (1).
90. Explain two ways in which more affordable medicines can improve standards of living.
- more people can have medicines (1) improve health (1) raise productivity / enable people to work / not off work sick (1)
different choice of medicines (1) consumers can find what suits them best (1)
- hospitals will have more medicines (1) easier to treat those who are ill/reduce death rate (1)
less spent on healthcare (1) can spend more on other things that can improve standard of living such as education, holidays (1)
- higher productivity (1) higher incomes (1)
91. Analyse how investment in research and development can help a firm to grow in size.
More innovation (1) e.g. Faster machines (1) increase productivity (1) decrease cost of production (1) decrease price of products (1) increase demand (1) increase market share (1) increase profits (1) more reinvestments (1).
New products produced (1) larger exports (1) enter new markets (1) at start no direct competition (1) may be high demand (1).
More skilled workers needed (1) creating a bigger workforce (1)
Provide information (1) influence what is produced (1).
92. Discuss whether or not a reduction in imports is beneficial to an economy.
Up to 5 marks for why it might be:
Reduction in imports may improve the trade in goods / trade in goods and services balance (1) this will improve the current account position / reduce a current account deficit (1) this may reduce a country’s debts (1) avoid downward pressure on the exchange rate (1).
Spending on imports may be replaced by spending on domestically produced products (1) this would increase the country’s output / cause economic growth (1) this would increase demand for labour (1) raise employment / reduce unemployment (1) increase incomes and living standards (1).
Fewer imports may enable infant industries to grow (1) may protect declining strategic industries (1).
May prevent dumping (1) explanation of what is meant by dumping (1)
Imports may be harmful products (1) might affect people’s health (1).
Up to 5 marks for why it might not be:
Imports of capital goods / raw materials may decline (1) these might be cheaper / lower quality than domestically produced capital goods and/or raw materials (1) this will raise costs of production (1) make the country’s products less internationally competitive (1) lower output/reduce economic growth (1) worsen the current account position (1) raise unemployment (1).
Fewer imports may reduce choice (1) reduce competition (1) may raise prices (1) lower quality of people’s lives (1).
Exports may be falling by more than imports (1) so current account position may be worsening (1).
Quantity of imports may be falling but value of imports may be rising (1).
If the reduction is caused by protectionist measures (1) this would reduce benefits of free trade (1).
Loss of tariff revenue (1) may be a major source of tax revenue/reduce amount that can be spent on e.g. education (1).
Imports may be of beneficial products (1) not produced in the country (1).
93. Define choice and provide an example.
Two or more different alternatives that an economic agent may have OR the idea of sacrifice and opportunity cost (1) different coloured bicycle helmets / any example (1).
94. Explain how the CPI is calculated.
CPI uses a basket of goods and services (1) weighted to account for the proportion of income (1) spent by the average household (1) found in a survey (1) uses a base year (1) for comparison (1) prices around the country surveyed (1) various types of firms / sources e.g. physical shops and also online (1) weights multiplied by price changes (1).
95. Analyse the possible reasons for the increase in global demand for bicycle helmets.
Increase in popularity of cycling (1) helmets are complements to bicycles (1) quantity demanded for bicycles increasing would increase the demand for helmets (1).
Increase in environmental awareness (1) less driving (1) more bicycles (1) thus, more demand for bicycle helmets (1).
Increase in health and safety awareness (1) dangers of cycling (1) increased awareness of benefits of helmets (1).
Increase in income (1) bicycle helmet is normal good (1) YED positive (1).
Increase subsidies for bicycles (1) decrease price of bicycles (1).
Increase demand for bicycles (1) increase demand for bicycle helmets
Increase in population (1).
Reduction in price of helmets (1).
96. Discuss whether or not increasing sales of a product will be beneficial to a firm.
Up to 5 marks why it will be:
Increase sales revenue/income (1) increase profits (1) allowing firm to reinvest (1) into R&D (1) employ more labour (1) making new products (1) better quality products (1) profits increase even more (1).
Revenue may increase if PED is elastic (1) as demand will rise by a greater proportion than price (1).
Economies of scale (1) as output increases and average cost falls (1) efficiency arising from bulk buying / lower interest rates / indivisibility / division of labour (1).
Up to 5 marks why it will not be:
Price might be lower (1) revenue is lower (1) profit is lower (1) sales of product increase but sales of other products decrease (1) not enough to offset each other (1).
Extra sales only achieved through higher costs of production (1) e.g. advertising (1).
Diseconomies of scale (1) increase output and average costs increases (1) due to control and coordination problems (1).
97. Define tertiary sector and give an example of an industry operating in the tertiary sector.
Services (1) e.g. banking (1).
98. Explain two reasons why farm workers may be low paid.
high supply / easily replaced / lower productivity / labour intensive / low value products (1) low skills/qualifications required (1).
- low demand (1) can be replaced by capital equipment (1).
- low bargaining strength (1) weak trade unions/low trade union membership (1)
99. Analyse how lower unemployment may cause inflation.
More people in work (1) incomes may rise (1) as more people are earning wages / higher purchasing power (1) this could increase spending (1) which may increase total (aggregate) demand (1) without a rise in output / supply (1) causing demand-pull inflation (1).
There may be a shortage of workers/increased competition for workers (1) wages may be raised (1) to attract workers (1) this increases the average cost of production (1) firms raise prices to maintain profit margins (1) causing cost-push inflation (1).
100. Discuss whether or not a country with high wage rates will have a high unemployment rate.
Up to 5 marks for why it might:
- High wages may mean high cost of production (1) this may mean higher prices / inflation (1) international competitiveness may be low (1) exports may fall (1)imports may rise(1) net exports may fall(1) total (aggregate ) demand may fall(1) causing cyclical unemployment / firms may lay off workers(1).
- May encourage capital intensive production (1) particular industries may be driven out of business by foreign competition (1) causing structural unemployment (1).
Up to 5 marks for why it might not:
High wages may motivate workers to work harder (1) making them feel appreciated (1) causing productivity to be high (1) resulting in high demand for labour (1).
- Workers may be working with high value capital equipment (1) keeping cost per unit low (1).
- High wages can mean high consumer spending (1) so total (aggregate) demand may be high (1) resulting in higher demand for workers (1).
- Wages may rise above benefits (1) leading to less voluntary unemployment (1).
- Higher tax revenue (1) allows government to increase spending on reducing unemployment e.g. training (1).
101. Identify the difference between a tax and a subsidy.
A tax is a payment to the government (1) whereas a subsidy is a grant from the government (1).
- A tax increases costs/prices (1) a subsidy reduces costs/prices (1).
A tax reduces consumption / production (1) a subsidy increases consumption / production (1).
- A tax is a cost for people / firms (1) a subsidy is a cost to the government (1).
- A tax is placed on demerit goods (1) a subsidy is given to merit goods (1).
102. Explain two reasons why demand for a product may be price-inelastic.
- The product may not have a substitute (1) consumers will not be able to switch to rival products / example (1).
The product may be a necessity (1) people will need to buy it even if price rises / example (1).
The product may take up a small proportion of income (1) people may not notice a price rise / example (1).
The product may be addictive (1) people cannot do without the product / example (1).
The purchase of the product cannot be postponed/there is only a short time period (1) so people do not have time to find alternatives (1).
- Advertising changes tastes of consumer (1) making the product a “must have” (1).
103. Analyse, using a demand and supply diagram, the effect a report stating that eating tomatoes is good for health will have on the market for tomatoes.
Up to 4 marks for the diagram:
Axes correctly labelled – price and quantity or P and Q (1).
Demand and supply curves correctly labelled (1).
