Marking Scheme-Economics

Grade 10-Paper 2
Section A
a) 7% (1)

b) One mark each for any two from: • tariff • quota (2)

c) It has a private sector / private sector firms (1) and a public sector / public sector
firms /government intervention (1).

d) External costs are not considered (1) base decisions just on private costs and benefits
(1). They cause harmful effects to third parties / negative side effects (1) they result in
overconsumption (1) and overproduction (1). Their existence may mean that social costs
exceed social benefits (1). Examples of causes or costs: e.g. driving, pollution /
environmental damage, burning fields and mining (up to 2). They result in a
misallocation of resources / inefficient use of resources (1)

e) Axes correctly labelled – price and quantity or P and Q (1). Demand and supply curves
correctly labelled (1). Supply curve shifted to the right (1). Equilibriums – shown by lines
P1, P2 / Q1, Q2: or marking the equilibrium points E1 and E2 (1)

f) Generally, the countries with the relatively smallest primary sectors have the highest
GDP per head / inverse relationship (1). Evidence e.g. US has only 1% of output
accounted for by the primary sector and the highest GDP per head (1) another piece of
supporting evidence e.g. the two countries with the largest primary sectors have the
lowest GDP per head (1). Exception is India/Philippines (1) India has a smaller relative
sized primary sector but a lower GDP per head (1). This is the expected relationship as
primary sector tends to decline as an economy develops / often larger in developing
economies / resources move into secondary and then tertiary sectors (1) tertiary sector
tends to generate higher incomes / primary sector tends to generate lower incomes (1).

g) Award up to 4 marks for logical reasons why it might, which may include: • subsidies
reduce costs (1) increase supply (1) lower prices (1) raise quality of bus travel (1) and
cause demand to extend / higher demand (1) • people using buses will reduce the
 volume of traffic/reduce congestion (1) • buses use cleaner fuel (1). Award up to 4
marks for logical reasons why it might not, which may include: • people may not switch
from car to bus travel (1) price of cars may fall (1) cost of producing cars is declining (1)
other reason why e.g. more comfortable / door to door (1). • providers of bus transport
may not pass on much of the subsidies in the form of lower prices (1) • opportunity cost
of using subsidies (1) could spend money on other ways to reduce pollution e.g.
education (1) • economy is growing so incomes rising (1) both bus and car travel may
increase (1).

h) Award up to 4 marks for logical reasons why it might, which may include: • there was a
deficit in 2016 and 2017 (1) and it was on an upward trend (1) • incomes are rising /
economic growth is occurring (1) and so more imports may be purchased both by
consumers and by firms (1) • it is expected that the exchange rate will rise (1) this may
increase the price of exports (1) and demand for exports may fall (1) price of imports
may fall (1) so demand for imports may rise (1) • Indian trade restrictions may be
reduced / Indian government promoting free trade (1) which may increase imports (1). •
tax rates may be cut (1) with more disposable income (1) people may buy more imports
(1). Award up to 4 marks for logical reasons why it might not, which may include: •
there may be more foreign tourists (1) if pollution declines (1) • lower tariff on imported
raw materials / imported capital goods (1) may reduce costs of production (1). • other
countries may remove their trade restrictions (1) allowing India’s exports to rise (1) • if
the government does spend more on education (1) productivity may rise (1) and India’s
products may become more price and quality competitive (1). • MNCs may be attracted
for a number of the reasons given (1) MNCs may produce exports / import substitutes
(1). • Higher investment (1) may raise quality of exports / domestic products (1) lower
price of exports (1). • Car production is rising (1) more cars may be exported / fewer
cars may be imported (1).
Section B
Q1.
a) Availability of substitutes (1) Availability of complements (1) Proportion of income (1)
Whether the product is a luxury or a necessity / essential (1) Whether it is addictive (1)
Whether the purchase can be postponed (1) Impact of advertising / brand loyalty (1).

b) To gain market power or share / monopoly power / become larger (1) by eliminating a
competitor / controlling more of the market (1) can increase prices as fewer
competitors (1). To reduce average costs of production (1) by being able to take greater
advantage of economies of scale (1) example of economy of scale (1) more competitive
internationally (1) may decrease prices / profits (1)

c)

Up to 2 marks for written analysis which might include: An increase in population will
mean there are more people to buy / demand toothpaste (1). Price will rise / quantity
traded will increase (1)

d) Why it might: • increase in demand may cause supply to extend • may encourage more
people to train to be dentists • higher pay may increase the standard of living of dentists
• may persuade current dentists not to leave the occupation / delay retirement. • may
cause increased inward migration of qualified dentists
Why it might not: • decrease in supply may cause demand to contract long period of
training may discourage people • people may lack qualifications / skills • people may
not find the job enjoyable • people may think the job will be too physically demanding
e.g. backache • wages may rise more in other occupations • may increase costs for
dental firms employing dentists / consumers reducing demand for dentists
Q2
a) Workers without jobs (1) Unemployment due to a change in the structure of the
economy / change in demand and supply conditions / decline of some industries (2)
lack of the appropriate skills (1) lack of labour mobility (1).

