Economics 9708/44 May/June 2025: question paper and mark scheme

Mark scheme

1(a) Identify what is included in the HDI. 3 Health/Life Expectancy 1 Education/Years of Schooling 1 Income/Gross National Income pc/GNI 1 1(b) The passage states that the RMG industry ‘uses significant division of 3 labour’ takes place. Explain how this is likely to affect the average costs of firms in Bangladesh’s RMG industry. Division of labour increasing labour productivity/Increased efficiency (1) Definition of division of labour e.g. cutting, sewing zips, (1), and hence reduces average total costs (1). 1(c) Identify the probable market structure of the RMG industry in 6 Bangladesh and with the help of a diagram, consider the likely effect on the level of long-run profits of firms in this industry. Identification of Monopolistic Competition 1 Diagram 3 marks: Labels and axes 1 Identification of MC=MR for profit maximisation 1 Average cost and revenue/marginal costs and revenue curves 1 Explanation of why Normal Profits 1 in long run equilibrium 1 If correct analysis but market mis-identified as monopolistically up to 5 1(d) With reference to the article, assess whether there is enough evidence 8 to conclude that living standards in Bangladesh have improved since 1971. Distinction between standard of living: monetary e.g. income and non- monetary e.g. health, education, water quality 1. Improvements Rise in GNI from 2342 US$ to 5823 US$ = 2481 1 US$ / 143 % increase 1 HDI rose 0.49 to 0.66 1 Agricultural production/productivity. increased 1, Balance of Trade improved 1 Net exports increased 1, wider range of goods and services imported 1 Maximum 3 marks Disadvantages Development of negative externalities 1 air/water pollution 1 use of child labour 1 bad working conditions 1 Loss of agricultural jobs 1 Poorly constructed factories 1 Maximum 3 marks Conclusion Not enough evidence in the article 1 No information on housing/education or health 1 EITHER

Mark scheme

2 With the help of a diagram, consider whether economic efficiency can 20 be achieved without government intervention in a market economy Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question. AO1 and AO2 out of 14 marks. AO3 out of 6 marks. Indicative content Responses may include: AO1 Knowledge and understanding and AO2 Analysis • Definition and demonstration of productive efficiency in terms of minimum AC and allocative efficiency MC=MR. • Candidates may approach the question from a number of points of view • Comparison of equilibrium in Perfect Competition with reference to definitions of efficiency. • Negative externalities (e.g. the effects of environmental pollution) causing the social cost of production to exceed the private cost or positive externalities (e.g. the provision of education and health care) causing the social benefit of consumption to exceed the private benefit • Imperfect information or information failure means that merit goods are under-produced while demerit goods are over-produced or over- consumed. • The lack of supply of pure public goods and quasi-public goods issue that are needed to meet people's needs and wants. • Market dominance by monopolies can lead to under-production and higher prices than would exist under conditions of competition and the effect on price and quantity produced and consumer welfare. • Factor immobility causes unemployment and a loss of productive efficiency. • Equity (fairness) issues. Markets can generate an 'unacceptable' distribution of income and consequent social exclusion which the government may choose to change. • A choice of government policy to address a market failure from: • specific and ad valorem indirect taxes, subsidies, price controls, production quotas, prohibitions and licences, regulation and deregulation, direct provision, pollution permits property rights, nationalisation and privatization, provision of information or behavioural insights and ‘nudge’ theory. No Diagram Max L2 8 2 AO3 Evaluation • Opportunity costs of the policy that has been chosen, what are the alternative uses of the resources and how does it affect efficiency. • Can the government accurately measure the extent of the market failure. • Unintended consequences on, regulator capture, cost of bureaucracy, political interference. • Evaluation may be based on an example cited by candidates. • Implications for the government budget increase in tax revenues/costs of subsidies. Accept all valid responses. AO1 Knowledge and understanding and AO2 Analysis 14 AO3 Evaluation 6 OR

Mark scheme

3 Evaluate whether the marginal revenue product theory (MRP) always 20 explains the differences in wages. Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question. AO1 and AO2 out of 14 marks. AO3 out of 6 marks. Indicative content Responses may include: AO1 Knowledge and understanding and AO2 Analysis • Definition and explanation of the MRP theory in terms of marginal physical product (MPP) and price equaling MRP which is the demand element in the demand and supply of labour. • Explanations of what may affect the MPP. • The effect of market structure on MRP. • Explanations of factors affecting the supply of labour, for example population size, age structure, fertility, working conditions, education/experience migration etc. • The combination of demand and supply factors to produce a wage rate. AO3 Evaluation • The theory is usually applied in a world of perfect competition which does not hold in real life. • How do employers know MRP when labour is often collaborative. • How to measure productivity e.g. health services/education? • Trade union intervention in labour markets. • Lack of market price for product e.g. health care outcomes • Government intervention in labour markets e.g. minimum wage, staffing ratios (in childcare). • Discussion of factors which account for differences which could include discrimination, market segmentation, capital equipment, monopsony. Accept all valid responses AO1 Knowledge and understanding and AO2 Analysis 14 AO3 Evaluation 6 EITHER

Mark scheme

4 A country with an open economy has falling demand for exports. 20 Consider the view that monetary policy alone will solve this problem. Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question. AO1 and AO2 out of 14 marks. AO3 out of 6 marks. Indicative content Responses may include: AO1 Knowledge and understanding and AO2 Analysis • A definition of an open economy in terms of its foreign trade sector in the aggregate demand equation. • The effects of the falling exports on the level of aggregate demand. • The candidate should show the intended effect of monetary policy on the demand for exports – A choice is made of reducing the exchange rate to boost exports through increasing external demand and the effect of this on aggregate demand. • Governments can directly devalue the exchange rate. • Government can indirectly reduce the exchange rate by increasing the money supply/decreasing interest rates. AO3 Evaluation • The elasticity of demand for exports and the short-run, long run implications. • An explanation of whether the aims can be achieved in the short run or long run. • Governments might use supply-side policies e.g. subsidies. • Comments on other aims of the government which may be affected and how they may be affected by the policy/policies suggested. • The government impact through directly reducing the rate of interest and the effects of this through the monetary transmission mechanism can be traced. • Comments on the negative impact on other government aims e.g. Inflation. Accept all valid responses AO1 Knowledge and understanding and AO2 Analysis 14 AO3 Evaluation 6 OR

Mark scheme

5 Evaluate how a country might increase its potential economic growth. 20 Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question. AO1 and AO2 out of 14 marks. AO3 out of 6 marks. Indicative content Responses may include: AO1 Knowledge and understanding and AO2 Analysis • Definition and explanation of what is meant by potential economic growth (PEG): LRAS/AD analysis or production possibility curves may be used to illustrate the PEG. • Identification of government LRAS macroeconomic policies. • Supply-side policies: privatisation, education and training, labour market infrastructure Investment in R&D, increased net migration, FDI/MNC and competition policies. • Candidates need to identify and analyse at least 2 of these policies to show how they will increase the long-run economic performance of the economy. AO3 Evaluation • Government spending might be constrained by how much the government might borrow without high interest rates/domestic/international lenders becoming reluctant to lend. • Monetary policy the government aim to promote long run growth may be compromised by a growth in borrowing and a rise in interest rates to. • Supply-side policies may be compromised by political constraints as the government may rely for example, on TU or industrial support. • Shortages of Factors of production: labour, raw material or resources. • Time lags • Shortage of government finance • Environmental impact. • Privatisation and exploitation of labour/monopoly inefficiencies. Accept all valid responses AO1 Knowledge and understanding and AO2 Analysis 14 AO3 Evaluation 6