Demand curve shifted to the right (1).
Equilibriums – shown by lines or e.g. E1 and E2 (1).
Up to 2 marks for written analysis:
The report will encourage people to eat more tomatoes (1) rise in demand leads to shortages (1) a rise in price (1) and an increase in output of tomatoes (1).
The supply of tomatoes is likely to be relatively inelastic (1) and so an increase in demand will be likely to have more impact on price than quantity (1).
Do not reward analysis marks for description of diagram e.g. price changes from P2 to P1 or quantity changes from Q1 to Q2.
104. Discuss whether or not introducing more capital-intensive production methods will increase a firm’s profits.
Up to 5 marks for why it might:
Machines may introduce more advanced technology (1) increases productivity (1) higher output means firm benefits from economies of scale (1) less workers means lower labour costs (1) may reduce average costs / (1) may enable price to be lower (1) revenue will rise (1) if demand is elastic (1).
- Better quality products could be produced (1) increasing demand (1).
- May increase international competitiveness (1) sell more exports (1).
Up to 5 marks for why it might not:
Machines may be expensive (1) workers may not be trained in their use (1) average costs could rise (1) reducing gaps between revenue and cost (1).
- Machines may break down (1) consequences of breakdown e.g. interruptions in supply (1).
- Initial set-up costs may be high (1) profits are reduced in short-run (1).
- A fall in price may cause revenue to fall (1) if demand is inelastic (1).
- Consumers may prefer handmade/personalised products (1) demand may fall (1).
- Labour may be in large supply (1) resulting in low wages (1).
- Government may subsidise firms to employ workers (1) to reduce unemployment (1).
105. Identify the difference between economic growth and recession.
- Economic growth is an increase in GDP/output (1).
- Recession is a fall in GDP/output / negative economic growth (1).
106. Explain how the HDI compares living standards between countries.
- Measures output/income/material standard of living (1) GDP/GNI per head (1).
- Measures healthcare (1) life expectancy (1).
- Measures education (1) mean and expected years of schooling / literacy rate (1).
- Provides an index figure for each country (1) from 0 to 1 / divides countries into very high, high, medium and low (1).
- Higher HDI means higher standard of living (1).
107. Analyse the effects of a rise in a country’s birth rate.
- In the short run, fewer women may be able to work (1) which will decrease the size of the labour force (1) more children (1) increases the dependency ratio (1) putting pressure on the working population (1).
In the longer run there will be more workers (1) this may decrease the dependency ratio (1) population size may increase (1) increase output (1) encourage investment (1).
- Government will have to devote more resources e.g. to primary education / childcare / support families (1) this may mean fewer resources can be devoted to e.g. improving living standards (1).
- Higher demand for industries related to young children e.g. baby clothes, child minding (1) may reduce unemployment (1).
- Increase in population/ overpopulation (1) causes a strain on resources (1) fall in living standards (1).
- If birth rate still lower than death rate (1) will still have an ageing population (1).
108. Discuss whether or not parents should have to pay a fee to send their children to school.
Up to 5 marks for why they should:
- Some parents can afford to pay (1) some parents will work hard to pay (1) paying may make them more prepared to demand good standards (1) would see themselves as consumers (1).
- May result in more resources being devoted to education (1) teachers reive higher pay (1) and motivated to work harder (1) parents demand high standards for their money (1) improving outcomes (1).
- Education provides private benefits (1) in the form of higher pay (1) more career choice (1).
- The government paying for education (1) involves an opportunity cost (1) e.g. spending on healthcare (1).
- A fee may be charged for secondary education but not primary education (1) if it is considered a basic level of education should be available to all (1) parents may choose to pay for education if they think it will be of high quality (1).
Up to 5 marks for why they should not:
- Some parents may not send their children to school (1) some will not be able to afford to (1) some may undervalue education (1) may reduce desire to have children (1).
- Opportunity cost to parents (1) e.g. less spending on other goods / services (1).
- It would increase income inequality (1) price would take a higher percentage of the income of the poor (1) less educated workforce (1) lower standard of living (1).
Education provides external benefits (1) higher productivity (1) higher output/GDP (1) these could be lost (1)
- The government may need to provide education free to ensure the right quantity of education is consumed (1) that the poor have access to education (1).
109. Define saving
- Income (1) not spent / minus spending (1).
- Putting money in the bank (1) for future use (1).
110. Explain two benefits a country can gain from having a stock exchange.
- Provides a market for the sale of shares and bonds (1) encourages saving and investment (1).
Makes it easier for firms to grow / source of finance for firms (1) makes people more willing to buy shares / facilitates mergers (1).
Government able to raise funding through bonds (1) to support expenditure in economy (1).
- May encourage MNCs to set up in the country (1) which can increase economic growth / exports / employment (1).
- May encourage the setting up of other financial institutions (1) creating high-skilled/well-paid jobs (1).
111. Analyse how firms may be affected by a rise in the rate of interest.
It will increase the cost of borrowing (1) this may discourage firms from investing (1) reducing their growth (1) may put up their prices (1).
Firms may decide to save more (1) as the return will increase (1) the opportunity cost of investment will rise (1).
- It may increase the cost of past loans (1) reducing firms’ profits (1).
Demand for consumer goods may fall (1) as consumers will be discouraged from borrowing (1) be encouraged to save (1) so lower demand will reduce firms’ revenue (1).
112. Discuss whether or not an economy will benefit from its firms getting larger.
Up to 5 marks for why it might:
- To produce more (1) more workers may be employed (1) which may reduce unemployment (1).
- Larger firms may be more price competitive/produce at lower average cost (1) due to economies of scale (1) example (1) this may increase output (1) causing economic growth (1) lower prices (1) it may also increase exports (1) improving the current account position (1).
Up to 5 marks for why it might not:
- More imported raw materials/capital goods may be purchased (1) worsening the current account position (1).
- Larger firms may have more market power (1) may be less efficient (1) may experience diseconomies of scale (1) example (1) average costs may rise (1) cause cost-push inflation (1) reducing exports (1) worsening the current account position (1).
113. Define wages
- A payment (1) to a worker (1).
- Amount earned (1) by labour / employees (1).
- Reward (1) for labour (1).
114. Explain why the opportunity cost of becoming a teacher for one worker may be greater than for another worker.
- Opportunity cost is the (next) best alternative (1) forgone (1).
One worker may have earned more than another (1) and so would be giving up more earnings (1).
One worker may give up more non-wage benefits (1) example e.g. promotion chances (1).
- One worker has further to travel to work / higher costs of travelling (1) loss of leisure time / time with family / lower net income (1).
115. Analyse how an individual’s earnings are likely to change over her or his lifetime.
- At first an individual’s earnings are likely to be low (1) they will lack training / experience (1) low qualifications / skills (1) unlikely to have been promoted (1).
- In early middle-age earnings may be higher (1) become more productive due to higher skills / experience(1) adding value for employer (1) may have been promoted (1) may work overtime (1) have higher expenses (1) e.g. purchase of a house / paying to support children (1).
- In late-age before retirement (1) earnings may be high due to experience (1) but may be low due to working part-time (1) being less productive (1) as being more tired / less physically fit (1).
- At retirement (1) rely on pension / family for financial support (1).
- Gender discrimination may fall (1) so increasing a woman’s earnings (1).
116. Discuss whether most people would prefer to work for a multinational company (MNC) or a sole trader. (sole trader- not in syllabus)
Up to 5 marks for why they might want to work for an MNC:
- An MNC may earn high profits (1) benefits from economies of scale (1) lower costs enable them to pay high wages (1) may offer good fringe benefits (1) example (1) better working conditions (1)
- An MNC may provide training (1) improving their skills (1) give the opportunity to work with advanced technology (1) making it easier to get a well-paid job in another firm (1) better reputation / status for employee (1).
