Economics 0455/23 October/November 2021: question paper and mark scheme

Mark scheme

1(a) Calculate the number of obese people in the UK in 2016. 1 Accept 18 million. 18.2 million/18 200 000/18.2 × 106 1(b) Identify two reasons why the demand for vegan food has 2 One mark each for each of two reasons. increased in the UK. Two from: • (concerns about) health • (concerns about) obesity • (compassion for) animal welfare • rise in income/getting richer/higher standard of living • advertising of vegan products • less consumption of meat 1(c) Explain one external benefit that may arise from eating 2 One mark for the external benefit identified and one mark less meat. for the explanation. Healthy/less obese people (1) are more productive/higher output/live longer/government can spend more on education and raise skills (1). Improved environment/air/water quality (1) less greenhouse gases/pollution/people sick (1). 1(d) Explain how food consumption in Senegal differed from 4 Accept a response from the viewpoint of the US e.g. US the US in 2015. citizens ate more meat. Senegalese citizens consumed fewer calories (1) consumed less than the recommended amount/US consumed more than the recommended amount (1). Senegalese may have suffered malnourishment (1) US may have suffered from obesity (1). Senegalese had a healthier diet (1) e.g. more fruit and vegetables (1). A higher proportion of the Senegalese diet consisted of cereals/grains (1) because it was cheap (1). Senegalese citizens consumed less meat (1) because it was expensive/low incomes (1). Senegalese citizens consumed less sugar and/or sweeteners (1). Senegalese consumed a higher proportion of fruit and/or vegetables (1). Senegalese consumed less added fats and/or oils (1). 1(e) Analyse how an increase in labour mobility could 4 improve the performance of a country’s trade in goods. Coherent analysis which might include: Labour markets will become more efficient (1) workers become more skilled (1) workers will move more easily between industries/become more occupationally mobile/respond quickly to changes in demand (1). Workers can move more easily from one place to another/become more geographically mobile (1). If demand for a product rises (1) it will be easier to recruit new workers/fill vacancies (1) more can be produced/supplied (1) less need for imports (1) import expenditure could fall (1) more can be exported (1) export revenue could rise (1). 1(f) Analyse how an increase in meat consumption could 5 benefit African economies. Coherent analysis which might include: May reduce malnutrition/make people healthier (1) make workers more productive/efficient (1) improve quantity/quality of output (1) lower costs of production (1) more competitive internationally (1) exports increase/imports reduce (1) economic growth (1). Increase demand for vets and transport firms (1) increase number of meat processing firms (1) greater investment by firms (1) will increase output (1) raise employment (1) raise incomes/standard of living (1). Reduces government spending on health care (1) can spend more on education/unemployment benefits/infrastructure increasing skill levels/productivity (1). 1(g) Discuss whether or not an increase in Senegalese 6 Apply this example to all questions with the command government spending will stop the country experiencing word DISCUSS a recession. (1g, 1h, 2d, 3d, 4d and 5d) Award 1 mark for explanation of recession. Each point may be credited only once, on either side of an argument, but separate development as to how/why the Award up to 4 marks for logical reasons for why it might, outcome may differ is rewarded. which might include: Generic example Mar • Government spending part of total (aggregate) demand k (1) may increase total (aggregate) demand (1) may offset fall in consumer expenditure (1) this may encourage Tax revenue may decrease 1 firms to produce more/attract new firms to set up (1) employ more staff/lower (cyclical) unemployment (1) earn because of reason e.g. incomes may be 1 more income (1) purchase more goods and services (1). lower. • Government spending on Tax revenue may increase because 0 education/training/healthcare infrastructure (1) improves incomes may be higher i.e. reverse of a productivity (1) make products more internationally previous argument. competitive (1) increasing total (aggregate) demand (1) raising output (1). Tax revenue may increase because of a 1 different reason i.e. not the reverse of a • Government subsidies (1) will lower costs of production previous argument e.g. government (1) encouraging firms to produce more (1). spending on subsidies may stimulate the economy more than spending on education. Award up to 4 marks for logical reasons for why it might not, which might include: • May not be great enough to offset fall in investment (1) business confidence may be low (1). firms may not increase output after being given government subsidies (1) 1(g) • Consumer expenditure may fall (1) investment may not rise (1) exports may fall (1) • if consumer confidence is low (1). • May be global recession (1) exports may fall (1). • If taxes are raised to pay for the increase in government spending (1) government borrows (1) effect on total (aggregate) demand may be small (1). Higher spending on education/health/infrastructure may not result in increased workforce/greater productivity (1). 1(h) Discuss whether or not emigration would reduce poverty 6 in Senegal. Award up to 4 marks for logical reasons for why it might, which might include: • Workers’ remittances may increase/emigrants may send money home to Senegal (1) working abroad may enable them to provide more financial support for their families (1) than working at home (1) if wages are higher abroad (1) • Unemployment may fall (1) if potential emigrants could not gain work at home (1) • Increase ability of people to gain skills/work experience (1) increasing their ability to earn more (1) can share those skills with workers when they return to Senegal (1) • Emigration may move the country towards the optimum population (1) if the country lacks resources (1) this could increase income per head (1) increasing ability to purchase basic necessities (1) Award up to 4 marks for logical reasons for why it might not, which might include: • Skilled workers may leave the country (1) reducing output (1) discouraging MNCs (1) reducing jobs (1) reducing income (1) • There will be fewer people to pay taxes (1) lower tax revenue available to spend to reduce poverty (1) e.g. on education (1) • May be more dependents on the government (1) if parents leave children and elderly relatives behind (1) • Fewer workers in the population (1) will make it harder to finance state pensions (1) may reduce income of pensioners (1)

