Economics June 2009 MS

Mark Scheme Summer 2009
GCE
GCE Economics (8121/9121)
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Contents
1. 2. 3. 4. 5. 6. 7. 8.
General Marking Guidance 6351 Mark Scheme 6352 Mark Scheme 6353 Mark Scheme 6354 Mark Scheme 6355_01 Mark Scheme 6355_02 Mark Scheme 6356 Mark Scheme
4 5 13 21 31 51 59 71
GCE Economics 8121-9121 0906 3
General Marking Guidance

All candidates must receive the same treatment. Examiners must mark the first candidate in exactly the same way as they mark the last. Mark schemes should be applied positively. Candidates must be rewarded for what they have shown they can do rather than penalised for omissions. Examiners should mark according to the mark scheme not according to their perception of where the grade boundaries may lie. There is no ceiling on achievement. All marks on the mark scheme should be used appropriately. All the marks on the mark scheme are designed to be awarded. Examiners should always award full marks if deserved, i.e. if the answer matches the mark scheme. Examiners should also be prepared to award zero marks if the candidates response is not worthy of credit according to the mark scheme. Where some judgement is required, mark schemes will provide the principles by which marks will be awarded and exemplification may be limited. When examiners are in doubt regarding the application of the mark scheme to a candidates response, the team leader must be consulted. Crossed out work should be marked UNLESS the candidate has replaced it with an alternative response.
6351 Mark Scheme 1. If incorrect option is selected, a maximum of 2 marks are available for explanation. 2. Up to 2 marks are available for candidates explaining two incorrect options. 3. If option is left blank, but correct option is referred to in the text, then the mark for the correct key is available. Question Number 1 Answer A Definition of positive statement as one that is testable/verifiable (1 mark), reference to statement A as a positive statement and some justification for this assertion (will/can measure growth) (1 mark). Definition of normative statement as one that is a value judgement (opinion is not enough) (1 mark), reference to statement B as a normative statement and some justification for this assertion (should) (1 mark). Question Number 2 Answer C Definition of production possibility frontier the maximum output an economy can produce using available resources fully (2 marks). Explanation that point Q is unobtainable as it is outside the boundary of the PPF (1 mark). To achieve this would necessitate shifting the PPF, ie economic growth (1 mark). Mark (1)
(4) Mark (1)
(4)
Question Number 3
Answer B Candidates can refer to absolute and/or comparative advantage in the definition (total of 2 marks available). Recognition that France has an absolute advantage (1 mark). Definition of absolute advantage (1 mark). Comparative advantage is when a country can produce a good more efficiently than others (1 mark) based on differing opportunity cost ratios (1 mark) leading them to specialise (1 mark). Maximum of two marks for definition. Calculation of the opportunity cost ratios as 3 : 1 for both Belgium and France (1 mark) and therefore no trade should take place (1 mark).
Mark (1)
(4)
Question Number 4
Answer A European tour campaign causes a shift in demand to the right (1 mark) from D1 to D2 (1 mark). Increase in the cost of CDs causes the supply curve to shift to the left (1 mark) from S1 to S3 (1 mark).
Mark (1)
(4) Mark (1)
Question Number 5
Answer B Definition/formula for Price elasticity of demand (2 marks). Explanation that demand is price inelastic because response of demand is less than the price change or the value lies between 0 and -1 (1 mark) and continues to show how this will cause how total revenue will rise (1 mark). This can be done diagrammatically (2 marks) if there is an explanation in the text.
(4)
Question Number 6
Answer A Definition/formula for Income Elasticity of Demand (2 marks). Explanation of a normal good as incomes rise demand rises (1 mark). This implies a positive income elasticity of demand (1 mark).
Mark (1)
(4) Mark (1)
Question Number 7
Answer D Definition/formula for Cross price elasticity of demand (2 marks). Reference to the negative cross price elasticity of demand (1 mark). Explanation of complementary goods (1 mark).
(4) Mark (1)
Question Number 8
Answer B Definition of subsidy A payment made by government with the aim of increasing output (1 mark) by reducing cost of production (1 mark). Diagram to show the impact of the subsidy being abolished clearly showing price rising and output declining (2 marks). Or written explanation to the same effect with clear reference to the shift in the supply curve (2 marks).
(4)
Question Number 9(a)
Answer Correct diagram showing shift in demand curve to the right and supply curve to the left and therefore an increase in price of gold. The price and quantity equilibrium points must be shown (4 marks).
Mark
Written explanation of why demand for Gold has increased reference to increased demand by central banks (1 mark). Written explanation why supply has declined fewer mines producing (1 mark). Question Number 9(b) Answer Rising price of gold will cause costs of production of jewellery to increase and/or a rise in price of jewellery (1 mark). This will cause demand for jewellery to fall (1 mark). Evaluation: The effect on demand will depend on price elasticity or the proportion of gold costs in total costs or on the reaction of Signet to the higher costs. Any one point explained (2 marks).
(6) Mark
(4)
Question Number 9(c)
Answer As firms leave the industry supply will fall (1 mark) and therefore the price of jewellery will increase (1 mark). Evaluation: The extent of the price increase will depend on the price elasticity of demand or the number of firms that leave the industry. Any one point explained (2 marks).
Mark
(4) Mark
Question Number 9(d)
Answer Define cross price elasticity of demand or use of formula (1 mark). Impact of rising gold prices on substitutes demand for silver or other substitutes might increase. Impact on complements demand for diamonds or other complements may fall (up to 3 marks for explanation of the process) must consider both types of product. Evaluation: The extent of the impact on substitutes and complements will depend on the closeness of these to gold ie gold is irreplaceable in some processes and therefore has no close substitutes. The impact will also depend on the extent to which prices rise. The impact will also depend on the level of the prices of other goods in the first place (any one point explained 2 marks).
(6)
Answer Correct diagram showing supply curve shifting to the right and identifying the new lower equilibrium price (2 marks). Written explanation referring to lower costs of production (1 mark) and resulting in increased output (1 mark).
Mark
(4) Question Number 10(b) Answer This response can be answered in one of two ways, or a combination of both: Candidate could draw a diagram showing; original producer surplus (1 mark) correct shift of supply curve (1 mark) new producer surplus. (1 mark) OR Candidate could give a written explanation which shows clear understanding of the concept of producer surplus and explains how producer surplus changes as a result of a shift in the supply curve. Evaluation: A general idea that the size of the decline in producer surplus will depend on the elasticity of demand and/or supply curves (1 mark), if this is clearly explained (2 marks). Mark
(5)
GCE Economics 8121-9121 0906 10
Answer Definition/Formula for Price elasticity of supply: A measure of the responsiveness of quantity supplied to a change in price (1 mark). Comment on implications for resources (increase use of resources/resources are constrained) (1 mark) and comment on implication on output (1 mark). This could be shown diagrammatically. Evaluation: Recognition of differing short run and long run effect (1 mark) and any development of the difference between inelastic and elastic (1 mark).
Mark
(5) Mark
Answer Two marks for diagram showing: inward shift of supply curve original and new equilibrium points (price and quantity).
Written explanation which refers to rising costs of production (1 mark) leading to increase in final price of the product (1 mark). Evaluation: Are there substitutes to corn in the feed process? How significant is the cost of corn in the overall cost of the product? Is the pressure for the price increase coming from the demand side? Any one point explained (2 marks).
(6)
GCE Economics 8121-9121 0906 11
GCE Economics 8121-9121 0906 12
6352 Mark Scheme Question Number 1(a)(i) Answer 120/397 x 100 = 30.2%. Accept 30%. 1 mark if method correct but calculation incorrect. Award 2 marks if correct answer is written down without calculations. Answer Factors which might explain the increase in waste include: increase in income per head, leading to increased consumption of goods change in tastes and fashions more consumption of fast foods, ready meals resulting from lifestyle changes population changes: increase in number of households, for example resulting from divorce. Also, increase in single person households resulting from increased life expectancy and more young people choosing to live alone increased packaging associated with change in shopping patterns greater use of supermarkets. 2 marks for identification of any 2 relevant factors, 4 for application and analysis. Question Number 1(b) Answer Factors include: differences in cost of landfill sites resulting from differences in availability and of landfills sites and taxes on landfill differences in costs of recycling, eg nearness to recycling centres; government provision for collection differences in laws and regulations. 2 marks for identification of any 2 relevant factors, 1 for application (reference to figure 2) and 1 for analysis. (4) (6) Mark
(2) Mark
Question Number 1(a)(ii)
Mark
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Question Answer Number 1(c) Consideration of factors such as: external costs of waste disposal in landfills sites, eg methane gas; pollution of water table and discussion of impact on third parties
Mark
X: free market equilibrium; Y: socially efficient level of waste disposal Analysis could include effects of tax on local authorities of dumping waste in landfill sites, eg higher council tax; reduction in services. Evaluation could include: prioritisation of factors impact depends on magnitude of methane gas emissions; significance of methane gas for global warming significance of tax on dumping in landfill sites. 4 marks for diagram (2 for basic diagram, 1 for identifying free market and socially optimal levels of waste; and 1 for explaining that YX represents over-production or for explaining welfare loss area ABD; 2 marks for examples and 4 marks for any two evaluative points (2 + 2 or 3 + 1).
(10)
GCE Economics 8121-9121 0906 14
Answer Definition of external benefits: benefits to third parties not involved in the transaction; difference between social benefits and private benefits (2) 1 mark for imprecise definition e.g. benefit to society or benefits to consumers not involved in the transaction. Examples of possible external benefits: employment in recycling industries; innovation leading to economic growth (1 + 1) and explanation (1 + 1) .
Mark
(6) Mark
Question Number 1(e)
Answer Pay-as-you-throw schemes would: provide an incentive for greater recycling take account of the external costs of waste but might encourage fly tipping householders to put waste in someone elses bin would adversely affect households with a large number of people. Tax on packaging would: internalise the externality raise the costs of producers who may pass on these higher costs to consumers reduce the need for landfill and so reduce external costs of waste but: less packaging might lead to contamination of food or damage to products less incentive for consumers to reduce waste. 2 x 6 marks: each block of 6 marks to be awarded as follows: 2 marks for knowledge/identification; 1 mark for application of schemes to reduction of waste; 1 for analysis and 2 marks for any evaluative points.
(12)
GCE Economics 8121-9121 0906 15
Answer
Mark
Diagram showing minimum guaranteed price above the free market price (2 marks + 1 mark for showing surplus of XY). 4 marks for application and analysis: MGP leads to excess supply extension of supply and contraction in demand). Maximum 5/7 marks if no reference to context dairy products and milk powder. (7)
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Answer Reasons include: reduction of minimum guaranteed price but some surplus would have remained if the MPG was above the market price increased demand, for example from Asia this could be very significant because it appears to be a long term trend decreased supply (because of droughts such as those in Australia) this would probably be a short term problem only unless climate change causes permanent problems. Also allow factors from extract 2, eg use of crops for biofuel (but no application marks for these factors). 2 marks for identification of any 2 factors; 2 marks for application to context eg specific reference to extract; 2 marks for analysis and 4 marks for any two evaluative points (2 + 2 or 3 + 1).
Mark
(10)
Question Number 2(b)(i)
Answer 72/10 x 100 = 720%. Also allow: 73/10 x 100 = 730% or 71/10 x 100 = 710%. 1 mark for correct method but inaccurate calculation. Award 2 marks if correct answer is written down without calculations.
Mark
(2)
Question Number 2(b)(ii)