- The firm may provide the opportunity of promotion (1) and possibly the opportunity to work in another country (1)
- MNC more likely to provide stable employment (1) more likely to survive in recession (1)
117. Define a trade in services deficit.
- Imports of services being greater than exports of services (2).
- A deficit on a section of the balance of payments (1).
118. Explain two population problems a rich, developed country may experience.
- an ageing population (1) due to a falling death rate and birth rate / increasing dependency / increasing the cost of healthcare and/or pensions (1).
A decreasing population (1) a declining labour force (1) due to a falling birth rate / increasing dependency (1).
- net immigration (1) putting pressure on schools/hospitals/housing (1).
119. Analyse how a move to freer international trade may benefit a country’s producers.
- With lower tariffs (1) their exports will be cheaper (1) the volume of exports will not be restricted by quotas (1).
- If producers are efficient (1) they will sell more abroad (1).
- Producers will be able to buy imported raw materials more cheaply (1) this will reduce their costs of production (1) increase their profits (1).
120. Discuss whether or not the standard of living is higher in developed countries than in developing countries.
Up to 5 marks for why it might be:
- Higher average income (1) enabling people to buy more goods and services (1) spend money on healthcare (1) education (1) enabling people to live longer / be more productive (1).
- Government tax revenue is likely to be higher (1) enabling the government to spend more on e.g. pensions, healthcare (1).
Up to 5 marks for why it might not be:
- Some people’s living standards in developed countries are low/some people’s living standards in developing countries are high (1) income is not evenly distributed (1).
- Working hours in some developed countries are high (1) leading to stress (1) less leisure time (1).
- Environmental conditions are better in some developing countries (1) with less pollution (1).
121. Define private cost.
Private costs are costs borne by those producing the product (1) consuming the product (1) example of such a cost (1) social costs — external costs (1).
122. Explain two ways a government could reduce external costs.
Up to 2 marks for two explanations from:
Impose a tax (1) to discourage production / discourage consumption / turn external into private cost (1).
Regulation (1) ban or restrict production / ban or restrict consumption / may be enforced by fines (1).
Provide information (1) to discourage consumption / discourage production (1).
Government subsidies (1) to encourage cleaner production methods / the consumption of healthier food e.g. fruit instead of high fat foods (1).
123. Analyse how a high rate of inflation affects the functions of money.
People may not want to save money (1) as it may lose value (1) stop acting as a store of value (1).
People may not accept money as a payment (1) as it may lose value / people may not know what its value is (1) stop acting as a medium of exchange (1).
People may not be willing to lend money (1) inflation rate may be higher than interest rate (1) stop acting as a standard of deferred payments (1).
People may stop valuing products in monetary terms (1) due to instability of prices (1) stop acting as a unit of account / measure of value (1).
124. Discuss whether or not a fall in its foreign exchange rate will benefit an economy.
Up to 5 marks for why it might:
A lower exchange rate will reduce the price of exports (1) raise the price of imports (1) net exports may rise / exports may rise / imports may fall (1) current account of the balance of payments may improve (1) total (aggregate) demand may increase (1) real GDP may increase economic growth (1) employment may rise (1).
Up to 5 marks for why it might not:
Higher import prices may not reduce spending on imports if demand for imports is inelastic (1) export revenue may not rise if demand for exports is inelastic (1) import restrictions imposed on other countries may make it difficult to sell more exports (1).
Higher import prices may cause inflation(1) imported raw material costs may rise(1) causing cost-push inflation(1) imported finished products may not be replaced by domestic products (1) rise in net exports may cause demand-pull inflation(1).
Domestic citizens may be able to purchase fewer imports (1) lower living standards (1).
If the country is in debt (1) it may increase the cost of repaying the debt (1).
If the country is operating at full employment (1) it may not be possible to produce more exports / substitutes for imports (1).
Demand for the country’s exports may be low (1) if quality is poor / incomes abroad are falling abroad (1).
If the fall is used as a way to capture markets abroad / protect domestic industries (1) there may be retaliation (1).
125. Identify two types of tax.
Any 2 from:
Direct (1) indirect (1) progressive (1) regressive (1) proportional (1) VAT/GST (1) excise duty (1) income tax (1) corporation tax (1) inheritance tax (1) lump sum tax (1) specific tax (1) ad valorem tax (1).
126. Explain two benefits to a government from a fall in unemployment.
Rise in tax revenue (direct/indirect) (1) people earning more / people spending more / output higher (1).
Fall in expenditure on unemployment benefit (1) enabling government to spend on other areas e.g. healthcare/education (1)
May help the government achieve its macroeconomic objectives (1) e.g. raise
GDP / achieve full employment (1)
127. Analyse, using a production possibility curve (PPC) diagram, the effects of high unemployment in a country.
Diagram up to 3 marks:
- axes labelled Capital Goods & Consumer Goods (also accept any other combination as long as it is clear that it is two separate products, and not Price and Quantity)
- a curve bowed outwards or a downward sloping straight line drawn to the axes
- point inside the curve identified as point of unemployment e.g. X
Written analysis up to 3 marks:
- high unemployment means that the available resources are not fully (1) and efficiently used (1)
- the economy will not be able to produce at its maximum level (1) i.e. on the PPC (1) output of the economy is smaller than the maximum (1) lower than potential living standards (1)
May be negative or lower economic growth / recession (1)
128. Discuss whether or not a government should raise the school leaving age.
Up to 5 marks for why it should:
More time in education may increase workers’ skills (1) raise qualifications (1) reduce unemployment (1) raise productivity (1) increase output / increase economic growth (1) raise wages / increase living standards / increase HDI / reduce poverty (1) lower costs of production / improved quality of products (1) increase net exports / raise exports / lower imports (1) improve the current account position (1).
May improve life expectancy / health (1) by making people better informed (1).
May attract more MNCs to set up in the country (1) reduce their training costs / raise the quality of their output (1).
Up to 5 marks for why it should not:
May increase government spending (1) it will involve the use of extra resources (1) there will be an opportunity cost involved (1) example (1).
In the short run the labour force will be reduced (1) lower potential output (1).
A greater quantity of education does not necessarily mean a rise in quality of education (1).
Some of those who receive the extra years, of schooling may not take full advantage of these (1) which may disrupt the learning of others (1).
The dependency ratio may rise (1) tax rates may have to be increased (1).
Families may not be able to afford the extra years schooling (1).
129. Define earnings.
Income / money received by a factor of production (1) received from working / payment to workers (1) includes wages/salaries (1) overtime payments / bonuses / commission (1).income from other sources e.g. undertaking financial investment / renting / running a business (1).
130. Explain two non-wage factors that influence an individual’s choice of occupation.
Accept any valid non-wage factor (1) with a valid explanation (1) e.g.
Short working hours (1) would increase leisure time (1)
Job security (1) reduces stress (1)
Promotion chances (1) increase wages in long run (1)
Fringe benefit / example (1) explanation of fringe benefit / explanation of example (1).
Qualifications / skills / education (1) allow an individual to choose an appropriate occupation (1).
131. Analyse why economics graduates are well-paid.
Graduates are skilled / more knowledgeable (1) have high levels of qualifications/training/education (1) productive / efficient (1) demand for their services is high (1) demand is inelastic (1) supply is low (1) long period of training required (1) supply is inelastic (1).
Graduates tend to work in jobs with high pay/position/responsibility/stress (1) example (1).
