Cambridge A Level Economics 9708 — 2007 May/June Paper 4 · Variant 1

This document consists of 3 printed pages and 1 blank page. IB07 06_9708_04/4RP © UCLES 2007 [Turn over *3637910825* UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level ECONOMICS 9708/04 Paper 4 Data Response and Essay (Supplement) May/June 2007 2 hours 15 minutes Additional Materials: Answer Booklet/Paper READ THESE INSTRUCTIONS FIRST If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet. Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Section A Answer Question 1. Section B Answer any two questions. You may answer with reference to your own economy or other economies that you have studied where relevant to the question. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question.

2 © UCLES 2007 9708/04/M/J/07 Section A Answer this question. 1 Employment in Turkey A large proportion of the work that women do in Turkey consists of traditional activities and is unpaid. Of those Turkish women who are in employment, 72% work in agriculture (compared with a world average of 49%). In total, Turkey’s agricultural sector still employs 48% of the workforce (compared with 17% in the US and 3.9% in France). In Turkey, the greatest social inequality between the sexes lies in the level of education. 26% of the women are illiterate, compared with 7.5% of the men. There is mass migration to cities, which offer more jobs and services, but the less educated women are not able to take up these opportunities. There are more non-industrial jobs than industrial jobs in the cities and as many as 66% of all lower-class urban families depend on non-industrial, unskilled work for their livelihood. Turkey continues to face economic challenges including a large informal economy, large income inequalities, a large inefficient government sector, and relatively high unemployment. Birth rates and death rates are declining. The age structure, in which there are many young people, will continue to cause difficulties in the labour market as young people become old enough to seek jobs. Since 1970 the population of Europe has multiplied by 1.2 but in Turkey it has multiplied by 2.5. Many Turkish people seek work in other countries where they think the job opportunities are better. Table 1 Economic data about Turkey % of GDP from agriculture 11.7 % of GDP from industrial sector 29.8 % of GDP from service sector 58.5 1999 2000 2001 2002 2003 % Unemployment rate 7.6 6.6 8.5 10.4 9.0 (a) Explain what is meant by GDP. [3] (b) From the information give two reasons why Turkey’s GDP is lower than it could be. [2] (c) Name three influences on the supply of labour. [3] (d) How might labour migration to the cities affect GDP? [4] (e) Discuss whether there is sufficient evidence in the extract to indicate that Turkey should be classified as a developing country. [8] % of population below poverty line 20 % of population living on under US $2 a day 18

3 © UCLES 2007 9708/04/M/J/07 Section B Answer two questions from this section. 2 (a) Explain what is meant by productive and allocative efficiency. [12] (b) The decision to privatise Kenya Railways and Uganda Railways has met with interest among international rail operators as it is thought that profits could be made and current commercial losses could be avoided. Discuss how the privatisation of an industry might affect efficiency in the allocation of resources. [13] 3 (a) Explain how the analysis of wage determination in perfect competition leads to an equilibrium. [12] (b) Discuss how governments and trade unions can affect the equilibrium in a labour market. [13] 4 Some people say they are better off living in a rural area, where there is less congestion and pollution. Others prefer cities for the employment and the variety of leisure activities available. If there are such differences of opinion of living standards in one country, is there ever any chance of accurately comparing living standards between countries? [25] 5 In 2004 the US Federal Budget deficit rose to a record $412 billion. (a) Budget deficits are affected by fiscal policy. Explain how multiplier analysis might be used to predict the effects of changes in fiscal policy. [12] (b) Discuss whether a budget deficit should necessarily be a source of concern. [13] 6 These statements come from the same journal article: World population has grown to 6.5 billion, with an increase of more than 4 billion since 1950. The number of people starving has increased in the last 10 years. 31.6% of the urban population live in slums and 42 countries face food emergencies. Urbanisation could be a solution to poverty, disease and malnutrition owing to economies of scale that arise. Source: Royal Society of Arts Journal, August 2005 (a) Explain whether the growth of population is likely to have been faster in developing countries than in developed countries. [10] (b) Discuss whether you agree with the idea that urbanisation necessarily produces economies of scale and is, therefore, a solution to poverty. [15] 7 How far do you agree with the proposition that the main aims of economic government policy should be low unemployment and low tax rates? [25]