Answer External costs are those affecting third parties who are not part of the transaction; or difference between social costs and private costs (2 marks). 1 mark for imprecise definition eg cost to society; or cost to consumers not involved in the transaction. Examples include: loss of rainforest threatening wildlife eg orang-utans and associated problems of climate change; threat of increasing hunger for the poor because of higher food prices associated with the production of biofuels. (1 + 1 marks for examples).
Mark
(4)
GCE Economics 8121-9121 0906 17
Question Answer Number 2(c)
Mark
3 marks for diagram; 1 for application to biofuel production; 2 marks for explanation e.g. under a free market there would be over production of YX (just 1 for identifying free market level of production, Y, and socially efficient level, X). Also allow external benefits diagram and analysis mark as above. (5)
GCE Economics 8121-9121 0906 18
Answer Tighter legal regulations fixed limits can be placed on the amount of pollutants discharged and enforced with financial penalties. But.. enforcement costs might be significant difficulty of measuring discharge of pollutants. Higher taxes a means of making the polluter pay for carbon emissions could be illustrated with a supply and demand diagram. Taxes bring in revenue for the government. But.. the impact of taxes depends on the price elasticity of demand difficult to measure precisely the external costs of carbon emissions and therefore of setting the appropriate tax. 2 x 6 marks: each block of 6 marks to be awarded as follows: 2 marks for knowledge/identification; 1 mark for application of schemes to reduction of carbon emissions; 1 mark for analysis and 2 marks for any evaluative points.
Mark
(12)
GCE Economics 8121-9121 0906 19
GCE Economics 8121-9121 0906 20
6353 Mark Scheme Question Number 1(a)(i) Answer ILO definition (1 mark). Might include: involves a telephone/paper questionnaire survey of a sample asking whether respondents have been out of work in the last four weeks and/or ready to start in the next two weeks. Claimant count definition (1 mark) is a register of those who claim and/or receive (not just eligible) JSA or dole Up to (3 marks) for differences. Might include: ILO more inclusive ILO 16-65, CC 18-60/65 quarterly/monthly survey /raw data ILO might be better for international comparison. Mark
(3)
(1 mark) for reference to data.
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Answer Allow any one valid reason for divergence (1 mark for identification 1 mark for explanation of the different directions). Reasons might include: changes in rules of claiming JSA, eg savings threshold changes in savings ratio might make some people ineligible (JSA falls) but people might be saving more as confidence falls ease of claiming incapacity benefits may involve discussion of real values of JSA stigma issues when people become unemployed (for example no stigma for ILO but high stigma for JSA) increases in frictional employment would increase ILO but may show no change in JSA eg in an economic boom state of the economic cycle. More vacancies in a boom so it is harder to claim JSA.
Mark
(2) Mark
Answer Sterling price change: 5*100/38 = 13.2% (2 marks) Allow 13% Correct base: identified but incorrect arithmetic. (1 mark) Incorrect base: no reward. Answer The dollar has weakened against the pound. (2 marks) Allow the pound has strengthened. (2 marks) General reference to currency changes. (1 mark)
(2) Mark
Question Number 1(b) (ii)
(2)
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Question Number 1(b)(iii)
Answer AS analysis, up to (3 marks): Aggregate supply will decrease (1 mark) with increased costs of production (1 mark) with further explanation, eg all firms use gas and oil to some extent, or demand is inelastic. (1 mark)
Mark
Aggregate demand analysis, up to (3 marks): AD changes (must be via (X-M)) because the UK is a net oil/gas importer or net exporter.
Diagram showing an appropriate AS shift (1 mark) with changes in price level and equilibrium real output. (1 mark) Data reference (use of Figure 2). (1 mark)
Reserve (1 mark) for reference to AD shift (must be via (X-M)) and this will fall when prices rise as we are net importers of both OR data reference.
Evaluation (2 marks) (1 x 2 marks or 2 x 1 mark) points might include: gas prices have risen far more than oil prices (50%) other comment on the magnitude of the shifts context of previous price rises depends on time lag other things are not equal AD shift might outweigh AS shift or similar (but the AD shift must be correct).
(8)
Question Number 1(c)(i)
Answer A supply side policy is any attempt by governments or other policy decision-makers to increase the productive capacity, or cut costs for all firms in the economy, or increase incentives or to improve productivity. (2 marks) Allow simple AS curve, shifting to the right, as part of explanation, or outward shifting PPF. Diagram must have a macro feel. (1 mark)
Mark
(2)
GCE Economics 8121-9121 0906 23
Question Number 1(c)(ii)
Answer For each policy: Identification of policy. (1 mark) Explaining the policy or for use of data in the passage or from own knowledge of the UK economy. (1 mark) Reserve one mark for impact on employment or unemployment. (1 mark) Policies might include: labour market reform investment using tax system to increase incentives eg lowering corporation tax or income tax deregulation/privatisation, eg Royal Mail increasing productivity, eg by cutting the red tape trade union reform changes in National Minimum Wage.
Mark
Do not include reference to health or education spending.Do not allow answers related to subsidies unless there is the clear macroeconomic implication that AS will shift, rather than one firm benefiting at the expense of others.
(6)
GCE Economics 8121-9121 0906 24
Answer Concept of increasing government spending as an element of fiscal policy and/or supply side policy (this might be implicit). (1 mark) Diagram (or equivalent analysis) showing both an AD shift rightwards or upwards (1 mark) and an AS shift rightwards or downwards (1 mark) Allow both short run and long run diagrams. Analysis (6 marks) either ( 3 x 2 marks) or ( 2 x 3 marks) of the spending might include: Short run AD effects of increased spending such as: 1. Analysis of multiplier effects 2. Increased employment in the short run as schools and hospitals are being built. Long run AS effects as supply side improves such as: 1. Education spending can increase employability and flexibility 2. Healthcare spending can reduce the amount of days lost through illness 3. Healthcare can increase the working population as more work beyond retirement age.
Mark
Cap at 6/9 if either short run or long run ignored. Evaluation (6 marks) either ( 3 x 2 ) marks or ( 2 x 3 marks) might include depends on the elasticity of AD or AS time lags/implementation lags other things might not be equal eg depends on immigration of skilled workers negative effects of paying for the spending, eg increasing tax to finance the extra spending size of the multiplier shifts in AD and AS might cancel out price effect magnify output effect, or similar.
(15)
GCE Economics 8121-9121 0906 25
Question Number 2(a)(i)
Answer A permitted range for the increase in the price levels, measured by changes in the CPI OR range of +/-1% OR aim to keep prices stable (1 mark). 2% (1 mark). Allow RPIX 2.5% or ECB 2% ceiling. (1 mark) Target is a government-determined goal set for the MPC. (1 mark) Reference to data (for example the rate of inflation has been above its target since June 2007 Ext.1 Line 8) (1 mark) (1 mark for stating, 1 mark for context or brief explanation). Role of MPC by setting interest rates. (1 mark)
Mark
(2) Mark
Answer Weights are based on proportion of spending. Award Expenditure and Food Survey or similar. (1 mark) Reserve 1 mark for an explanation about food: food is a major expenditure, and prices of food rose by 1.5% in a month. (1 mark)
(2) Mark
Question Number 2(a)(iii)
Answer Factors (2 marks 1 x 2 marks or 2 x 1 mark) might include: negative wealth effect or reduced mortgage equity withdrawal falls in confidence credit problems consumers may defer current spending. Role of MPC it is likely to reduce interest rates or not raise them (1 mark) to reflate or bring general or average price level rises back to target not just house prices. (1 mark)
(4) Mark
Answer Imports or components are cheaper (1 mark) reducing inflationary pressure. (1 mark) Exports are more expensive (1 mark) reducing inflationary pressure. (1 mark)
(2)
GCE Economics 8121-9121 0906 26
Question Number 2(b)(ii)
Answer Effect of interest rate cut on exchange rate (up to 4 marks): Fall in interest rates should weaken the value of the pound (1 mark) with mechanism to explain this. (up to 3 marks) Other mechanisms (up to 4 marks): relating the interest rate to the price or quality of imports and exports (1 mark) with mechanism to explain this eg level of investment might rise improving quality of exports. (up to 3 marks) A relevant and contextualised diagram (ie must be related to international trade) may earn. (2 marks) Reserve (2 marks) for effect on current account of Balance of Payments, eg it improves because exports are relatively cheap. If the answer merely states that there will be a surplus then (1 mark) may be awarded. Evaluation (2 marks) (1 x 2 marks or 2 x 1 mark). Not necessarily true that the currencies will respond The response to price changes of exports and imports is likely to be inelastic in the short run The interest change is very small Depends on interest rates in other countries Other things are not equal Not enough information Credit crunch
Mark
(8)
GCE Economics 8121-9121 0906 27
Question Number 2(b)(iii)
Answer Award (1 mark) for valid factor, (2 marks) for explanation which may include use of data or use of the word deficit. Reasons might include: quality problems and other loss of competitiveness high unit labour costs high incomes increased prices of goods that the UK tends to import overspending in the UK confidence issues other countries making progress more quickly than the UK changes in comparative advantage or other opportunity issues. Do not award exchange rate or interest rate changes. Unless linked to X and M, award no marks for government or budget deficit reasons.
Mark
(3) Mark
Answer Award 2 reasons, (2 marks) each: Identification of each factor (1 mark); explanation of link to UK AD. (1 mark) Factors might include: confidence as US businesses close down this might increase market scope for UK firms? US produces will cut their prices therefore imports to the UK will increase credit crunch, eg decreased inter-bank credit availability wealth effects through the stock markets pension funds loss of confidence effect on UK exports (fall in aggregate demand) as incomes fall in the US direct effect on multinationals outlets fall in investment from USA.
(4)
GCE Economics 8121-9121 0906 28
Answer Concept of cutting the cost of borrowing money (this might be implicit). (1 mark) Diagram (or equivalent analysis) showing both an AD shift rightwards and/or AS shift rightwards (1 mark) and correct annotations to show change in price level and output. (1 mark) Analysis (6 marks) either ( 3 x 2 ) marks or ( 2 x 3 marks) of the policies might include: increase in C (wealth effects, loans, savings etc) increase in I falling value of the pound and effect via X-M AS shift to the right.
Mark
Evaluation (6 marks) either ( 3 x 2 ) marks or ( 2 x 3 marks ) might include: depends on the elasticity of AD or AS discussion of the size of the rate cut time lags/implementation lags other things might not be equal size of the multiplier fiscal or supply side policies might be better failure of monetary policy in the current climate.
Reserve 2 marks of the evaluation for reference to the contradiction of cutting rates when there is inflation.
(15)
GCE Economics 8121-9121 0906 29
GCE Economics 8121-9121 0906 30
6354 Mark Scheme NB Award a maximum of 2 explanation marks if the incorrect key is chosen NB Award a maximum of 2 marks (1 + 1) for valid explanations of 2 incorrect options (1 + 1).
Question Number 1 Answer C Definition of horizontal integration (firms merge in the same industry and at the same stage of production). (1) Definition or diagram of economies of scale(long run average costs fall as output increases). (1) NB Must state long-run. Application to any type of economy of scale to sportswear: (1 + 1) Purchasing (bulk buying of sportswear from suppliers). Technical (larger machinery to produce sports clothing / footwear). Managerial (specialist labour for example accountants / lawyers). Risk bearing (diversifying into UK market). Financial (easier to raise funds at lower cost). Marketing (lower unit cost of advertising). Mark
(4)
GCE Economics 8121-9121 0906 31
Question Number 2
Answer C Correct completion of column to show rising marginal costs (at least three figures to be shown). (1) Correct completion of column to show constant marginal revenue (at least three figures to be shown). (1) Correct definition or formula for marginal cost, marginal revenue or average revenue. (MC is the addition to total cost from producing one more unit of a good or MC = TC TQ). (MR is the addition to total revenue from production of one more unit of a good or MR = TR TQ). (AR is revenue per unit of good or AR = TR TQ). (1) Perfect competition since marginal revenue equals average revenue or firm is price taker or demand is perfectly price elastic. (1) Total Output 0 1 2 3 4 5 The MR Total Total Revenue Cost () () 40 0 80 100 140 200 220 300 320 400 440 500 can also be labelled AR. Marginal Cost () --40 60 80 100 120 Marginal Revenue () --100 100 100 100 100