An economics degree is held in high esteem as a qualification (1).
132. Discuss whether or not people in developed countries are likely to save more than people in developing countries.
Up to 5 marks for why they might:
On average people in developed countries have a higher income (1) so are more able to save (1) or more able to save larger amounts so may gain a higher interest rate (1).
There tends to be a greater range of financial institutions in developed countries (1) more secure financial institutions (1) this gives greater confidence in saving (1).
People in some developed countries may have a culture of saving (1) e.g. Japan (1).
Inflation rate may be lower in developed countries (1) enabling people to save more of their income (1).
Up to 5 marks for why they might not:
The lack of a developed welfare system in some developing countries (1) means that some people may save more for e.g. their old age / retirement (1) future health problems (1).
There may be greater confidence about economic prospects in some developed countries (1) encouraging people to spend more (1).
The rate of interest may be lower in some developed countries (1) reducing the incentive to save (1).
Some people in developing countries are richer than some people in developed countries (1).
Some people in developing countries may save more to spend on higher education to increase the opportunity to work abroad (1).
133. What is the difference between the private sector and the public sector?
The private sector is the part of the economy where market forces / price mechanism / producers and consumers’ decisions allocate resources (1) firms are owned by private individuals (1).
The public sector is the part of the economy where the government makes the decisions / government controlled / government-owned firms (1).
134. Explain two reasons why productivity may fall.
Productivity may fall as the result of a decline in the quantity or quality of education/training (1) workers will be less skilled (1).
A decline in investment (1) workers will work with less equipment (1).
A decline in wage rates (1) will reduce workers’ motivation (1).
Worse working conditions (1) reduce job satisfaction (1).
A rise in working hours (1) making workers more tired (1).
Work may become more repetitive / less interesting (1) which may result in workers becoming bored (1).
Change in average age of workers (1) e.g. older workers may be less up to date with new technology / younger workers may have received less training / be less experienced (1).
Higher tax rates in a country (1) may reduce workers’ motivation (1).
Poorer healthcare in a country (1) reducing workers’ physical strength / mental alertness (1).
135. Analyse how an increase in the price elasticity of demand and the price elasticity of supply of its products could benefit a firm.
A more elastic demand would mean that the firm could reduce price (1) to raise revenue (1) as demand would rise by more than the fall in price (1) if revenue rises by more than costs, profit will increase (1).
A more elastic supply will mean that the firm can adjust more quickly the amount it sells when price changes (1) the firm will be able to take greater advantage of an increase in demand / rise in price (1) the firm will be able to take more of its products off the market should price fall (1).
136. Discuss whether or not small firms are likely to survive in the long run.
Up to 5 marks for why they might:
Small firms may provide a personal service (1) may have greater contact with their customers (1) more responsive to changes in consumer demand (1).
May be more flexible (1) fewer people to consult (1).
May be producing products in low demand (1) not facing competition from large firms (1).
May be a local monopoly / in a good location (1) may not face competition in the area (1).
May cooperate with other small firms (1) enable advantage to be taken of e.g. buying in bulk (1).
May supply specialised products / in a niche market (1) including to large firms (1).
May receive government subsidies (1) lowering their costs of production (1).
Up to 5 marks for why they might not:
May be driven out of business (1) by larger firms with lower costs of production (1) better known (1) larger firms can take advantage of economies of scale (1). examples of economies of scale (Up to 2).
Large firms may take over / merge with smaller firms (1) to gain market power (1) take advantage of economies of scale (1).
Government subsidies may only be short term (1).
Some small firms may cease to exist when their owners retire/die (1) e.g. sole traders (1).
Less capital available / difficulties in raising capital (1) make it difficult to purchase new / high quality equipment (1) make it difficult to invest in R&D (1).
137. Define Gross Domestic Product.
The (total) output/income/expenditure (1) of a country/economy (1).
138. Explain two reasons why a person may be willing to work at night.
A person may lack the skills to gain another job (1) have no choice (1).
There may be a high unemployment rate (1) a person will be grateful for any job (1).
Night work may fit in with family circumstances (1) a person may have to look after children / older relatives during the day (1)
The job may be well paid (1) compensating for the inconvenience (1).
The job may offer fringe benefits (1) example e.g. longer holidays (1).
A person may enjoy their job (1) example (1).
A person may need to earn additional income (1) to supplement income from day job / to support their family (1).
139. Analyse how having some of its population working abroad may benefit an economy.
The workers may send income home (1) helping to support dependents / raise living standards of dependents (1) saving on some government benefits having to be paid (1).
They may gain skills abroad (1) if they return they will increase the productivity of the labour force (1) may raise output / cause economic growth (1) reduce firms costs of production (1).
The money they sent back will be an inflow of foreign currency / remittance / primary income (1) improving the current account position on the balance of payments (1).
May reduce unemployment (1) if the workers’ skills are not in demand at home (1).
140. Discuss whether or not advances in technology benefit an economy.
Up to 5 marks for why they might:
Advances in technology will raise the quality / productivity of capital / labour (1) it will increase the output that can be made / cause economic growth / increase GDP (1) may raise income (1)
Advances in technology can lower costs of production (1) reduce cost-push inflation (1) make domestic products more internationally competitive (1) improve the current account position of the balance of payments (1).
May raise the quality of products produced (1) raise living standards (1) make domestic products more quality competitive (1) improve the position of the current account of the balance of payments (1).
May attract MNCs (1).
Provide employment for certain classes of worker (1) e.g. skilled (1).
Up to 5 marks for why they might not:
Advances in technology may result in capital equipment that can replace labour (1) result in unemployment (1).
If workers do not have sufficient skills (1) they may not be able to get the most out of more advanced equipment (1).
New capital equipment may worsen working conditions (1) e.g. workers may get eye strain by looking at a screen for long periods of time (1).
May be an opportunity cost (in the short run) (1) as more resources may have to be devoted to capital goods / R&D (1).
New capital equipment may be expensive (1) increase firm’ costs (1) may be an opportunity cost if provided by the government (1).
141. Identify two factors of production involved in mining gold.
Any 2 from:
Labour/miner (1) land / gold ore (1) capital/equipment (1) enterprise/owner (1)
142. Explain two reasons why a government may impose a tariff on imported gold.
To discourage the purchase of the foreign gold / reduce the demand for imported gold (1) to improve the current account position on the balance of payments (1).
To raise revenue (1) to fund government expenditure (1).
If gold is an infant industry (1) enable domestic industries to grow (1) increase output / become more competitive / efficient / natural resources discovered (1)
Protect domestic gold industry (1) protect jobs / keep unemployment low (1) encourage expansion of domestic firms (1).
Retaliation (1) in response to trade restrictions on gold imposed by other countries (1).
143. Analyse how perfect competition differs from a monopoly.
In perfect competition there are many sellers (1) in monopoly there is only one (1).
In perfect competition there are no barriers to entry and exit / free entry and exit (1) in monopoly there are barriers (1).
Firms in perfect competition are price takers (1) a monopoly is a price maker (1).
In perfect competition there is perfect knowledge (1) that other firms may not be aware of e.g. the profit being earned by a monopoly (1).
In perfect competition there is a low degree of market concentration (1) in monopoly it is 100% (1).
In perfect competition there are perfect substitutes / homogenous products / identical products (1) in monopoly there are no substitutes / a unique product (1).
144. Discuss whether or not an economy should mine and sell all of its gold now.
Up to 5 marks for why it should:
Will create employment (1) raise output / higher economic growth (1) increase incomes (1) increase living standards (1).
It can be exported (1) demand may be high now (1) improve trade in goods (1) improve the current account position (1).