Mark scheme

2(a) Identify two reasons why a country may have more 2 women than men in its population. Two from: • women living longer • more girls being born • fewer female emigrants or male immigrants • more female immigrants or male emigrants • more men killed in wars 2(b) Explain two advantages of raising the retirement age. 4 One mark each for each of two advantages identified and one mark each for each of two explanations. Logical explanation which might include: Reduction in pensions paid (1) money could be spent for other purposes e.g. infrastructure (1). Increase in size of the labour force/(1) increase in output/productive potential/GDP/reduction in firms’ wage costs (1). Reduction in size of dependency ratio (1) less burden on working population (1). Rise in tax revenue/improve budget position (1) government can spend more on e.g. public sector wages (1). May increase health of the old (1) work may be mentally challenging (1). People can work longer (1) and earn more income/enjoy higher living standards (1). Older people have greater skills/more years of training (1) can raise productivity/pass on skills to younger workers (1). 2(c) Analyse how the price mechanism answers the three key 6 resource allocation questions. Coherent analysis which might include: Definition of price mechanism e.g. where forces of demand and supply determine the prices of goods and services (1) in a market economy (1). What to produce (1) the price mechanism acts a signal/the price mechanism acts as an incentive on what to produce (1) rations goods and services (1) price will rise for products in higher demand (1) encouraging more to be made (1). How to produce (1) e.g. more labour-intensive/more capital- intensive methods of production will be used (1) if wages fall/if cost of capital goods fall (1). Who to produce for (1) those whose services are most in demand will have the highest income (1) will be able to buy the most (1) 2(d) Discuss whether or not indirect taxation can reduce 8 market failure. Level Description Marks In assessing each answer, use the table opposite. 3 A reasoned discussion which 6–8 accurately examines both sides of Why it might: the economic argument, making use of economic information and • demerit goods are overconsumed and cause external clear and logical analysis to costs evaluate economic issues and • demerit goods and other products causing external costs situations. One side of the can be taxed argument may have more depth • indirect taxation on demerit goods can discourage their than the other, but overall, both consumption sides of the argument are • merit goods are under-consumed and create external considered and developed. There benefits is thoughtful evaluation of • indirect tax revenue can be used to subsidise or produce economic concepts, terminology, merit goods information and/or data appropriate • public goods would not be produced by the private sector to the question. The discussion as they have the characteristics of non-rival and non- may also point out the possible excludable uncertainties of alternative • indirect tax revenue can be used to finance the decisions and outcomes. production of public goods 2 A reasoned discussion which 3–5 Why it might not: makes use of economic information and clear analysis to evaluate • difficult to measure external costs economic issues and situations. The answer may lack some depth • demerit goods may be overtaxed, changing from being and development may be one- overconsumed to being under-consumed sided. There is relevant use of • demand for some demerit goods is price inelastic economic concepts, terminology, • indirect taxes may fall more heavily on the poor information and data appropriate to • demand may just shift to imports if other countries do not the question. impose indirect tax or have lower tax rates • tax revenue may not be used to promote the consumption of merit and public goods 2(d) Level Description Marks 1 There is a simple attempt at u sing 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