4 BLANK PAGE Copyright Acknowledgements: Question 6 © RSA Journal, August 2005, p. 16 Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. 9708/04/M/J/07

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS GCE Advanced Subsidiary Level and GCE Advanced Level MARK SCHEME for the May/June 2007 question paper 9708 ECONOMICS 9708/04 Paper 4 (Data Response and Essays (Supplement)), maximum raw mark 70 This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began. All Examiners are instructed that alternative correct answers and unexpected approaches in candidates’ scripts must be given marks that fairly reflect the relevant knowledge and skills demonstrated. Mark schemes must be read in conjunction with the question papers and the report on the examination. • CIE will not enter into discussions or correspondence in connection with these mark schemes. CIE is publishing the mark schemes for the May/June 2007 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2 Mark Scheme Syllabus Paper GCE A/AS LEVEL – May/June 2007 9708 04 © UCLES 2007 Section A 1 (a) Identification of letters (1) together with explanation of meaning (2). [3] (b) Traditional unpaid work; informal economy; poor use of labour resources expressed as inefficient government, high unemployment, poor education especially of females; poor use of resources in agricultural sector. [2] (c) Wages, training, non-wage factors, occupational mobility, geographical mobility, birth rate, migration. [3] (d) Movement from agriculture, which has relatively low productivity into industrial employment. Those in employment will have larger incomes, spending will rise, with resulting effect on growth and GDP. However, the workers may be inefficient so the increase in incomes may not be large. Also output, if it were recorded, would be lower in rural areas as labour migrates with negative effect on GDP. Overall uncertain result. [4] (e) Evidence for: amount of traditional unpaid work; inequalities in education; % employed in agriculture compared to other known developed countries, % given on those below poverty line, on problems in the economy. All of these fit the description of a developing economy. However, these alone are not sufficient and other information should be provided, for example, on levels of GDP and change in the GDP, on distribution of income, on income levels per head, on information about health provision. There is information about % of GDP from employment in manufacturing and services but there is no comparison given with other countries. [One side of argument 4; + 1 for conclusion.] [8]

Page 3 Mark Scheme Syllabus Paper GCE A/AS LEVEL – May/June 2007 9708 04 © UCLES 2007 Section B General comments The essay questions carry a maximum mark of 25. Try not to 'bunch' marks, but use the whole mark range. If there is any doubt in your mind, give the benefit of doubt to the candidate. The difference in grades should be assessed on the ability of the candidate to demonstrate the various objectives of the examination listed in the syllabus and not purely on the ability to itemise further facts from the content of the syllabus. Marks should be awarded for the ability to demonstrate that aim b) of the syllabus has been achieved as well as aim a) - which refers to content knowledge. It is the objective of the examination, as listed in the syllabus, to assess both these aims. An overall guide for marks for individual questions is given below; these are from a total of 25. They may be applied proportionally of course to parts of questions where the total is less than 25: Mark 1–9 (Linked to level one in individual question notes). 1-5 where the answer is mostly irrelevant and only contains a few valid points made incidentally in an irrelevant context. There will also be substantial omissions of analysis. 6-9 where the answer shows some knowledge but does not indicate that the meaning of the question has been properly grasped. Basic errors of theory, or an inadequate development of analysis may be evident. Mark 10–13 (Linked to level two in individual question notes). 10–11 where there is evidence of an ability to identify facts or some ability at graphs and/or a fair ability to apply known laws to new situations. There should be an accurate although undeveloped explanation of the facts relating to the question together with an explanation of the theory, and evidence of some ability to discriminate and form elementary judgements. Do not expect a clear logical presentation. There will not be much evidence of the ability to recognise unstated assumptions, nor to examine the implications of a hypothesis, nor of the ability to organize ideas into a new unity. 12 -13 where the answer has a more thorough relevance to the question but where the theory is incompletely explained. Mark 14–17 (Linked to level 3 in individual question notes). 14–15 where there is a good knowledge of the facts and theory of the question, clear evidence of the ability to use the facts and theory with accurate reference to the question that may have presented the candidate with a novel application. There should also be evidence, where appropriate, of the ability to examine the implications of the question and an attempt to distinguish between facts and value judgements. Clear statements, supported by reasoned arguments should be given and there should be some attempt at a conclusion to the question. There should be a reasoned structure to the whole answer. Do not expect too many extra Illustrative points which are not explicitly referred to in the question, do not expect too much critical comment on unstated assumptions 16-17 for an answer showing a well reasoned understanding of the question's requirements and of the relevant theory: the analysis should be sound though the illustration and development may not be very full.