More tax revenue can be earned (1) enable the government to spend more on e.g. education/healthcare (1).
Up to 5 marks for why it should not:
It will stop future generations (1) being able to benefit from its sale / reduce economic growth (1) as resources will be depleted (1) as a result of higher demand (1) e.g. due to higher income (1).
The price of gold may rise in the future (1) now may not be the best time to sel it (1).
The exchange rate may currently be low (1) which may reduce the revenue that the country can gain from exporting the gold (1).
Advances in technology (1) may lower costs of extraction in the future (1).
Gold mining may cause external costs (1) example e.g. pollution (1).
In the long run, gold may have to be imported (1) increasing the current account position (1).
It may lead to overspecialisation (1) potential for structural unemployment (1).
145. Define protectionism.
Protectionism is the deliberate attempt to limit imports or promote exports / make foreign products less competitive (1) have trade restrictions (1).
146. Explain two methods of trade protection.
Tariffs (1) tax on imports that would increase the price of imports (1).
Quotas (1) limit on the volume of imported goods allowed into the country (1).
Subsidies (1) to reduce the costs of domestic firms / reduce the price of domestic goods and services (1).
Embargoes (1) total restriction / ban on imported goods (1).
Exchange controls (1) limit on the amount of foreign currency that can be purchased (1)
Regulations (1) making it difficult to import (1)
147. Analyse, using a demand and supply diagram, the effect of falling steel prices on the market for cars.
Diagram up to 3 marks:
- P, Q, S, D correctly labelled
- Shift in supply curve to the right
- Decrease in P and increase in Q
- New equilibrium indicated
Written analysis up to 3 marks:
- Steel prices decreasing will lead to a decrease in car manufacturers costs (1)
- This may be passed on in lower price of cars (1)
- The extent of the change might be influenced by PED/PES (1)
148. Discuss whether or not protectionism is effective in raising living standards.
Up to 5 marks on how it will be effective in raising living standards:
Protectionism may increase the price of imports (1) the quantity of imports demanded will decrease (1) the quantity of domestic goods demanded may increase (1) demand for labour is derived demand (1) demand for workers will increase (1), therefore unemployment decreases (1) domestic incomes increase (1) consumption of goods and services increase (1) employment in infant/declining (sunrise/sunset) industries may be protected (1).
Increased demand for products of domestic firms may lead to an increase in total revenue (1) and profits (1).
Protectionism can decrease imports of demerit goods (1) reducing external costs (1) e.g. pollution, health/social problems (1).
Up to 5 marks on how it will not be effective in raising living standards:
Protectionism may reduce the possibility of specialisation (1) to produce what a country is best at (1) increasing production costs (1) increasing import prices (1).
Protectionism might lead to retaliation (1) other countries may adopt protectionist policies on imports (1) increasing the price of the country’s exports (1) decreasing the demand for exports (1) reducing the demand for workers (1) unemployment increases (1) less income (1) consumption/production of goods and services decreases (1).
Protectionism may reduce competition / choices available to domestic consumers (1) reducing the quality of the products available (1).
Protectionist policies in one country could reduce employment in other countries (1) as they are no longer able to export the same amount (1).
149. Define supply.
The number of products firms are willing to provide/sell (1) and are able to provide/sell (1) at a given price (1).
150. Explain one market failure that may occur in the salmon market.
Market mechanism fails to allocate resources efficiently / not all costs are considered (1).
Social cost is greater than private cost (1) as there are external costs / negative externalities (1) consumption at the current rate may lead to depletion of stock (1) consumption becomes unsustainable (1) overconsumption / resources are overused (1) these resources could be conserved for future generations (1) cost to future generations who will not be able to enjoy the product (1) pollution may occur e.g. water pollution (1).
Monopoly / one large producer (1) no competition (1) can charge high prices / exploit consumers (1) excess profits of producers (1).
Inequality (1) high price (1) poor cannot afford the product (1) and will not be able to attain any health benefits of consuming the product (1).
151. Analyse how information on changes in a firm’s revenue can be obtained from price elasticity of demand calculations.
152. Discuss whether or not government subsidies are always beneficial to producers.
153. Identify the difference between absolute and relative poverty.
154. Explain two characteristics of a developed country.
155. Analyse two policy measures to alleviate poverty.
156. Discuss whether or not moving firms from the public sector to the private sector will benefit an economy.
157. Explain the difference between productivity and production.
158. Analyse how increased productivity could reduce inflation.
159. Discuss whether or not a merger would make it easier for a firm to achieve its goals.
160. Identify two reasons why a person may want to work in the state sector.
161. Explain two reasons why a government may want to cut spending on education.
162. Analyse the contribution that education can make in an economy.
163. Discuss whether or not a worker would always benefit by specialising.
164. Define unemployment.
165. Explain two reasons for wage differentials amongst different economies.
166. Analyse how a recession in one country could cause unemployment in another country.
167. Discuss whether or not the economic advantages of immigration into countries such as the UK and Germany outweigh the economic disadvantages.
168. State 2 benefits a country may gain from immigration.
169. Explain 2 consequences of deflation.
170. Analyse why children from low-income families may have low incomes as adults.
171. Discuss whether or not a national minimum wage will reduce poverty
172. Define a capital good.
173. Explain two challenges facing small firms.
174. Analyse, using a demand and supply diagram, how a rise in income may affect the market for gold
175. Discuss whether or not MNCs increase production and productivity in their host countries.
176. Define macroeconomics
177. Explain two consequences to firms of unemployment.
178. Analyse how tax cuts could increase exports.
179. Discuss whether or not a current account deficit on its balance of payment harms an economy
180. State 2 objectives of firms
survival, social welfare, profit maximisation and growth.
181. Explain how a subsidy can correct market failure
182. Analyse, using a production possibility curve (PPC) diagram, the effect of advances in technology on an economy
183. Discuss whether or not an increase in government spending will reduce unemployment
184. Define external costs
Harmful effects (1) on third parties (1).
Social costs – private costs (1).
185. Explain two influences on whether demand for a product is price-elastic or price-inelastic.
186. Analyse, using a demand and supply diagram, how a subsidy given to producers could affect the marker for electric cars.
187. Discuss whether cars should be produced by the private sector or the public sector.
188. State two functions of money, other than a store of value.
medium of exchange, measure of value (unit of account) and standard of deferred payments.
189. Explain two advantages banknotes have as a form of money.
190. Analyse the influences on the mobility of workers.
191. Discuss whether or not a central bank should raise the rate of interest.
192. State two qualities of a good tax.
convenient, equitable, certain, efficient, flexible.
193. Explain two causes of a decrease in the death rate.
194. Analyse, using a production possibility curve (PPC) diagram, the effect of a decrease in population size on an economy.
195. Discuss whether or not an ageing population is a benefit to an economy.
196. State 2 key questions about how resources are allocated.
What to produce, how to produce it, for whom / who gets what is produced.
197. Explain two fiscal policy measures that can be used to reduce poverty.
198. Analyse why a country may have low productivity.
199. Discuss whether or not mergers benefit an economy.
200. State two functions of local government.
201. Explain how a lower cost of living can encourage population growth.
202. Analyse the influences on the mobility of two factors of production.
203. Discuss whether or not increased investment is beneficial to an economy
204. State two benefits of free trade.
Increase choices, more competition, lower prices, more specialisation
205. Explain two reasons why governments levy taxes.
206. Analyse, using a production possibility curve (PPC) diagram, the impact of higher labour productivity on an economy.