Mark scheme

3(a) Identify two ways unemployment is measured. 2 • claimant count/claiming benefits • labour force survey/ILO measure/without a job and seeking work • formula for the unemployment rate/number of unemployed divided by labour force × 100/through the unemployment rate • total labour force minus those currently employed 3(b) Explain two ways an increase in wages can cause 4 One mark each for each of two ways identified and one inflation. mark each for each of two explanations. Logical explanation which might include: Allow 1 mark if refer to prices rise but no mention of Increase in wages may increase total (aggregate) demand-pull or cost-push inflation demand/consumption (1) causing demand-pull inflation (1). Increase in wages may increase costs of production (1) causing cost-push inflation (1). 3(c) Analyse, using a production possibility curve (PPC), the 6 opportunity cost to an economy of producing more consumer goods. Up to 4 marks for the diagram: Axes correctly labelled with capital/consumer goods (1). Curve drawn as a curve/line sloping downward to the axes (1). Movement along the curve/along the axes (1). Reduction in capital goods/increase in consumer goods shown by numbers or letters or arrows (1). Up to 2 marks for coherent analysis which might include: Opportunity cost is the (next) best alternative forgone (1) resources used to produce consumer goods cannot be used to produce capital goods (1). Producing more consumer goods now may mean fewer consumer goods in the future (1) as there may be fewer capital goods to make them (1). 3(d) Discuss whether or not an increase in foreign MNCs will 8 For level 3, an answer must look at both sides of reduce a deficit on the current account of the balance of whether a deficit on the current account would be payments of a host country. reduced. In assessing each answer, use the table opposite. Level Description Marks Why it might: 3 A reasoned discussion which 6–8 accurately examines both sides of • MNCs tend to export a relatively high proportion of their the economic argument, making output use of economic information and • may produce at a low cost of production/be efficient clear and logical analysis to • may be internationally competitive evaluate economic issues and • may produce products that were previously imported situations. One side of the • may bring in new technology argument may have more depth than the other, but overall, both Why it might not: sides of the argument are considered and developed. There • may buy raw materials and capital goods from their home is thoughtful evaluation of countries economic concepts, terminology, • MNC may send profits back to home country information and/or data appropriate • workers/managers may send remittances back to home to the question. The discussion country may also point out the possible • may eliminate firms in the host country that had a good uncertainties of alternative export record decisions and outcomes. • may deplete non-renewable resources reducing the 2 A reasoned discussion which 3–5 ability to export in the long run makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

Mark scheme

4(a) Identify two benefits of free trade. 2 Two from: • higher output/growth • higher income/living standards • more employment/more jobs • more choice/access to other markets • lower price • greater ability to take advantage of economies of scale/greater efficiency/specialisation • drives competition • better quality goods • stronger global co-operation 4(b) Explain two differences between a floating foreign 4 One mark each for each of two differences identified and exchange rate and a fixed foreign exchange rate. one mark each for each of two explanations. Logical explanation which might include: A floating exchange rate is determined by market forces (1) a fixed exchange rate is set by the government/central bank (1). A floating exchange rate can change on a day-to-day basis (1) whereas a fixed exchange does not often change in value (1). A rise in the value of floating exchange rate is an appreciation / a fall in the value of a floating exchange rate is a depreciation (1) a rise in the value of a fixed exchange rate is a revaluation/a fall in value of a fixed exchange rate is a devaluation (1). A floating exchange rate does not require a central bank to buy and sell the currency (1) a fixed exchange rate needs reserves of foreign currency to maintain it (1). 4(c) Analyse how a change in the pattern of employment in a 6 Allow up to 3 marks for why wages may change due to country may change its average wage. changes in demand and supply with reference to a particular industry. Coherent analysis which might include: Note: answers must address a change in pattern of A higher proportion of skilled workers (1) due to better employment education/training (1) will raise the average wage/skilled workers tend to be highly paid (1). An increase in proportion of workers in the tertiary sector/smaller proportion of workers in the primary sector (1) example of industry/as economy develops there tends to be more workers in the tertiary sector/fewer in the primary sector (1) will tend to increase the average wage (1). A greater proportion of women workers (1) change in social attitudes/anti-discrimination legislation (1) may increase the average wage (1). A higher proportion of workers in the public sector (1) may be better training / may be more fringe benefits/may be more job security (1) may increase/reduce the average wage (1). A larger proportion of workers in the formal economy (1) more likely to be represented by a trade union/will have legal rights (1) may increase the average wage. Age (1) older workers may be more experienced/in promoted posts (1) may be better paid (1). 4(d) Discuss whether or not a government should stop firms 8 merging. Level Description Marks In assessing each answer, use the table opposite. 3 A reasoned discussion which 6–8 accurately examines both sides of Why it should: the economic argument, making use of economic information and • will have greater market share clear and logical analysis to • may abuse greater market power evaluate economic issues and • may become complacent situations. One side of the • consumers may experience higher prices and lower argument may have more depth quality than the other, but overall, both • may engage in rationalisation sides of the argument are • may increase unemployment considered and developed. There • may experience diseconomies of scale is thoughtful evaluation of economic concepts, terminology, Why it should not: information and/or data appropriate to the question. The discussion • may innovate more may also point out the possible • may provide consumers with lower prices and higher uncertainties of alternative quality decisions and outcomes. • may be more international competitive 2 A reasoned discussion which 3–5 • may improve current account position makes use of economic information • may increase economic growth and clear analysis to evaluate • may experience economies of scale economic issues and situations. The answer may lack some depth and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 4(d) Level Description Marks 1 There is a simple attempt at u sing 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