Page 4 Mark Scheme Syllabus Paper GCE A/AS LEVEL – May/June 2007 9708 04 © UCLES 2007 Mark 18–25 (Linked to level 4 in individual question notes). 18–20 where there is a thorough knowledge of the facts and theory with an excellent ability to describe, explain or analyse this in a precise, logical, reasoned manner. There should be an ability to query some of the assumptions in the question and clear evidence of an ability to distinguish between fact and value judgements and to draw some conclusions on the matter being discussed. Conclusions should be formed and expressed within a sound structured answer so that the whole is well presented. New illustrations and apposite examples should be introduced as further evidence of an ability to recognise the principles of the question and their application to relevant current situations. 21- 25 for an answer which, given the time constraint, could not be improved significantly: it will have clear analysis, ample illustration and a good attempt at considered evaluation. Be positive in your marking awarding marks for what is there without being too much influenced by omissions. Marks should not be deleted for inaccuracies. Corresponding marks for sub-sections. 1 2 3 4 Total Mark 10 1–3 4–5 6–7 8–10 Total Mark 12 1–4 5–6 7–8 9–12 Total Mark 13 1–4+ 5–6+ 7–8+ 9–13 Total Mark 15 1–5 6–8 9–11 12–15 2 (a) (L4) For a reasoned and clear explanation of both types of efficiency, mentioning types of market structure when they could occur. [9–12] (L3) For a competent comment but with either a limited elaboration of the whole analysis or a concentration on one type of efficiency and the likelihood of achieving it. [7–8] (L2) For a correct explanation and limited development of part of the analysis – probably productive efficiency. [5–6] (L1) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–4] (b) Candidates should explain how increases in competition might affect output decisions and changes in costs. Whether these lead to an approach to productive efficiency once possible opportunities for economies of scale are removed is debateable. It is also debateable whether competition – unless it is perfect - allows allocative efficiency and no account is taken of externalities so social allocative efficiency is not attained. (L4) For an explanation of how competition affects each type of efficiency, a discussion of the possible outcome of a market system with a reasoned conclusion. [9–13] (L3) For a competent explanation which does not fully analyse both types of efficiency. There will be some discussion but the evaluation will not be fully developed or extensive. [7–8] (L2) For an accurate though undeveloped explanation concentrating on only one type of efficiency (probably productive) with some attempt at analysis but only limited evaluation. [5–6] (L1) For an answer which shows some knowledge but does not indicate that the question has been fully grasped. The answer will have some correct facts but include irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–4]