b) Poor education and training (1) leading to lack of skills / qualifications (1). Poor
technology (1) slower or less output per capital / labour input (1). Poor management
(1) waste of resources (1). Lack of investment (1) capital older/slower/out-of-date
(1). Emigration of skilled workers (1) output of unskilled workers who are left is
lower (1). Poor working conditions (1) making it difficult for workers to do their jobs
efficiently (1). Low pay (1) which may demotivate workers (1). Long working hours
(1) making workers tired (1).

c) Higher spending on e.g. unemployment benefits / education / infrastructure /

healthcare (1) could lead to higher demand for goods and services (1) increased
demand for goods and services leads to higher revenues/profits for firms (1)
increased investments (1) increasing output (1) increased demand for workers to
produce the output (1). Tax cuts such as income tax cuts (1) increased disposable
income (1) increase consumer expenditure (1) increased demand for goods and
services (1) higher revenues/profits for firms (1) increased investments (1) increasing
output (1). Tax cuts such as corporation tax cuts (1) increased after tax profits (1)
increased investments (1) increasing output (1). Tax cuts such as indirect tax cuts (1)
decrease cost of production (1) increased supply / output (1)

d) Why it might be a disadvantage • more competition between firms means firms try
to be more efficient, which could lead to lower job opportunities / greater instability
of employment • there may be greater use of short-term employment contracts •
more competition between firms could push down the wages of the workers. •
more competition between firms could lead to workers being exploited e.g.
overtime work, worse working conditions.

Why it might be an advantage • more competition between firms would lead to

firms training workers to be more productive • increased productivity leads to
higher wages • increased productivity could lead to more investments – leading to
more demand for workers • more competition between firms could lead to lower
prices, which benefits workers who are also consumers • lower prices could lead to
more demand, which increases the demand for workers as well • greater efficiency
could result in higher revenue some of which may be spent improving working
conditions • more competition between firms could lead to them raising wages
and / or improving working conditions to attract the best workers • more
competition between firms gives more opportunities for workers to switch jobs.

Q3
a) Increase choices, more competition, lower prices, more specialization
b) To be able to fund government spending (1) types of government spending (1) to
improve standards of living (1). To be able to control inflation (1) fiscal policy (1)
reducing total demand (1). To reduce inequality (1) tax the rich and help the
poor (1). To discourage the consumption of demerit good (1), to improve
allocation of resources / reduce external cost (1) to change external costs to
private costs (1) e.g. reduce pollution (1). To reduce imports (1) to protect home
producers (1).
c)

Up to 2 marks for coherent analysis which might include: Higher labour productivity
will increase output per worker (1) increase productive capacity (1)

d) Why they might: • bring in more investment • increase total demand and
economic growth • provide more employment opportunities • bring in more
foreign capital and more advanced machinery.
Why they might not: • MNCs might exploit local workers, pay low wages /
provide low quality working environments • most profits of MNCs not reinvested
back into the domestic economy but brought back to home country • big MNCs
may meddle with domestic policy making
Q4
a) A fall in the value/price of a currency/exchange rate (1) against another currency/caused by
market forces/demand and supply (1).

b) Exports may lack substitutes/a country may have a monopoly in the product (1) people/firms
may find it difficult to switch easily to products from home country or other countries (1).
Exports may be of addictive products (1) so a rise in price will not discourage people from
buying the product (1). Exports may be low-priced products which take up only a small part of
income (1) so a price change will not have a significant impact on the amount people buy (1).
Exports may be necessities (1) and so people may continue to buy them in almost the same
quantities should their price rise (1)

c)The removal of import tariffs would reduce the price of imports (1) enable firms to buy better
quality products (1). A lower price of imported raw materials (1) would reduce the cost of
production (1) this may lower price of finished products (1) increasing demand (1) stimulating
firms to produce a higher output (1). A lower price of imports may put pressure on domestic
firms to be more competitive (1) this may encourage them to be more efficient (1) raising
quality (1) lowering price (1) increasing sales (1) stimulating firms to produce a higher output
(1). May attract MNCs into the country (1) as it is a move towards free trade (1). May encourage
other countries to remove tariffs (1) increase global output/allow firms to specialise (1)

d)Up to 5 marks for why it might: Net emigration of workers (1) may result in money
(remittances) being set home (1) such remittances may increase the income of their families (1)
allowing them to buy basic necessities (1). Net emigration may result in ideas being set home
(1) workers may later return with better skills (1) raising the country’s output (1) increasing
employment (1). Wages may be raised (1) to retain workers (1). If a country is overpopulated
(1) net emigration may enable there to be better use of resources (1). Net emigration of older
people (1) may reduce dependency (1) lower cost of pensions (1) lower healthcare costs (1).
Net emigration of unemployed/low-paid workers may reduce the number living in poverty (1).
Up to 5 marks for why it might not: Net emigration of workers may reduce output (1) this could
lower tax revenue (1) reduce the revenue the government can spend on lowering
unemployment (1). Net emigration of skilled workers may discourage MNCs setting up in the
country (1) lowering potential output/income (1). Net emigration of workers may leave their
dependents relying on government benefits (1). If a country is underpopulated (1) net
emigration may mean there is worse use of resources (1)