207. Discuss whether or not MNCs always benefit their host countries
208. Define profit maximisation.
209. Explain two types of mergers
210. Analyse how fiscal policy can encourage firms to produce more
211. Discuss whether or not maximum prices are beneficial.
212. Define market failure.
Market failure is when the market mechanism / price mechanism /demand and supply (1) does not lead to an efficient allocation of resources (1).
213. Explain two influences, other than weather, that could affect the demand for a product.
214. Analyse the possible effects of a shortage of a product such as energy on an economy
215. Discuss whether or not workers benefit from division of labour.
216. State the formula for calculating the price elasticity of supply (PES)
217. Explain how opportunity cost is different for economic goods and free goods.
218. Analyse, using a production possibility curve (PPC) diagram, the effect of an increase in enterprise on an economy.
219. Discuss whether or not skilled workers are always paid more than unskilled workers.
220. Define total revenue.
The total income / money received (1) from a firm’s sales (1)
OR
Price (1) multiplied by quantity sold (1).
221. Explain two differences between capital and labour.
222. Analyse the possible effects on consumers of a merger between two paper-producing firms.
223. Discuss whether or not demand for coffee is likely to rise in the future.
224. Define gender distribution.
The number of males compared to the number of females in the population / the ratio of males to females in the population (2).
The sex distribution / sex ratio (1).
225. Explain two benefits of a higher economic growth rate.
226. Analyse the disadvantages of a rapidly growing population.
227. Discuss whether or not a cut in the rate of interest will increase investment.
228. State two reasons for levying taxes.
229. Explain the difference between a progressive tax and a regressive tax
230. Analyse how a cut in in the rates of corporation tax and income tax may influence the number of MNC’s setting up in the country.
231. Discuss whether or not people in a high income country always enjoy a higher living standard than those in low income countries.
232. Define a floating foreign exchange rate.
The price of a currency (1) determined by market forces (1).
233. Explain two benefits a government may gain from the growth of the private sector.
234. Analyse why a country with low costs of production may experience a decrease in its exports.
235. Discuss whether or not a government should prevent a fall in its country’s foreign exchange rate.
236. When is a market in equilibrium?
When demand equals supply / when there is no pressure for price to change (2). When it is in balance (1).
237. Explain how a rise in the price of food would affect a country’s consumer prices index (CPI).
238. Analyse, using a demand and supply diagram, how bad weather is likely to affect the market for broccoli.
239. Discuss whether or not a higher inflation rate will benefit producers.
240. Define a loss.
Costs exceed revenue (2).
Insufficient revenue / costs too high (1).
241. Explain, giving examples, the difference between an internal economy of scale and an external economy of scale.
Internal economy is the benefit a firm gains from itself (1) e.g. buying economies (1).
External economy is the benefit a firm gains from the industry (1) e.g ancillary industries (1).
242. Analyse how a government could increase the supply of enterprise.
243. Discuss whether or not consumers would benefit from a firm changing from being a public limited company to a public corporation (state-owned enterprise).
244. Identify two functions of money.
- Medium of exchange
- Store of value
- Unit of account (measure of value)
- Standard of deferred payments
245. Explain two reasons why a central bank may want to reduce borrowing.
246. Analyse why skilled workers are usually paid more than unskilled workers.
247. Discuss whether or not a rise in the rate of interest will reduce economic growth.
248. Define a multinational company.
A firm that produces / operates (1) in more than one country (1).
A firm that has its headquarters in one country (1) but also produces / operates in other countries (1).
249. Explain two disadvantages a worker could experience from specialising.
250. Analyse how a change in the PED for its products may benefit a firm
251. Discuss whether or not the government should subsidise the production of books.
252. Identify two fiscal policy measures.
- Government spending
- Taxation
253. Explain two reasons why the unemployment rate may be higher in one country than another.
254. Analyse how supply-side policy measures may reduce unemployment.
255. Discuss whether or not a government should protect its country’s industries from foreign competition.
256. Explain what effect more firms producing tyres would have on the PED of individual firms’ tyres.
Will increase competition (1) more substitutes will be available (1) a rise in the price of one firm’s tyres would cause people to switch to other firms’ tyres (1) demand would become more elastic (1).
257. Analyse, using a demand and supply diagram, the effect of an increase in demand for cars on the market for tyres.
258. Analyse, using a demand and supply diagram, the effect of an increase in demand for cars on the market for tyres.
259. Discuss whether a large firm will earn more profit per unit sold than a small firm.
260. Identify two methods of trade protection other than tariffs.
- quotas
- embargoes
- voluntary export restraint
- red tape / bureaucracy / artificially high standard
- subsidies
261. Explain how market forces will eliminate a surplus and shortage
A surplus will be eliminated by a fall in price (1) demand will rise / supply will fall (1).
A shortage will be eliminated by a rise in price (1) demand will fall / supply will rise (1).
262. Analyse how improvements in education can affect the pattern of employment.
263. Discuss whether or not the imposition of import tariffs by a country will reduce its unemployment.
264. Define a capital good.
A human-made good (1) used to produce other goods and services (1).
265. Explain two causes of an increase in a country’s HDI.
- an increase in GDP / GNI / income per head (1) raises the goods and services people can consume / due to e.g. higher employment (1)
- an increase in life expectancy (1) indicates better healthcare / due to better healthcare / more investment in healthcare (1)
- an increase in education / mean and expected years of schooling (1) increases job opportunities / quality of life / due to government investing more in education (1)|
266. Analyse, using a production possibility curve (PPC) diagram, the effect of damaging weather on an economy.
267. Discuss whether countries with a high Gross Domestic Product (GDP) per head will have a faster rate of economic growth than countries with a low GDP per head.
268. Identify two supply-side policy measures.
- a cut in income tax
- a cut in corporation tax
- a cut in unemployment benefit
- education
- training
- privatisation
- deregulation
- subsidy
- legislation to reduce trade union power
269. Explain two ways a government could reduce relative poverty.
270. Analyse the reasons why small shops may be easy to set up.
271. Discuss whether or not firms will benefit from a fall in unemployment.
272. Identify two reasons why market failure may occur.
273. Explain how resources are allocated in a mixed economic system.
274. Analyse how a high rate of inflation may harm the poor.
275. Discuss whether or not increasing government spending will enable a government to achieve its aims for the economy.
276. State the formula used to calculate PED.
% change in quantity demanded divided by % change in price (2).
Change in demand divided by change in price (1).
277. Explain two reasons why the price of sugar may fall.
278. Analyse the possible reasons why a producer’s fixed cost may increase.
279. Discuss whether or not a country will benefit from specialising in an agricultural product such as sugar.
280. Define a surplus on the current account of the balance of payments.
281. Explain two possible causes of low unemployment.
282. Analyse how long-term unemployment can cause relative poverty.
283. Discuss whether or not an increase in a surplus on the current account of the balance of payments decreases unemployment.
284. Define supply-side policy.
Policy which is designed to increase the total (aggregate) output / supply / productive capacity of an economy (2).
Policy aimed at making markets work more efficiently (1) to encourage economic growth (1).
285. Explain two functions of the stock exchange
286. Analyse two possible conflicts between government aims
287. Discuss whether or not infrastructure projects will benefit the economy.
288. Identify two motives for consumer spending.
- to satisfy needs e.g food, shelter
- to satisfy wants e.g. luxury goods
- fear of future price rises
- to gain satisfaction from that consumption
289. Explain two benefits a firm can gain by borrowing
290. Analyse two consequences of a depreciating foreign exchange rate.
291. Discuss whether or not a fall in interest rates will benefit an economy.
292. Explain two reasons for growth in average earnings.
293. Analyse, using a demand and supply diagram, how government subsidies help firms grow.
294. Discuss whether or not trade protection supports the growth of domestic firms.
295. Define social cost.
Social cost is equal to the sum of private costs (1) and external costs(1). Costs to the entire society (1).