Page 5 Mark Scheme Syllabus Paper GCE A/AS LEVEL – May/June 2007 9708 04 © UCLES 2007 3 (a) Candidates could explain the equilibrium in the firm and in the industry in perfect product and perfect factor markets. (L4) For an explanation of equilibrium in either firm and industry or product and factor market and a comment on the possible outcome of a market system with a reasoned conclusion. [9–12] (L3) For a competent explanation which does not fully analyse both types of market structure or both firm and industry but does deal with both demand and supply. There will be some comment but the analysis will not be fully developed or extensive. [7–8] (L2) For an accurate though undeveloped explanation concentrating either on demand or supply with some attempt at analysis. [5–6] (L1) For an answer which shows some knowledge but does not indicate that the question has been fully grasped. The answer will have some correct facts but include irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–4] (b) Candidates could discuss how the equilibrium would change if there is imperfect competition. Governments may fix wage levels and unions cause imperfections in the factor market and may also help fix wage levels. (L4) For a reasoned and clear discussion of the analysis mentioning both macro and micro elements. [9–13] (L3) For a competent comment but with either a limited elaboration of the whole analysis or a concentration on either micro or macro with a clear understanding. [7–8] (L2) For a correct explanation and limited discussion of part of the analysis – probably micro only. [5–6] (L1) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–4] 4 Discussion of ways of measuring whether people are ‘better off’. Consideration of indicators that might be used both quantitative and qualitative. Discussion of difficulties of comparing even the quantitative indicators in different cultures, climates and economic structures. (L4) For a thorough explanation of the terms, a competent coverage of data, and a reasoned conclusion. [18–25] (L3) For a competent explanation but with a more limited range of data and less developed discussion. [14–17] (L2) For an accurate though undeveloped explanation with some attempt at analysis but only limited evaluation and no mention of alternative measures (HDI, MEW). [10–13] (L1) For an answer which shows some knowledge but does not indicate that the question has been fully grasped, or where the answer contains irrelevancies and errors of theory. [1–9]

Page 6 Mark Scheme Syllabus Paper GCE A/AS LEVEL – May/June 2007 9708 04 © UCLES 2007 5 (a) Explanation of multiplier; explanation of effect of changes in expenditure or taxation – increase and decrease, indirect and direct – also could mention changes in tariffs. (L4) For a good explanation with a reasoned comment of different tax changes or expenditure and clearly structured answer. [9–12] (L3) For a fair explanation but undeveloped answer covering either changes in tax or expenditure. [7–8] (L2) For a limited but acceptable attempt to consider the tax changes or expenditure but with little development. [5–6] (L1) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–4] (b) Discussion of meaning of budget deficit with comment on possible effect on incomes, employment, growth, imports. (L4) For a sound discussion with clear understanding of the principles involved and a reasoned conclusion. [9–13] (L3) For a competent discussion but with limited development and limited conclusion. [7–8] (L2) For a correct explanation but without concluding comment. [5–6] (L1) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–4] 6 (a) Explanation of differences in birth rates, death rates, migration, health policies, education, illness and change caused by AIDS. (L4) For a sound explanation with clear understanding of the principles involved and a reasoned conclusion. [8–10] (L3) For a competent explanation but with limited development and limited conclusion. [6–7] (L2) For a correct explanation but without concluding comment. [4–5] (L1) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–3] (b) Two parts to the answer. One deals with whether urbanisation necessarily leads to economies, the other deals with whether urbanisation, even if this occurs, necessarily is a solution to poverty. The answer will involve explanations of urbanisation, how economies might occur, how poverty may or may not be alleviated. (L4) For a good discussion with a reasoned discussion of the argument and clearly structured answer which reaches a conclusion. [12–15] (L3) For a fair discussion but undeveloped answer which does not present a well-structured reasoned response. [9–11] (L2) For a limited but acceptable attempt to consider the proposition but with little development. [6–8] (L1) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. [1–5]

Page 7 Mark Scheme Syllabus Paper GCE A/AS LEVEL – May/June 2007 9708 04 © UCLES 2007 7 Candidates should discuss the aims of government policy and suggest which might be most important. Reasons should be given for their choice and they should come to a conclusion about the proposition in the question. (L4) For a thorough explanation of the terms, a competent discussion of the proposition and a reasoned conclusion. [18–25] (L3) For a competent explanation but with a more limited and less developed discussion and conclusion. [14–17] (L2) For an accurate though undeveloped explanation with some attempt at analysis but only limited evaluation. [10–13] (L1) For an answer which shows some knowledge but does not indicate that the question has been fully grasped, or where the answer contains irrelevancies and errors of theory. [1– 9]