Mark
Also award: Diagram of perfectly competitive firm with horizontal MR curve and rising MC curve (accept SR and LR).(1) NB No marks for other characteristics of perfect competition.
(4)
GCE Economics 8121-9121 0906 32
Question Number 3
Answer A Role of OFT or Competition Commission investigate anti-competitive practices / protect the consumer or public interest / the powers of the OFT, for example fine firms up to 10% of annual revenue. (1) Identification of price fixing / collusion / cartel. (1) Price fixing is against interest of consumers since it leads to higher prices / lower consumer surplus. (1)
Mark
(4) Mark
Question Number 4
Answer B Allocative efficient pricing is where marginal cost equals average revenue (MC = AR or MC = Price). (1) Definition of supernormal profit (where total revenue exceed total costs / profits in excess of that required to keep resources in their current use / profits greater than normal profits). (1) At output level Q4, price (average revenue) exceeds average cost and so supernormal profit is made. (1) Also award: Annotation of diagram, for example, shading in area of supernormal profit. (1) Be prepared to award knock-out marks, for example option A is incorrect since revenue maximisation output of Q2 is greater than profit maximisation output of Q1. (1)
(4)
GCE Economics 8121-9121 0906 33
Question Number 5
Answer C Definition of price discrimination (a firm charging different prices to different consumers for the same product). (1) Apple is able to charge a higher price in UK since it has lower price elasticity of demand (less elastic / more inelastic demand) than for the US. (1) Diagrammatic analysis depicting different price elasticities of demand, with UK market having a higher price than US market. (1 + 1) Also award: Apple is able to separate the two markets and so there is little leakage or has monopoly power / market power. (1) (Only 1 mark available here.)
Mark
(4) Mark
Question Number 6
Answer E Data reference for example, UK gas market appears more competitive in terms of price it has the lowest price of gas for the three countries shown / a higher proportion of consumers have been able to switch gas suppliers. (1) NB award a maximum of 1 mark for data reference. Award for development of these points, for example this implies significant consumer choice exists for UK gas consumers / more firms are likely to exist in UK gas market / lower concentration ratio / higher consumer surplus in the UK / less brand loyalty in UK / lower unit costs of production in the UK. (1 + 1)
(4)
GCE Economics 8121-9121 0906 34
Question Number 7
Answer B Role of Competition Commission, for example, to promote competition in markets / protect consumer or public interest. (1) A patent on Microsofts technological information is an entry barrier. (1) Definition of contestable market in terms of low entry and exit barriers/ low sunk costs / hit and run competition. (1) Patents enable firms to exploit consumers through high prices / less choice OR removal of patents / consumer welfare through lower prices, more choice and improved quality. (1) Sharing of patents allows rival firms to have increased technical information and compete. (1)
Mark
(4) Mark
Question Number 8
Answer E Definition or formula of average revenue (revenue per unit of output or TR TQ) or average variable cost (variable cost per unit of output or TVC TQ) or variable cost (costs which vary directly with output). (1) Examples of variable costs to motor vehicle manufacture labour, electricity, vehicle components. (1) By remaining in production the firm can reduce its losses by contributing to part of its fixed costs or fixed costs only need to be covered in long run as they are sunk into the firm. (1) Also award: Diagram showing firm making loss (1) but covering average variable costs. (1) Numerical example of loss making firm where revenue exceeds variable costs. (1) In the long-run the firm will exit the industry if it cannot cover both fixed and variable costs. (1) Identification of shut-down position when AR = AVC or AR is below AVC. (1)
(4)
GCE Economics 8121-9121 0906 35
Question Number 9
Answer E Outline of product differentiation applied to games consoles, for example different quality / unique good / different games played on consoles / different graphics / different speed of characters / different functions of consoles / colour / packaging. (1 + 1) A higher price is likely to reflect higher production costs per unit. (1) Product differentiation creates brand loyalty / demand is more price inelastic / higher prices may lead to higher profits. (1 + 1)
Mark
(4) Mark
Question Number 10
Answer A Allocative inefficiency since MC does not equal AR (accept answers which state the firm is not allocative efficient since it is not producing where MC = AR or MC = Price). (1) Any characteristic of low entry barriers, for example rent out a building / employ staff on temporary basis / purchase beauty products from wholesaler at low cost / low level of skills / low level of technology. (1) Low entry barriers mean supernormal profits are competed away in the long run so only normal profits made. (1) Any characteristic of product differentiation, for example location / dcor / type of beauty treatments available / staff uniforms / opening hours. (1) Also award: Correct diagram showing firm in monopolistic competition long run. (1) NB No marks awarded for other characteristics of monopolistically competitive markets.
(4)
GCE Economics 8121-9121 0906 36
Answer Understanding of a price cap / explain RPI-X, for example, the regulator puts a limit on the increase in rail fares. (1) Price capping helps to protect consumer interest / regular travellers. (1) Train operators have (natural) monopoly power / so can exploit customers by raising rail fares to very high levels / obtaining high supernormal profits /demand is price inelastic for commuters / capturing consumer surplus any two points (1 + 1) Also award: Train operators have an incentive to increase efficiency in order to make profits / if X% price cap set. (1 + 1) Note: Accept a combination of ideas from the two factors.
Mark
(3) Mark
Answer Understanding of the X factor change , for example: improvement in the prices that rail operators can charge / relaxation of price cap or RPI - 1% means rail fares rise by 1% below rate of inflation and RPI + 1% mean rail fares rise by 1% above the rate of inflation. (1 + 1) One reason for the relaxation of price capping. (3) Train operators require more funds for investment purposes / to increase capacity / to keep up with the growth in passenger numbers / to improve quality of service, for example more trains running on time / frequency of service / reduce overcrowding / to avoid increase in government subsidies. Data use such as explicit reference to growth in passenger kilometres from 38 billion in 2000 to 47 billion in 2007 / figure 2 refers to the age of trains. (1) Also award up to 3 marks: There has been a reduction in the efficiency savings train operators can make over the time period / train operators have been successful in achieving efficiency savings (so little scope for further efficiency gains).
(4)
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Question Number 11(b)
Answer Train operator should be able to increase price or output. (1) The increase in demand means the AR and MR curves shift outwards. (1) One further comment, for example, train operator is likely to have spare capacity on its off-peak services to raise output. (1) Diagram (up to 5 marks) Original position with costs and revenue curves for a monopoly. (1) Average revenue curve shifting outwards to AR2. (1) Marginal revenue curve shifting outwards to MR2.(1) Original and new price / increase in price (Pe to P2). (1) Original and new output / increase in output (Qe to Q2). (1) Also accept increase in supernormal profits. (1) Cost / revenue
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NB Accept diagram showing constant AC and MC curves. NB Award a maximum of 1 mark for a basic supply and demand diagram where demand curve shifts outwards. NB Award a maximum of 2 marks if no diagram showing cost and revenue provided.
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Answer Definition of price discrimination. (1) Data use, eg reference to figure 1 where consumers are separated into different markets according to time of booking / Application of PED to advance booking and buying on the day / other examples. (1 + 1) Purpose of price discrimination is to capture consumer surplus where demand is price inelastic. (1) Conditions necessary for price discrimination: monopoly power / ability to separate markets and prevent leakage / different PEDs between markets. (1 + 1 + 1)
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Diagram(s) (up to 5 marks) Different price elasticity of demand between markets. (1) Accompanying marginal revenue curves for each market. (1) Higher price where demand is inelastic / lower price where demand is elastic. (1) Costs shown as same (may be horizontal marginal costs curve / average costs curve). (1) Areas of profit. (1)
Also award for single diagram depicting price discrimination where different prices are shown for capturing consumer surplus. NB Award a maximum of 1 mark for simple demand and supply diagrams. Award a maximum of 4 marks if no diagram for KAA. NB There is a maximum of 7 marks for KAA. Evaluation (3 + 2 or 2 + 2 + 1) Effectiveness of price discrimination depends on various factors: Extent of monopoly power - many train operators are regional monopolies with little effective competition / for example road travel may be very poor / profits can be high. Extent of preventing leakage - train operators can prevent
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leakage between markets by enforcement for example ticket inspectors / ticket barriers / time of booking / and therefore profits can be high. Costs of separating consumers into different markets should not exceed the extra revenue generated. Spare capacity is required on train services where a lower price is charged / Extract 1 indicates that spare capacity remains even after price discrimination / therefore profits might be increased through further price discrimination. Issue of price capping by regulator may limit ability of train operator to increase rail fares and profits / 40% of rail fares are price capped. Internet usage increase consumer knowledge which impact on price discrimination as a means of affecting profits. Duration of the rail franchise the longer this is the greater the possibility of gaining profits from price discrimination.
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Answer NB Candidates may argue an increase or decrease in welfare for analysis marks. Evaluation is when both sides of the argument is presented. Consumer welfare may have increased since. (2 + 2 + 2) Growing passenger numbers (Extract 1) / from 38 billion in 2000 to 47 billion in 2007. Increase in punctuality of trains (Figure 3) / from 79.1% of trains arriving on time in 2000 to 90.8% in 2007 / this implies that fewer people are late for work or meetings. Fall in passenger complaints (Figure 3) / from 131 per 100,000 in 2000 to 52 in 2007 / this implies fewer problems or people resigned to the quality of service. Fall in age of trains (Figure 3) / from 20.67 years in 2000 to 13.95 years in 2007 / this implies more comfortable and reliable journeys. Lower rail fares if book well in advance / use of data in figure 1 such as London Newcastle where fares were as low as 16 eleven weeks before departure but as high as 92 on day of departure / this enables more consumers to be able to afford rail travel / increase consumer surplus. Government subsidy of 4.6 billion to rail industry could finance investment / run unprofitable services for rail consumers. These gain at expense of other consumers who do not use rail network. Consumer welfare may have decreased (2 + 2 + 2) Overcrowding on peak time train services / this suggest too few trains to cope with rising demand. Uncertainty over train fares and consumers do not always get the lowest price possible / over 70 different fare types. Significant increase in unregulated train fares above inflation rate (accounting for 60% of journeys) / consumer surplus is captured. Since 2004 regulated train fares have
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increased by 1% above inflation rate so a real increase in fares. Issue of regulated fares linked to RPI rather than CPI. Note RPI has been higher than CPI over recent years. Government subsidy of 4.6 billion has implications / higher taxes / opportunity cost associated with the subsidy. Weighing up the overall argument and justifying conclusion arrived at. Reliability of the data / further information which could help make an evaluation. Difficulty in measuring consumer welfare. Time issue perhaps improvement may / may not continue. Issue of too short franchises for train operators to invest sufficiently into new rolling stock.