296. Explain two reasons why a firm would want to specialise in producing only one product.
297. Analyse how the ability of firms to produce on a larger scale is beneficial to consumers.
298. Discuss whether or not the operation of a market economic system is harmful to an economy.
299. Define labour.
The human factor of production (1) mental and physical effort (1) required for The human factor of production (1) mental and physical effort (1) required for production (1).
300. Explain two motives for saving.
301. Analyse the reasons for countries having different population growth rates
302. Discuss whether or not a rise in the working-age population, as a percentage of the total population.
303. Identify two reasons why an MNC may decide to start producing in a foreign country.
- access to raw materials
- cheap labour
- skilled labour
- large market
- government support
- low taxes
- avoid trade restrictions
304. Explain two reasons why someone may want to work for an MNC.
305. Analyse how an increase in exports could improve a country’s macroeconomic performance.
306. Discuss whether or not an increase in government spending will reduces a surplus on the current account of the country’s balance of payments.
307. Identify two ways a government could encourage people to spend more.
- lower taxes
- increase government spending / expansionary fiscal policy
- increase money supply
- reduce interest rates / expansionary monetary policy
- raise subsidies
308. Explain how the economic problem results in people having to make choices.
The economic problem is unlimited wants (1) but limited resources (1). As resources are limited, people cannot have everything they want / not everything can be produced / there is scarcity (1) there is an opportunity cost (1).
309. Analyse why deflation may cause a fall in output.
A fall in the price level (1) may discourage spending / reduce total (aggregate) demand (1) households waiting for prices to fall further (1) the fall in demand may reduce firms’ output (1).
Deflation may reduce firms profits (1) this may discourage investment (1) reduce demand for capital goods (1) lower the output of capital goods (1).
310. Discuss whether or not a country will suffer if its output falls.
311. Identify two reasons why someone may want to migrate to the USA.
- higher wages
- better education
- better healthcare
- better employment prospects
312. Explain two reasons why less-educated people tend to have a shorter life expectancy than people who have received more education.
- a lower income (1) worse nutrition/healthcare/housing (1)
- less well-informed (1) less likely to eat healthily / more likely to have unhealthy habits e.g. smoking (1)
- more likely to be in a more physically demanding / risky job (1) less choice of occupation due to less skills/qualifications (1).
313. Analyse how economic growth can reduce absolute poverty.
Economic growth is likely to increase employment (1) this may increase the chances of the poor gaining jobs (1) raise income (1) allow them to buy basic necessities / definition of absolute poverty (1).
Economic growth can increase tax revenue (1) this may enable the government to spend more to help the poor (1) e.g. improved education for the poor (1) higher state benefits (1).
314. Discuss whether or not a cut in the tax on firms’ profits will increase employment.
315. Identify two fixed costs.
- rent
- interest on past loans
- insurance
- salaries
316. Explain two ways monopoly differs from perfect competition.
317. Analyse what determines a firm’s demand for labour.
318. Discuss whether or not a merger will increase profits.
319. Define social benefit.
The total benefit to society of an economic activity or external benefit + private benefit (2).
A beneficial effect on society (1).
320. Explain two advantages of conserving natural resources.
321. Analyse how taxation could reduce market failure.
Monopolies may be taxed (1) if they exploit their market power (1) by charging high prices (1).
Production and consumption that generates external costs may be taxed (1) example (1) this will turn an external cost into a private cost (1) increase costs of production (1) reduce output (1).
Tax revenue can be used to e.g. subsidise products with external benefits (1) example (1).
322. Discuss the advantages and disadvantages of a market economic system.
323. Define a market.
An arrangement that brings buyers and sellers into contact / products are bought and sold (2).
Buyers (1) sellers (1).
Example of the purchase and sale of products (1).
324. Explain two reasons why the supply of a raw material such as oil may rise in the future.
325. Analyse, using a demand and supply diagram, how the market for oil would be affected when the demand for oil increases by more than the supply of oil.
326. Discuss whether or not car travel will increase in the future.
327. Define perfectly inelastic supply.
A change in price causes no change in supply (2).
Correct formula (1).
A PES of 0 (1).
328. Explain TWO reasons why a firm may NOT aim to earn maximum profit
329. Analyse why Premier League footballers receive very high wages.
330. Discuss whether or not a government should spend some of its tax revenue on building sports stadiums.
331. Define devaluation.
A fall in the value (1) of a (fixed) exchange rate (1).
Fall in value of currency (1) relative to another (1).
Fall/decrease in exchange rate (1).
Fall/decrease in currency (0).
332. Explain TWO advantages of a floating exchange rate.
333. Analyse how fiscal policy measures could reduce inflation.
A rise in taxes (1) causes a fall in disposable income/rise in costs (1) fall in government spending (1) will reduce total (aggregate) demand (1) reduce demand-pull inflation (1).
Government spending on education/training/subsidies (1) lower taxes (1) could reduce costs of production (1) will increase total (aggregate) supply (1) lower cost-push inflation (1).
Lower taxes on imports would reduce cost-push inflation (1).
334. Discuss whether or not a reduction in a current account deficit on the balance of payments will benefit an economy.
335. Define economies of scale.
A fall in average costs (1) resulting from an increase in output/scale of production (1).
336. Explain TWO benefits consumers may gain from free trade.
Lower prices (1) increases purchasing power (1) due to greater competition or economies of scale (1).
Better quality (1) improve living standards (1) due to greater competition (1).
Greater availability/variety of products (1) products can be purchased that are not made in the domestic economy (1).
Higher exports can lead to economies of scale (1) and therefore lower prices (1).
337. Analyse how reducing transport costs could increase a country’s exports and imports.
338. Discuss whether or not raising living standards is the most important economic objective for developing countries.
339. Identify TWO price indices
RPI (1) CPI (1).
340. Explain TWO supply-side policy measures.
341. Analyse why a government may want to reduce its country’s inflation rate.
342. Discuss whether or not increasing the strength of trade unions will benefit an economy.
343. Define net immigration.
More people coming to live in the country than leaving the country to live elsewhere (2).
The number of immigrants exceeding emigrants (2).
The difference between immigration and emigration (1).
People coming to live in the country (1).
344. Explain how market forces would respond to a shortage of drinking water
A shortage means demand exceeds supply (1) price would rise (1) more would be supplied (1) due to the profit motive (1) price signal sent to producers (1) demand would also contract (1).
Demand likely to be price inelastic (1) leading to large rise in price (1).
345. Analyse what determines the demand for labour.
346. Discuss whether or not increased government spending will increase economic growth.
347. Define regressive tax.
A tax that takes a lower percentage of the income of the rich higher percentage of the income of the poor(2).
A tax that falls more heavily on the poor (1).
Disadvantages the poor/higher burden on the poor/higher rate for the poor (1).
348. Explain why the social benefit of healthcare is greater than the private benefit.
349. Analyse why a government imposes taxes.
350. Discuss whether or not consumers are likely to benefit from state-owned enterprises becoming private sector firms.
351. What may be the opportunity cost of building an airport?
Opportunity cost is the (next) best alternative foregone (1).
Relevant example e.g. building a hospital (1).
352. Explain two reasons why a government would want to turn its country from a developing into a developed country.
353. Analyse the external costs that can be caused by the building and expansion of an airport.
354. Discuss whether people would prefer to buy a product from a small firm or a large firm.
355. Identify two examples of capital goods that may be used by a farm.
One mark each for each of two examples e.g. tractor, farm buildings.