Mark scheme

5(a) Define division of labour. 2 Workers specialising (1) in particular tasks / repeating the same task (1). Breaking down production into different / separate tasks (1) using different workers for the different tasks (1). 5(b) Explain two reasons why a loss-making firm may 4 One mark each for each of two reasons identified and one continue to produce. mark each for each of two explanations. Logical explanation which might include: Reward but do not expect reference to predatory pricing. May not expect the loss to last (1) may think demand will rise/costs will fall in the future (1). May be subsidised by the government (1) to e.g. promote social welfare/encourage consumption of merit goods/increase exports/respond to dumping by other countries (1). May lower prices to drive out competitors/increase market share (1) raising price when successful (1). May accept losses in short-term (1) in order to expand in long-term (1) May have high retained profits (1) to allow for downturns in demand/cover the losses (1). May be a new firm (1) in the process of growth/trying to survive (1). A firm’s main objective may not be profit maximisation (1) e.g. growing market share/charity/provides public goods (1). 5(c) Analyse the advantages that consumers may gain from a 6 competitive market. Coherent analysis which might include: Wide choice of producers (1) producing a similar product (1). Efficiency (1) better quality (1) greater choice of products (1) firms may innovate (1) as firms try to gain a larger share of the market (1). Lower price (1) as firms try to beat competition (1) increasing consumers’ purchasing power/standard of living (1). Raise consumer sovereignty (1) firms may respond quickly to changes in consumer demand (1). 5(d) Discuss whether or not an increase in a country’s 8 manufacturing output will increase its economic Level Description Marks development. 3 A reasoned discussion which 6–8 accurately examines both sides of In assessing each answer, use the table opposite. the economic argument, making use of economic information and Why it might: clear and logical analysis to evaluate economic issues and • increase products available for households situations. One side of the • increase capital goods enabling greater capacity argument may have more depth • may raise incomes/profits than the other, but overall, both • create employment sides of the argument are • may promote growth of the other two sectors – greater considered and developed. There demand for raw materials and greater demand for is thoughtful evaluation of services e.g. insurance economic concepts, terminology, • may mean firms are getting larger – economies of scale, information and/or data appropriate reduced average costs, increased exports to the question. The discussion • likely to have a higher value added than primary sector may also point out the possible • greater stability in income than primary sector uncertainties of alternative decisions and outcomes. Why it might not: 2 A reasoned discussion which 3–5 • may create pollution/reduce open spaces makes use of economic information • jobs may have poor working conditions and clear analysis to evaluate • employment may not rise if capital-intensive methods are economic issues and situations. used The answer may lack some depth • opportunity cost/less resources used in primary and/or and development may be one- tertiary sectors sided. There is relevant use of • wages may be lower than tertiary sector economic concepts, terminology, • may reduce natural resources available for future information and data appropriate to the question. • goods produced may be of poor quality/inefficiently produced/uncompetitive 5(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.