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Answer NB Presenting both arguments for and against the train operating market being contestable can be considered as evaluation. NB If no application to train operating market then award a maximum of 3 marks. Definition of contestable / uncontestable market, for example a contestable market has low entry & exit barriers / low sunk costs / hit and run entry. (1) Train operating market unlikely to be contestable since: (1+1) Government licence required. Limited time allocation slots on rail track. Dependant on government subsidy or purchase of franchise. Economies of scale / natural monopoly. Limit pricing of existing franchise holder. High start up costs in terms of purchasing / renting rolling stock. High exit costs in terms of loss of rolling stock / weak second hand market. Redundancy payments on exit could be quite high. Recruitment of train drivers could be hard. Brand loyalty to specific rail services. Evaluation (up to 2 marks) Contestable once the franchise is due for renewal on existing franchise. Magnitude of the entry barrier - impossible without franchise. Company can rent rolling stock which reduces entry cost. Company rents time slot along track, signalling & stations so reduces entry cost. Large firms may have the funds to enter the train operating market. Government can subsidise new entrants to help reduce entry barriers. Firm can buy / sell trains and carriages on entry and exit.
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Answer Identification: the market structure is an oligopoly. (1) Definition: an oligopoly (few sellers and many buyers or a few large firms dominate the market). (1) Application: the 4-firm concentration ratio is 74.5% or the 3-firm concentration ratio is 64.2% or the 2-firm concentration ratio is 48.5%. (1) Also award Identification: the market structure is monopoly. (1) Definition: a monopoly (a single producer in a market / a legal definition where firm has 25% or more market share). Application Universal has 31.9% market share which exceeds the legal definition of a monopoly having 25% market share. (1) NB Maximum of 1 identification mark available.
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Answer Consideration of one type of collusive practice and development of it for example, price fixing / allocating market shares / limits to marketing budgets / sharing market information / tacit collusion. (1+1) An oligopolistic market structure may make it conducive to collusion, eg relatively few major firms to reach an agreement / high barriers to entry. (1+1) Tacit collusion may occur since Universal is market leader with 31.9% share and so other firms might follow its pricing and marketing decisions (price leadership). (1) Evaluation (2 marks for one factor) Collusion is unlikely due to the severe penalties firms may face, for example, fines of up to 10% of revenue / possible imprisonment of directors. Collusion is unlikely since Competition laws encourage whistle blower since main informant is treated leniently. Collusion less effective when cheating occurs and is likely to break down. Collusion is unlikely since 25% of the market contains independent music companies who could expand their market share if the major firms undertake price fixing. Collusion is unlikely since the pace of technological change is so fast, undermining any price and output agreements for a specific mode of music, eg internet downloads. Tacit collusion may occur as it is very difficult to prove by the competition authorities. Collusion unnecessary if a music firm has top artists under contract / PED is inelastic.
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Answer Explicit reference to data using figures for both CD sales increasing and CD revenue decreasing (accept reasonable approximations) (2). If candidates just refer to CD sales increasing and CD revenue decreasing just award 1 mark. CD prices must be falling. (1) Reasons for falling CD prices include: increase in internet downloads / improvements in technology. (1) Demand is price inelastic (1) the percentage fall in price is greater than the percentage increase in sales of CDs. (1) Also award for diagram showing falling price & revenue. (1)
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Answer
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Diagram which explicitly shows: (up to 6 marks) Original position with cost and revenue curves which shows profit maximisation (1) inward shift of Average Revenue and Marginal Revenue curves (both required)(1) falling price level (1) falling output level (1) original profit level (1) new profit level.(1) NB Allow pivotal shift in AR and MR curves. NB Candidate must show a fall in price, a fall in output and a fall in profits to obtain maximum marks from the diagram. Otherwise award a maximum of 4 marks for the diagram. Written explanation of falling demand causing a decrease in price, output and profits. (1) Reference to CD sales decreasing by 11% in 2007. (1)
Note: Award a maximum of 1 mark for diagram showing an inward shift in demand and fall in price if a basic demand and supply diagram is used. Evaluation (2 + 1 or up to 3 marks for one point well developed) Magnitude: the extract indicates an 11% fall in CD sales in 2007 and so is likely to have a significant impact on price, output and profits. Time factor: the question asks candidates to consider 2007 but this decline in sales is likely to be part of a long term trend. It seems appropriate for candidates to
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assume the situation will worsen in the long term. However, a music company may diversify into other methods of music sales and so may not be affected too seriously in terms of price, output and profits for its music. For example, legal download sales have risen from 5 million in 2004 to 73 million in 2007. A music company may be able to reduce its production costs / reduce its CD operations to offset the decline in CD sales / an increase in productivity could also help restore profits. Firms might switch strategies, eg from profit maximisation (MC = MR) to sales maximisation (AC = AR). Mark
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Answer Award a maximum of 8 marks out of 12 if only the music industry or consumers considered. (KAA 3 + 3 + 2 or 2 + 2 + 2 + 2) Music industry (producers) positive effects: Once the system is set up very low marginal costs of supplying tunes. Internet download is growing rapidly as people become more proficient with new technology so a lucrative market for music producers. New technology is opening up new markets, for example, mobile ringtones & USB memory sticks. Lower marketing costs for new artists and new releases. Lower production costs, eg less stores and staff required. A huge audience using the internet so potential market for songs is enormous. Immediate payment system online. Music industry (producers) negative effects: Spread of illegal internet downloads around 10% of music market / lower revenue and profits. Fighting illegal downloads is time consuming, expensive to monitor and hard to prosecute offenders. Prosecution of minor offenders is bad for public relations. Requires support from Trading Standards and authorities to enforce. Legal internet downloads undermines music sales in CD market. Consumers positive effects: Downloads are cheaper / greater consumer surplus / consumers can purchase individual
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songs rather than whole albums. Highly convenient to purchase online in own home rather than going to shop. Instant collection of purchase via internet. Vast choice of music on internet websites. Improved consumer knowledge, for example, price discrimination is made more difficult for firms.
Consumers disadvantages: Question mark over the safety of online payments. Some consumers desire a physical product like a CD. Closure of music stores in shopping centres. Some consumers may not have access to internet or lack skills to use it. Evaluation (2 + 2) There are 4 evaluation marks and these may be awarded for discussing both the positive and negative impact on either the music industry or consumers. Evaluation also includes: Prioritise: discussion of who gains most consumers or producers. Prioritise: discussion of whether the advantages of the internet outweigh disadvantages. Magnitude: the change to internet shopping is very rapid; note the growth in legal music downloads from 5 million to 73 million between 2004 and 2007. Time factor: The internet is revolutionising the way producers sell and consumers shop - music downloads is at the forefront of this change.
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Answer Identification (1 + 1) development / analysis of two barriers to entry (1 + 1). Barriers to entry include: start up costs eg recording studios / research into developing new artists / contracts with artists / advertising expenditure / brand loyalty of artists to existing music firms / technological skills in setting up internet download website / marketing costs / limit pricing of the big four music companies. Evaluation (2) Prioritise over the greatest entry barrier: Research into developing new artists might involve element of luck and be very significant. The internet makes it easier for companies to enter the music recording industry. Music recording studios can always be hired out for artists so less significant. Marketing costs can be kept down through use of internet. Limit pricing is illegal and so the big four are unlikely to carry this out. Magnitude of entry barriers, for example, many small independents record labels exist suggesting lack of brand loyalty to large firms.
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6355_01 Mark Scheme Question Number 1(a) Answer KAA 9 marks (3 + 3 + 3). Award three reasons. Reasons might include: many workers, who can be easily replaced PED/PES not directly employed easier to hire and fire or fee taken by agency permanent workers are paid more as a financial incentive for retention sellers of labour have less market power monopsony and less unionisation MRP or productivity analysis, for example lower MPP or MRP not comparing like with like permanent workers might be receiving more training and other investment in human capital temporary workers may lack expertise, experience and/or skills discrimination, eg ethnic minorities, gender reward data use. Evaluation 6 marks (2 + 2 + 2). Factors might include: questioning of MRP analysis the degree of monopsony power these wage differentials are a reward for loyalty for those in permanent jobs it may be that permanent staff have more access to promotion (glass ceiling) permanent workers are currently more expensive to remove so they are offered more incentives to work hard productivity may change with rates of pay degree of elasticity (PED/PES) prioritisation with justification. Mark
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Answer KAA 9 marks (3+3+3). Award three aspects: Wage changes: 3 marks wages increase need to match the level of workers doing equivalent work increasing costs for firms use of data. Employment changes: 3 marks employment levels decrease firms demand for labour contracts agencies cut back on recruitment use of data. Do not reward changes to unemployment. Diagram: 3 marks accept higher wage floor diagram accept shift left in demand for agency workers as firms adapt their employment policies accept monopsony diagram. Alternative approach: accept well argued monopsony analysis with diagram up to 9 KAA marks. If no valid diagram award maximum of 6 out of 9 KAA marks. Evaluation 6 marks (3 x 2 marks or 2 x 3 marks) might include: supply of agency workers is likely to fall if agencies start going out of business depends on the degree of monopsony power of employers possible increased participation levels might mean increased employment if there are jobs available changes over time small businesses may be affected more than large ones impact depends on the state of the economy degree of elasticity of PED/PES questioning the validity of the data reaction of full time staff, eg pay demands to maintain differentials efficiency wage theory, eg that higher wages might increase productivity.
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Answer KAA 9 marks (3 x 3 marks or fewer points well developed). Analysis of three likely effects of Working Time Directive opt-out on the UK economy. Effects might include: labour market flexibility lower unit costs, relatively, in UK rather than EU. May be linked to monopsony, which could benefit from exploitation of workers increased employment in the UK as firms are attracted by the labour market and less in the EU increased unemployment, eg firms less inclined to take on unemployed as those currently in work can have their hours increased increased overall productivity rates, eg more efficient use of labour and capital combined reduced demand for part-time workers social implications, eg quality of life, family breakdown award macro benefits, eg higher incomes of employees have multiplied effects, inflow of investment weakening of trade union power. Evaluation 6 marks (3 x 2 marks or 2 x 3 marks) points might include: WTD might improve morale and incentives in the workforce WTD preserves quality of human capital over time opting out of European agreements marginalises the effectiveness of UK in other policy matters hourly productivity might fall, although per worker productivity might be higher in the UK potential weakness in the economy in need to compromise over agency workers rights worsening relations for the UK within the EU workers might not opt to work the extra hours.