356. Explain how a country could have a trade in goods surplus but a deficit on the current account on the balance of payments.
357. Analyse the economies of scale from which a farm may benefit.
358. Discuss whether or not developing countries benefit from producing mainly primary products.
359. Define a substitute and give an example.
A rival product / a product that can be used instead of another (1) e.g. bus travel and car travel / oranges and apples (1).
360. Explain two advantages a firm may gain from being a monopoly.
361. Analyse how price elasticity of demand for a product influences the revenue a firm receives.
362. Discuss whether or not a government should subsidise bus transport.
363. Identify two causes of an ageing population.
One mark each for each of two. from:
A fall in the birth rate (1) a fall in the death rate / longer life expectancy (1) net emigration of young people / net immigration of old people (1).
364. Explain why the price of housing may increase.
Increase in demand (1) due to e.g. increase in income / rise in population (1).
Decrease in supply (1) due to e.g. rise in costs of production (1).
365. Analyse why more women may enter the labour force.
366. Discuss whether or not a rise in the birth rate will benefit an economy.
367. Define commercial bank.
A financial institution (1) that offers services to people/households/firms (1) examples of services (1) that is profit orientated (1) (usually) in the private sector (1).
368. Analyse what can cause deflation.
369. Discuss whether or not government policy measures to reduce unemployment will cause inflation.
370. Define import tariff.
A tax (1) imposed on products purchased from other countries / imports (1).
371. Explain two benefits of an increase in world output.
372. Analyse how a recession may reduce a country’s imports.
373. Discuss whether or not a developing country will benefit from the removal of trade restrictions.
374. Identify two influences on the strength of a trade union’s collective bargaining power.
- size of membership
- financial position
- level of employment
- government legislation
- willingness to take industrial action
375. Explain the likely impact of trade unions on the welfare of their members.
376. Analyse the impact of a reduction in government expenditure on healthcare on a country’s unemployment rate.
377. Discuss whether or not a decrease in the number of doctors will reduce living standards.
378. Define import quota.
Limit (1) on quantity of good and service allowed in to a country / bought from abroad / imported (1).
379. Explain two advantages to a country of specialisation.
380. Analyse the impact on an economy of the removal of import quotas imposed by other countries.
381. Discuss whether or not an increase in the role of the private sector will benefit an economy.
382. Identify two functions of a central bank.
383. Explain how the Consumer Prices Index (CPI) is calculated.
384. Analyse the impact of a cut in interest rates on saving and investment.
385. Discuss the impact of supply-side policy measures on government expenditure and on government revenue.
386. Define progressive tax.
387. Explain two reasons why a government may want to reduce poverty.
388. Analyse, using a supply and demand diagram, the effect of increasing a sales tax.
389. Discuss whether a government should increase indirect taxes and whether it should reduce direct taxes.
390. Identify two features of a capital-intensive production process.
Process which relies heavily on capital goods e.g. machines (1) does not use much labour (1) relies less on other factors of production e.g. land (1).
391. Explain how market failure might occur in the oil industry.
392. Analyse, using a production possibility curve (PPC) diagram, the effect of reallocating resources from kerosene to LPG.
393. Discuss whether or not removing a firm’s monopoly power will benefit consumers.
394. Define recession.
A fall in GDP / negative economic growth (1) for two successive quarters / 6 months or more (1)
395. Explain why a recession is likely to reduce consumer spending.
Rise in unemployment (1) reduced income (1) reduced ability to spend (1).
Consumers save more (1) for fear of future / increased pessimism (1).
Likely to be associated with lower prices (1) consumers delay purchases (1).
396. Analyse the consequences of rising unemployment on a government’s spending and tax revenue.
397. Discuss whether or not an exchange rate depreciation will prevent an economy from experiencing a recession.
398. Define resources.
Factors of production/inputs (1) used to produce goods and services/example of a factor of production (1).
399. Explain two reasons why the quality of a country’s resources may increase.
400. Analyse the reasons why a country’s birth rate may fall.
401. Discuss whether or not a government should be worried about an increase in the proportion of its population aged over 65.
402. Define a fixed cost.
A cost that does not change with output/has to be paid even if no output produced (1) in the short run/example (1).
403. Explain why traffic congestion is an external cost.
404. Analyse how a taxi firm could make use of information about the price elasticity of demand for its service.
405. Discuss whether or not a reduction in unemployment always increases living standards.
406. Define a subsidy.
A government payment/extra payment/grant/financial assistance (1) designed to encourage production/consumption/lower costs of production (1).
407. Explain two disadvantages of inflation.
408. Analyse how an increase in government spending may cause inflation.
409. Discuss whether or not an increase in the top rate of income tax will benefit an economy.
410. Explain, giving examples, the difference between vertical integration and horizontal integration.
411. Analyse how a monopoly could benefit consumers.
412. Discuss whether or not a country should devote more of its resources to building and operating new railway lines and stations.
413. Define a depreciation of the currency.
A fall in the value/price of a currency/exchange rate (1) against another currency/caused by market forces/demand and supply (1).
414. Explain two reasons why demand for a country’s exports may be price inelastic.
415. Analyse how the removal of import tariffs could increase a country’s output.
416. Discuss whether or not net emigration will reduce poverty in a country.
417. Define a mixed economy.
An economy with a private sector and a public sector (2).
An economy where some resources are allocated by the government and some by market forces/the price mechanism (2).
An economy where different groups own resources (1).
418. Explain two advantages of working in the tertiary sector rather than the primary sector.
419. Analyse why a trade union may oppose a rise in working hours.
420. Discuss whether a government should pay high wages to workers in the public sector.
421. Define total revenue.
Price × quantity (2).
Total cost plus total profit/total cost minus any loss (2).
The amount received (1) from selling a product (1).
422. Explain how a firm may earn a profit despite a fall in revenue.
423. Analyse how the introduction of an indirect tax may cause unemployment.
424. Discuss whether or not MNCs are likely to set up in countries with low unemployment.
425. Identify two reasons why someone may choose to train to become a dentist.
High pay (1) fringe benefits (1) job security (1) good working conditions/environment (1)
Interest/vocation/passion/high job satisfaction (1) high status (1).
426. Explain two reasons why manufactured goods are usually in more price elastic supply than agricultural goods.
427. Analyse the advantages of an increase in a country’s labour force.
428. Discuss whether or not a government should provide free dental treatment.
429. Define death rate.
The number of deaths per 1000 of the country’s population (1) per year/time period (1).
430. Explain two policy measures a government could introduce to encourage families to have more children.
431. Analyse the impact that a declining population could have on the environment.
432. Discuss whether or not a firm that produces a wide range of products can take advantage of economies of scale.
433. What is the difference between the price of a product and the cost of a product?
The price is the amount the customer pays for the product/average revenue/how much the product is sold for (1).
The cost is the expenditure involved in producing product e.g. labour costs (1).
434. Explain two influences on a country’s demand for food.
435. Analyse why a country may change from a net exporter of a product into a net importer of the product.
436. Discuss whether or not a central bank should limit the amount commercial banks can lend to its customers.
437. Identify two ways a government could conserve its country’s resources.
438. Explain two external benefits that can arise from education.
439. Analyse how a cut in the rate of interest could reduce poverty.
440. Discuss whether or not economic growth always increases living standards.
441. Identify the reward received by labour and the reward received by enterprise.
Labour = wages (1). Enterprise = profit (1).
442. Explain how inflation may affect borrowers and savers.
443. Analyse why it is important to a government that inflation is measured accurately.
444. Discuss whether or not an increase in investment would reduce a deficit on the current account of the balance of payments.