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Answer KAA 9 marks (3 x 3 marks or fewer points well developed). Accept answers either narrowly focused on agency workers or more widely argued. Factors might include: membership of trade unions tends to rise as hardship increases but falls in very high rates of unemployment trade unions are more effective if demand for labour is strong ie in an economic boom trade unions less effective in recession if there are fewer profits to redistribute analysis of monopoly supply of labour priorities of trade unions vary depending on the economic cycle agency workers less likely to get their requests fulfilled as employers are more cautious in recessionary times WTD may cause problems for firms, and employment might fall further involvement of multinational corporations PED/YED analysis; derived demand. Mark cap 6/9 marks if no reference to both wages and employment. Evaluation 6 marks (3 x 2 marks or 2 x 3 marks). Factors might include: increased rights of workers diminishes scope of trade unions depth and longevity of the slowdown in the UK inaccurate or misleading data depends on size and influence of trade unions and sector changing role of trade unions as they become stakeholders questioning the degree of PED for final product eg to what extent labour can be replaced with capital. Other factors apart from the state of the economic cycle determine the effectiveness of trade unions eg increasing in importance amongst part time workers and women.
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Answer KAA 6 marks (3 + 3). Accept any two reasonable factors (3 marks each). Factors might include: strength of unions or other bargaining power issues. Reward use of data in Figures 1 and 2 state of the economic cycle/level of GDP state of economic development, for example secondary/tertiary comparisons whether or not the country is part of the euro will determine the purchasing power Czech Rep and Poland figures represent higher effective wages MRP analysis of the value of a workers output and the value of the final product. This could count as two factors priority given to income equality in government policy cost of living index linking size of the welfare state, eg level of benefits. Evaluation 4 marks (2 + 2). Factors might include: unreliable, missing or misleading data, eg use of euro as common currency, no reference to source year in Figure 1; no reference to comparative productivity; no reference to the percentage affected by NMW or exemptions hidden economy Luxembourg (or other countries in the Figures) has unique factors which cannot simply be explained using the labour markets analysis exceptions in data, eg Greece has high union density but relatively low minimum wage factors which might change the data in the future, eg skilled Polish workers returning home
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Answer KAA 9 marks. Award three factors (3 + 3 + 3). Factors might include: lack of minimum wage recent pay awards have been lower than elsewhere Extract 1 lines 19 to 20 trade unions and employers with strong powers of negotiation without interference from government Extract 1 Lines 10-11 MRP analysis, eg executive salaries - Extract 1 line 4 - and/or marginal cost analysis state of the economic cycle widens differentials when growth rates high? union density below average in Germany (Fig 2) monopoly and monopsony theory, eg in different sectors such as hairdressers - Extract 1 Line 2 job insecurity by the low paid owing to fear of international competition - Extract 1 Line 14 discrimination temporary workers with lower pay - Extract 1 Line 20 working conditions PED/PES analysis; derived demand skills, education, experience and training. Evaluation 6 marks (2 + 2 + 2) Factors might include: extract 1 line 27 - minimum wage would wipe out 1.1m low-wage jobs. While this might appear to narrow wage differentials it will worsen income differentials Luxembourg has high correlation between union density and minimum wage reinforces union argument other things might not be equal, eg the high level of manufacturing in Germany which is particularly sensitive to globalisation, increasing competitiveness hence forcing down wages factors which might change the data in the future, eg government policy, introduction of minimum wage.
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Answer KAA 12 marks (4 x 3 marks or fewer points well developed). Accept four factors for or against the case for minimum wages, or a combination of both. The following three implications must be included, though they may be combined as a result of one factor: Answers must address the 3 aspects: blunt tool, stifle competition and destroy jobs. Factors might include: blunt tool for fighting poverty that is, effects not specifically on the poor. Reward definitions, eg absolute/relative poverty, 60% median incomes stifle competition that is, create inflexibility in the labour market, increased costs, loss of international competitiveness against lower wage countries could destroy jobs effects on levels or employment. Award use of an NMW diagram minimum wages might only affect second or third earners in a household they have no impact if people cannot find work people might lose their jobs which would worsen poverty an NMW can provide an incentive to look for work Efficiency wage theory people will work harder if they are paid more, and/or firms will have to become more efficient other macro impact of NMW, eg multiplied growth, inflationary pressures. Mark cap 9/12 marks if all three aspects are not referred to. Evaluation 8 marks (4 x 2 marks or 2 x 4 marks): depends on PED and PES depends on the demand for the final product monopsony argument other policies might be more effective or other prioritisation moving in and out of jobs is thought to be more a cause of poverty than joblessness itself poverty is a multi-dimensional concept and very hard to measure, and questioning of other definitions possible benefits of Regional Minimum Wages.
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Answer KAA 9 marks (3+3+3). Award three policies. Policies might include: action by government as an employer, eg Positive discrimination regional policy if linked to poor regions income support subsidies to firms other benefit changes tax - award use of Lorenz curve to illustrate this legislation reduction in working time (if this increases employment) or increase in working time (if this increases final take-home pay) education and training. Allow wider macro policies such as import substitution, leaving the euro, cutting the interest rate. Evaluation 6 marks (2+2+2). Factors might include: poverty is a multi-dimensional concept and very hard to measure prioritisation of policies, with justification consideration of side effects which might limit the effectiveness of the policies, eg the need to increase tax rates might act as an impediment to poverty reduction consideration of the magnitude of wage or price elasticity of demand or supply time lag and other dynamic analysis other things are not equal, for example the EU might make policies which counteract the effectiveness, eg fiscal constraints.
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6355_02 Mark Scheme Question Number 1(a) Answer KAA 9 Award 3 marks for three factors identified, analysed and applied or award fewer points very well developed up to a maximum of 9 marks. These for or against the argument, or both. These might include: Factors may include: increased economic growth increased opportunities for domestic investment increased opportunities for FDI increased employment ability to increase exports generates foreign currency ability to sell excess electricity to neighbouring countries reduces primary product dependency move away from subsistence agriculture concept of balanced growth local added value increase in government receipts increasing scope for government spending reward appropriate use of development models, such as Rostow or Lewis. A link must be made to how the above can contribute to reducing poverty through increased development and economic growth. If no explicit reference to the concept of absolute poverty then mark cap 7/9. E6 Award up to 6 marks for evaluation, ( 3 x 2 marks or fewer more developed points up to 4 marks each). Evaluation may consider points for or against effectiveness of elimination of poverty: human cost, for example displacement of 50 000 people to poor land for Merowe dam environmental costs destruction of local heritage local objections lack of fair distribution of income FDI may employ foreigners FDI may exploit workers expense of building dams has an opportunity cost, e.g. financing issues or tax rises in the future can only be effective if other things are in place, eg health education Mark
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the drive towards might not be successful, eg wastefulness, corruption, ignorance or poor governance the produce may face protectionism in export markets may be leading away from areas of comparative advantages, eg oil/gold/cotton reference to the elimination of poverty being more than just a rise in incomes development is a holistic concept.
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Answer KAA 12 3 + 3 + 3 + 3 Award 3 marks for four factors identified, analysed and applied up to a maximum of 12 marks. These might include: infrastructure problems, eg lack of access to the internet Fig. 4 consequences of colonial background, eg national boundaries formed without reference to ethnicity dependency on agriculture debt as a constraint land-locked, therefore increasingly strained in globalised world missing capital markets / lack of domestic investment lack of FDI inability to exploit natural resources, eg oil civil war/political infighting, eg Darfur and therefore the opportunity cost involved, waste of human capital low levels of educational attainment, eg Fig. 2 literacy corruption, governance and mismanagement of economic policies international isolation resulting from political issues poor healthcare, eg Fig. 3 life expectancy gender inequalities skill shortages lack of property rights. Evaluation 4 Award up to 8 marks for evaluation (2 + 2 + 2 + 2) Responses may consider: significance of colonial background depends on individual circumstances, eg Egypt has had successes cultural norms may mean that educational attainment will be limited oil can be a cause of conflict not a solution to backwardness, eg Nigeria the factors which have caused the backwardness are now being alleviated, eg China effect short run impacts but in the long run these may not be insurmountable significance of one factor over another, or relative to another country, with justification.
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Answer KAA 6 Award 3 marks each for two factors identified, analysed and applied or award fewer points very well developed up to a maximum of 6 marks. Responses may consider: advantages of specialisation reference to international trade, comparative advantage or economies of scale promotes employment direct input of infrastructure and/or technology allows greater trade opportunities promotes investment gives Sudanese government resources to improve technological uptake and infrastructure non-tangible benefits, for example advice, expertise ability to increase exports generates foreign currency indirect effects of Chinas demand pushing up the price of oil plugging the savings gap, eg ref to $15bn Extract 2 Line 4. Reward reference to Harrod-Domar political support ally and commercial partner Extract 2 Line 1. E4 Award up to 4 marks for evaluation, ( 2 + 2 marks or fewer more developed points up to 4 marks each). Responses may consider: primary product dependency difficulties of trying to access new markets for any exports that result from diversification eg EU exploitation of the economy by FDI how the money is spent Responses may refer to arms shipments from China to Sudan and the Darfur conflict keeps a government in place that provides fundamentally inefficient market conditions the international sanctions make the revenues from exports even more significant distortion of local markets corruption comment on the magnitude of $15bn relative to the cost of a dam development is a holistic concept free choice (Sen) which will not be achieved with abuse of human rights China itself is suffering from global slowdown so it may not need as much oil in the future.
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Answer KAA 9 Award 3 marks for three factors, either for or against compatibility, or both, identified, analysed and applied or award fewer points very well developed up to a maximum of 9 marks. These might include: Not compatible, ie negative externalities: pollution attracting people into cities causing slums pollutants into the Nile, damaging crops in Sudan and into Egypt higher incomes mean more meat eating with effects on carbon emissions dams flora and fauna impact of global warming on agricultural output. Compatible: growing awareness that care for the planet is incompatible with economic growth and natural disasters can be mitigated through sustainable economic growth Chinas economic growth has continued but there has been reduced damage to the environment new technology will reduce pollution, eg new processes new technology will reduce demand for fossil fuels. E6 Award up to 6 marks for evaluation, ( 3 x 2 marks or fewer more developed points up to 4 marks each). Responses may consider: the main evaluation points will be for or against compatibility depends on the sector in which the growth takes place eg services might be greener than manufacturing LDCs destroy the environment in any event eg Nepal and deforestation to provide firewood depends upon the strength of the government in standing up to the MNCs growing importance of Kyoto protocols global awareness and payments to preserve the environment information failure people might not know what they are doing effects might be localised or cross border the money gained from growth might cross subsidise environmental cleaning eco-tourism there is no alternative to growth the only way to exit absolute poverty, which is worse than environmental damage.
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Answer KAA 9 (3 + 3 + 3) Award 3 marks for three factors identified, analysed and applied up to a maximum of 9 marks. Responses may consider: infrastructure issues, eg problems with power supplies, Extract 1 line 9 labour costs education levels health care stability of government political issues, eg level of corruption, democracy red tape/bureaucracy economic policy macro issues, eg inflation control, exchange rate tax levels access to raw materials access to markets are there tariffs imposed on goods from this market potential for profits distance from ports. Land Locked countries have far lower FDI conflicts such as civil unrest or war cluster effect one occurrence of FDI leads to much more (Krugman) global confidence/recession/credit issues. If no explicit reference to Southern Africa (as a region or individual countries) then mark cap 7/9. E6 Award up to 6 marks for evaluation, ( 3 x 2 marks). Responses may consider: only a short run phenomenon, ie there have been steady improvements in infrastructure and education in South Africa consider the influence of the attractiveness of Asia for FDI example of failing states in SSA doesnt inspire confidence conflict in local area reduces confidence in a specific country some issues are more important than others, eg oil over democracy in Sudan prioritisation with justification.
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Answer KAA 9 Award 3 marks for three factors identified, analysed and applied or award fewer points very well developed up to a maximum of 9 marks. Responses may consider: improved infrastructure corporate tax revenue increases increased employment income tax revenue increases increased competition leading to increased efficiency access to markets potential for profits better management skills access to new technology improved human capital as firms train labour health care may be provided by the firm government actions on health and education to attract inflows, ie human capital investment plugs the savings gap allow macro benefits, eg economic growth, multiplier, support of currency valuation tends to be a higher value added improves export performance, improving the current account of balance of payments and a source of foreign exchange. E6 Award up to 6 marks for evaluation, ( 3 x 2 marks or fewer more developed points up to 4 marks each). Responses may consider: consider the significance of one factor over another, with justification increased competition may lead to failure of domestic firms or markets exploitation of workers. Depends on the nature of FDI. use of imported foreign labour, especially at the skilled end employment of indigenous workers in low skilled menial tasks therefore not improving human capital, eg dual economy environmental degradation few profits kept in the country tax incentives negotiated which can cost the government and unfair on other firms footloose and cannot be relied upon can damage government policies as reduce
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intervention to attract FDI Oppenheimer says FDI is better than aid because if were in we stay Extract 1 lines 2628 over-dependence vulnerable to global recession time lags.
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Answer KAA 9 Award 3 marks for three factors either for or against the failure of aid, identified, analysed and applied or award fewer points very well developed up to a maximum of 9 marks. Candidate may consider the benefits of aid and therefore why it has been a success - these might include: Why aid has failed (accept the reverse arguments): NGOs and media might have short attention spans so no continuity. Aid fatigue other factors are more important than aid, eg Africa has become poorer despite being the biggest recipient of aid aid fatigue has started to become more evident becoming less significant role that corruption plays in reducing effectiveness of aid dependency culture is built up lack of infrastructure reduces effectiveness of aid it might be temporary and can destroy local industry or provide illusion of improvement that is not sustained (for example temporary drug relief only withdrawn later, Bill Gatess imported mosquito nets) can encourage corruption moral hazard government failure even if there is aid it isnt channelled through. E6 Award up to 6 marks for evaluation, (3 x 2 marks or fewer more developed points up to 4 marks each). Responses may consider the following: it depends of size, conditionality and type of aid/better healthcare better education/better sanitation cleaner water better access to food greater stability in the home and in sources of income economic growth and employment improvements in infrastructure and therefore encourage FDI responses may reference Harrod-Domar model if so this needs to be explained for full marks depends on level of monitoring and accountability.
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Responses could also support the assertion that aid has been a success and may consider some of the failures as evaluation.
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Answer KAA 9 Award 3 marks for three factors identified (3 + 3 + 3), analysed and applied or award fewer points very well developed up to a maximum of 9 marks. Responses may consider: greater primary product dependency possible reference to Prebisch-Singer thesis, as there is an increase the price of diamonds this is improving Botswanas terms of trade OR accept declining terms of trade argument as prices of a countries primary product exports fall relative to world prices vulnerability to global recession, eg falls in income in developed economies will cause demand for diamonds (highly income elastic goods) to fall long-term potential for unemployment, fall in economic growth conflicts surrounding extraction of resources, eg blood diamonds risk of corruption protectionism placed on exports may destroy the industry can attract FDI if shown to have expertise in one area may result in acquiring of transferable skills conflicts over ownership of resources, eg diamonds the employment that is required may be essentially unskilled. E6 Award up to 6 marks for evaluation, ( 3 x 2 marks or fewer more developed points up to 4 marks each). Responses may consider: dependency might arise owing to comparative advantage when primary product prices rise the country does very well (a benign Prebisch-Singer scenario) or the reverse argument if the benign scenario argued as part of KAA local sources removes some of the vulnerability, by adding value magnitude issues, eg depends on the size of the country as to whether there are economies of scale in many products Dutch disease; leading to higher exchange rate that destroys local industry provides the revenue to allow Botswana to diversify and protect themselves from future changes in demand
Mark
GCE Economics 8121-9121 0906 69
impact of changes in global demand depends on the product likelihood of demand falling is low Botswana possesses almost monopoly power two-thirds of Botswanas GDP is not diamond related comment on the magnitude of dependency depends on area of concentration: cars v diamonds FDI evaluation eg MNCs can distort democracy by asserting influence on governments.
(15)
GCE Economics 8121-9121 0906 70
6356 Mark Scheme Question Number 1(a) Answer Mark
Possible effects include: fall in consumption negative wealth effect but...correlation between house prices and consumer spending may not be high rising unemployment as aggregate demand falls, especially in those sectors related to housing but other components may increase so offsetting the fall in consumption impact on related industries including rented accommodation impact of public finances impact on banks and building societies has been very significant, for example resulting in part-nationalisation of several banks.
For a L5 mark (28-31): Consideration of 3 factors together with 1 evaluative point. A Level 5* mark (32-40) should be awarded for answers which meet the Level 5 criteria convincingly eg 3 points and 2 pieces of evaluation. Max 28 marks if no evaluation. Award a L4 mark (24-27 marks) if only 2 factors + evaluation. Award a L2 mark (16-19 marks) for identification of points only or for narrow response focussing on one or two points.
(40)
GCE Economics 8121-9121 0906 71
Answer
Mark
Understanding of the meaning of supply side policies: definition and diagram. Understanding of recession: 2 successive quarters of negative economic growth. Examples of specific supply side policies: reduction in trade union power but...if earnings are held down then the chances of recession might increase cuts in income tax rates to increase incentives to work this could have beneficial demand-side effects by increasing disposable income, although the tax cuts might just be saved. Also, danger of increased inflationary pressures cuts in rates of corporation tax Ireland only 12.5% compared with UK of 28% might help to increase investment and FDI but unlikely if fear of recession is great. Also danger that the increased injection could exacerbate inflation further reductions in unemployment benefits and/or limiting benefits to those who demonstrate willingness to take a job butthis would reduce the incomes of those on low incomes so further reducing consumption and making recession more likely reduction in red tape EU regulations have increased admin burden on most firms, for example health and safety but...no guarantee that this would prevent recession although such measures would reduce cost reduce employment protection and employment rights; abolish maximum working time directive improvements in infrastructure buttake considerable time to implement. Also: for evaluation supply side policies are only likely to have an impact in the long run. Therefore, they are unlikely to alleviate an imminent recession. And: Supply side policies would be ineffective in preventing a recession if AD is very low (this may be illustrated with a diagram).
GCE Economics 8121-9121 0906 72
For a L5 mark: Discussion of 4 points and 2 evaluative points. A Level 5* mark (48-60) should be awarded for answers which meet the Level 5 criteria convincingly, for example 4 points and 3 pieces of evaluation. Award a L4 mark (36-41 marks) if only 3 points + evaluation. Max 42 marks (top L4) if no evaluation. Award a L2 mark (24-29 marks) for identification of points only or for narrow response focussing on one or two points. Question Number 2(a) Answer Possible factors include: fall in UK interest rates relative to rates in eurozone and expectations of further cuts UK has a significant balance payments deficit on current account but...UK has attracted significant sums into its financial account as a result of FDI UKs greater exposure to the credit crunch given its greater dependency on housing and Northern Rock but..other factors may be more significant UK economy slowing down more rapidly than eurozone economies but.. this is short term evidence only pound had been overvalued in recent years this may be significant given the PPP calculations relative inflation rates: The UK has experienced a higher rate of inflation than many eurozone countries butrate of inflation was expected to fall rapidly speculation. If reference is not made to both recession and inflation: For a L5 mark (28-31): Consideration of 3 factors together with 1 evaluative point. A Level 5* mark (32-40) should be awarded for answers which meet the Level 5 criteria convincingly, eg 3 points and 2 pieces of evaluation. Max 28 marks if no evaluation. Award a L4 mark (24-27 marks) if only 2 factors + evaluation. Award a L2 mark (16-19 marks) for identification of points only or for narrow response focussing on one or two points.
(60)
Mark
(40)
GCE Economics 8121-9121 0906 73
Answer
Mark
Possible effects include: reduction in cost-push inflationary pressures (increase in AS) higher aggregate demand given that UK is now a net oil importer possibility of higher rate of economic growth improvement in the balance of trade in goods danger of increase in external costs, eg increase in use of fuel inefficient cars impact on real income and consumption increase in AD impact on profits and investment increase in AD. Evaluation could include: businesses might increase profit margins and so inflation may be less likely fall in oil prices reflects world recession so few benefits to the UK economy short run/long run effects consideration of whether or not fall in price is temporary.
For a L5 mark: Discussion of 4 points and 2 evaluative points. A Level 5* mark (48-60) should be awarded for answers which meet the Level 5 criteria convincingly eg 4 points and 3 pieces of evaluation. Award a L4 mark (36-41 marks) if only 3 points + evaluation. Max 42 marks (top L4) if no evaluation. Award a L2 mark (24-29 marks) for identification of points only or for narrow response focussing on one or two points.
(60)
GCE Economics 8121-9121 0906 74
Answer
Mark
Implications on public finances could include: increased expenditure on for example healthcare increased expenditure on pensions and tax credits for elderly but...more targeted benefits might not result in significant rise or retirement age could be increased increased dependency ratio; higher tax burden on those working but...could be offset by increased immigrants of working age danger that structural fiscal deficit will increase and rising national debt but country may be able to afford extra burden if economic growth continues. Implication for the UKs competitiveness include: older people less geographically and occupationally mobile leading to a slower growth rate but...many elderly people have become IT literate low levels of productivity butolder workers have more experience and be more productive less dynamic/efficient economy higher inflation if ageing population causes increased public expenditure.
For a L5 mark (28-31): Consideration of 3 factors together with 1 evaluative point. At least one factor must relate to public finances and one to competitiveness. A Level 5* mark (32-40) should be awarded for answers which meet the Level 5 criteria convincingly eg 3 points and 2 pieces of evaluation. Max 28 marks if no evaluation. Award a L4 mark (24-27 marks) if only 2 factors + evaluation.
Award a L2 mark (16-19 marks) for identification of points only or for narrow response focussing on one or two points. If focus is on either public finances or competitiveness, then maximum mark is 27.
(40)
GCE Economics 8121-9121 0906 75
Answer
Mark
Effects could include: increase in working population and in aggregate supply but...may only be temporary source of increased aggregate demand when they spend their earnings in UK economy but... money may be repatriated to families in home country increased burden on public services, for example health and education leading to higher public expenditure in these areas but...immigrants also source of tax revenue for government implications for housing market both for rent and purchase wage costs may be held down so helping to increase competitiveness of UK goods improvement in the current account of balance of payments butfirms might simply raise profit margins and increase dividends income transferred abroad increased unemployment among UK workers.
For a L5 mark: Discussion of 4 points and 2 evaluative points. A Level 5* mark (48-60) should be awarded for answers which meet the Level 5 criteria convincingly, eg 4 points and 3 pieces of evaluation. Award a L4 mark (36-41 marks) if only 3 points + evaluation. Max 42 marks (top L4) if no evaluation. Award a L2 mark (24-29 marks) for identification of points only or for narrow response focussing on one or two points.
(60)
GCE Economics 8121-9121 0906 76
Answer
Mark
Identification of trends: Savings ratio: falling since 1992 from nearly 14% to 3.5% Debt ratio: doubled from just over 80% to 160%. Explanations could include: reduction in interest rates high consumer confidence based on long period of continuous economic growth & job security rising house prices leading to increase in mortgage equity withdrawal ease of obtaining credit and mortgages (until mid-2007). 2 marks for identification of factors; 2 for application (1 mark for reference to savings ratio falling + 1 mark for reference to household debt rising) and 2 for analysis.
(6)
GCE Economics 8121-9121 0906 77
Answer
Mark
lower savings rate and/or increased debt implies increased consumer expenditure which implies increased imports UK has a high marginal propensity to import continuous economic growth; rising real incomes leading to higher imports Other explanations include: value of pound has been high until 2007 industrialisation of China and cheap imports from this low wage economy UK has relatively low productivity. Therefore, its goods are not so price competitive foreign goods more competitive in non-price terms. 2 marks for identification; 2 for application (1 data ref. to B/P; 1 for relationship) and 3 for analysis and 3 for any evaluative comment (or 2+1). Candidates may take either viewpoint, ie their answers might be based on factors other than declining saving ratio and increasing debt as the main reasons for the rising current account deficit. As long as this is evaluated, then this approach is acceptable. Evaluative comments could include: Identification of most significant factor, with justification. Consideration of the other explanations listed above.
(10)
GCE Economics 8121-9121 0906 78
Answer
Mark
A wide range of responses may be expected but candidates could consider: implications for employment which has been increasing steadily until 2008 but much employment part-time implications for inflation with lower savings and higher debts a consumer boom could cause inflationary pressures but downward price pressures because of Chindia effect; slow growth of wages associated with net migration asset price bubbles possibly leading to financial crisis certainly true for the housing market e.g. buyto-let but less so for share prices shortage of funds for investment but not a problem because of FDI and access to global credit markets improvement in public finances. 2 marks for identification; 1 for application (UK context); 4 for analysis and 3 for any evaluative comment (or 2+1).
(10)
GCE Economics 8121-9121 0906 79
Answer
Mark
Possible effects include: fall in exports to US, leading to worsening of current account significant because about 17% of UKs exports go to US; but UK may be able to increase exports to emerging economies which are still growing strongly rising unemployment slowdown in economic growth or recession again, this may not happen if growth in emerging markets continues to be rapid credit crunch has not only affected US but also UK housing market (Northern Rock; LIBOR). Less availability of loans implies less spending but consumers could use savings to maintain current living standards fall in retail sales; lower profits made by firms. Evaluation may also include: length of slowdown in the US magnitude of slowdown/recession in US. 2 marks for identification of factors (must be related to context); 1 mark for reference to US being a major trading partner of UK: 3 for analysis and 4 for any 2 evaluative comments (2 + 2; 3 + (10) 1).
Question Number 4(e)(i)
Answer
Mark (2)
When public expenditure is greater than tax revenue.
GCE Economics 8121-9121 0906 80
Question Number 4(e)(ii)
Answer
Mark
Definition or implicit understanding of fiscal stimulus: for example tax rebates, higher government expenditure (1 mark). Case for: ineffectiveness of monetary policy in current financial crisis provides a means of helping consumers to increase spending use of passage with regard to US: employment is falling, consumers spending is growing very slowly and credit conditions are tightening to avoid danger of deep recession use of AD/AS analysis and multiplier to demonstrate impact. Case against: (evaluation) danger of inflation increased government borrowing crowding out fine tuning has failed in past led to stagflation automatic stabilisers are already in place in many countries so not necessary tax rebates may simply be used to repay debts or saved. 1 mark for identification; 6 for application and analysis and 5 for any 2 or 3 evaluative comments (3 + 2; 2 + 2 + 1). Maximum 10/12 if not related to UK or US.
(12)
GCE Economics 8121-9121 0906 81
Answer
Mark
Fixed exchange rate: one which has a set value against another currency.
Answer
(2) Mark
Meaning of devaluation/depreciation. Analysis: impact on export prices and import prices. Effect on demand for imports and exports. Effect on balance of payments. Evaluation: Time lags: J curve effect; reference to extract for application marks. Significance of PEDs: Marshall-Lerner condition. Significance of PES of exports. 2 marks for definition; 2 for application (ie reference to devaluation of from $2.80 to $2.40 OR effect on current account) and 3 for analysis and 3 for any evaluative comment (or 2 + 1).
(10) Mark
Answer
Effects include: inflation: increased cost of imported raw materials and manufactured goods higher investment resulting from increased domestic demand and exports, or increased uncertainty could cause a fall in investment higher employment resulting from increased aggregate demand positive impact on tourism. 2 marks for identification; 4 for application and analysis. If no specific reference to UK then maximum 5/6.
(6)
GCE Economics 8121-9121 0906 82
Question Number 5(d)(i)
Answer
Mark
Factors could include: high value of pound rising real incomes cheap air flights/more package deals to exotic destinations ageing population baby boomer cruisers cost of holiday accommodation in UK/fashion. Evaluation: Short run/long term trend? Significance of rising real incomes income elastic demand. Prioritisation. 2 marks for identification; 2 for application (1 mark for noting general trend; 2 marks if figures are used) and 2 for analysis and 4 for any 2 evaluative comments (2 + 2 or 3 + 1).
(10) Mark
Question Number 5(d)(ii)
Answer
Factors include: 2012 Olympics butOlympics might actually deter some potential visitors to London in 2012 promotion of UK as tourist destination butcosts involved might be considerable how will this be financed? improvements in hotel accommodation buthotels have reputation for being relatively expensive compared with e.g. France fall in value of pound butthis could raise costs e.g. food increased cost of air travel butbudget airlines are still likely to offer attractive prices recession in UK butevidence that people are unwilling to cut back on holidays they are more likely to reduce expenditure on consumer durables. 2 marks for identification; 4 for application and analysis but only 3/4 if not related to UK. 4 for any 2 evaluative comments (2 + 2; 3 + 1).
(10)
GCE Economics 8121-9121 0906 83
Answer
Mark
Cause for concern: Could reflect serious overvaluation of currency Might indicate fall in competitiveness of UK goods Could cause a rise in unemployment May lead to fall in foreign currency reserves Could lead to fall in value of currency Not a cause for concern: If financed by inflows into financial account Adjustment easy under a system of floating exchange rates If imbalance caused by imports of capital goods If imbalance is temporary in nature 1 mark for definition or implicit understanding of current account deficit; 6 for application and analysis and 5 for any 2 or 3 evaluative comments (3 + 2 or 2 + 2 + 1) For maximum marks at least 2 issues should be discussed and evaluated. Candidates may take either viewpoint, ie they could argue that it is or is not a cause for concern. As long as the approach is evaluated, full marks could be obtained.
(12)
GCE Economics 8121-9121 0906 84
General Guidelines What follows is an attempt to identify different levels of responses across different mark bands. The performance criteria are based on the five assessment objectives for the paper as a whole. They are intended to be used in conjunction with the mark scheme and indicative content for each question. Mark band 40 60 Performance criteria Displays a wide range of knowledge of economic principles, concepts and theories together with a rigorous analysis of issues. Demonstrates skill in interpreting different types of data and an outstanding ability to select and apply economics ideas both to economic problems and to data. Evaluation is well balanced and critical, leading to valid conclusions. Material is presented in a relevant, clear and coherent way with evidence fully and reliably integrated. At this level excellence is displayed across all assessment objectives. Displays a very good answer based in knowledge of economic principles, concepts and theories together with an analysis of the issues involved. Demonstrates skill in interpreting data, and an ability to select and apply economic ideas, relating them both to economics problems and to data. Alternative approaches are evaluated, leading to reasoned conclusions which are presented in a relevant, coherent and integrated way. Displays a basic knowledge with a sound understanding of economic principles, concepts and theories as well as some analysis issues. Can interpret data and select and apply some economic ideas, relating them to economic problems and to data. Employs different approaches to reach conclusions, presenting evidence with some relevance and coherence. Displays some knowledge of economic principles, concepts and theories with an attempt at providing an analysis of alternative views. Some ability to use data and select and apply economic ideas, relating them to economic problems and data. Employs different approaches to reach conclusions, presenting evidence with some relevance and coherence. Displays elementary knowledge of well learnt economic facts and a generalised understanding together with limited analysis. A limited ability to use data and to select and apply different economics ideas in order to provide some relevant opinion. Evidence is presented which has a basic relevance. Displays knowledge presented as facts without any awareness of other viewpoints. Demonstrates limited understanding with little or no analysis. Attempts at selecting, applying, evaluating and presenting material are irrelevant and unclear. None of the assessment objectives are covered satisfactorily.
Level 5*
32-40
48-60
Level 5
28-31
42-47
Level 4
24-27
36-41
Level 3
20-23
30-35
Level 2
16-19
24-29
Level 1
0-15
0-23
GCE Economics 8121-9121 0906 85
Further copies of this publication are available from Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4FN Telephone 01623 467467 Fax 01623 450481 Email publications@linneydirect.com Order Code UA021260 Summer 2009 For more information on Edexcel qualifications, please visit www.edexcel.com/quals Edexcel Limited. Registered in England and Wales no.4496750 Registered Office: One90 High Holborn, London, WC1V 7BH

Economics June 2009 MS

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Economics June 2009 MS

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Mark Scheme Summer 2009

GCE Economics (8121/9121)

GCE Economics 8121-9121 0906 3

General Marking Guidance

GCE Economics 8121-9121 0906 4

(4) Mark (1)

GCE Economics 8121-9121 0906 5

(4) Mark (1)

GCE Economics 8121-9121 0906 6

(4) Mark (1)

(4) Mark (1)

GCE Economics 8121-9121 0906 7

Question Number 9(a)

GCE Economics 8121-9121 0906 8

Question Number 9(c)

Question Number 9(d)

GCE Economics 8121-9121 0906 9

Question Number 10(a)

GCE Economics 8121-9121 0906 10

Question Number 10(c)

Question Number 10(d)

GCE Economics 8121-9121 0906 11

GCE Economics 8121-9121 0906 12

Question Number 1(a)(ii)

GCE Economics 8121-9121 0906 13

GCE Economics 8121-9121 0906 14

Question Number 1(d)

Question Number 1(e)

GCE Economics 8121-9121 0906 15

Question Number 2(a)

GCE Economics 8121-9121 0906 16

Question Number 2(a)(ii)

Question Number 2(b)(i)

Question Number 2(b)(ii)

GCE Economics 8121-9121 0906 17

Question Answer Number 2(c)

GCE Economics 8121-9121 0906 18

Question Number 2(d)

GCE Economics 8121-9121 0906 19

GCE Economics 8121-9121 0906 20

(1 mark) for reference to data.

GCE Economics 8121-9121 0906 21

Question Number 1(a)(ii)

Question Number 1(b)(i)

Question Number 1(b) (ii)

GCE Economics 8121-9121 0906 22

Question Number 1(b)(iii)

Question Number 1(c)(i)

GCE Economics 8121-9121 0906 23

Question Number 1(c)(ii)

GCE Economics 8121-9121 0906 24

Question Number 1(d)

GCE Economics 8121-9121 0906 25

Question Number 2(a)(i)

Question Number 2(a)(ii)

Question Number 2(a)(iii)

Question Number 2(b)(i)

GCE Economics 8121-9121 0906 26

Question Number 2(b)(ii)

GCE Economics 8121-9121 0906 27

Question Number 2(b)(iii)

Question Number 2(c)

GCE Economics 8121-9121 0906 28