Cambridge A Level Economics 9708 — 2009 Oct/Nov Paper 4 · Variant 1

This document consists of 3 printed pages and 1 blank page. IB09 11_9708_41/4RP © UCLES 2009 [Turn over *8327664414* UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level ECONOMICS 9708/41 Paper 4 Data Response and Essays (Supplement) October/November 2009 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 2009 9708/41/O/N/09 Section A Answer this question. 1 Counting the Cost India has transformed itself from a primarily agricultural economy into a major industrial one in less than 60 years. Some argue that industrialisation results in increased wealth and a better standard of living. Certain areas of India are better suited to this industrialisation than others. The state of Orissa is one. Orissa is a state of contrasts – 48 % of its people live below the poverty line; it is the most heavily indebted Indian state; its literacy level is below the national average; the level of infectious disease is high and malnutrition is alarming; it is subject to natural disasters such as floods. But it has unrivalled natural resources including one of Asia’s largest deposits of coal, large areas of forest and extensive mineral reserves. These attract big industrial companies. A new steel plant has been established which will produce six million tonnes of steel a year. In Orissa, a balance has to be achieved between potential profits and benefits from industrialisation and its cost to the people and the environment. The steel company is recruiting from local engineering colleges and is able to offer employment and new opportunities. People have increased incomes. Farm workers earn less than half what the factory pays its workers. One worker said ‘I used to work on the land and was at the mercy of the weather. Now I do not have to pray for rain. The company also employs my sons and we are much better off’. However, the factory is not labour-intensive and is unlikely to employ the huge numbers of people seeking work. Also, mining and infrastructure development destroyed some of the forest. Industrial production results in soil erosion and pollutes the air with the dark smoke from factory chimneys which causes acid rain. The rivers have also become contaminated with toxic waste which is posing a threat to wildlife, such as elephants, tigers and deer, as well as to local people. The industrialisation meant that some people lost their homes and had to be resettled elsewhere. The new houses had safe water provision and drainage, unlike some of the original homes, but people complained about the poor way the houses were built. In 2007, 13 were killed during a protest about the lack of compensation for the loss of their homes. (a) What is meant by industrialisation? [2] (b) Why might some argue that the economic costs of the exploitation of the natural resources in Orissa are too high? [5] (c) Comment on whether the development of the steel plant is likely to have been a benefit for the workers in Orissa. [5] (d) It is said that the standard of living in Orissa continues to be very low. Discuss whether the evidence you have been given is sufficient to support this view. [8]

3 © UCLES 2009 9708/41/O/N/09 Section B Answer any two questions from this section. 2 There has been much discussion recently about the effect of climate change and the efficient use of economic resources. Discuss whether the efficient allocation of resources can be achieved only if governments are involved in the process. [25] 3 BG is a rapidly growing energy company with operations in 25 countries engaged in the exploration, production and distribution of natural gas and oil. This requires complex chains of physical infrastructure, major investment funds and detailed commercial agreements with different countries. (a) Explain why economies of scale might be significant in an industry such as gas supply. [12] (b) Discuss whether companies that supply energy are likely to operate in contestable markets. [13] 4 Workers in the public sector are sometimes paid less than workers in the private sector. Discuss why wage rates differ. [25] 5 Some Japanese economists have argued that higher interest rates would, unusually, improve Japan’s economic growth. (a) Explain why it might be said that this link between interest rates and economic growth is unusual. [12] (b) Discuss whether economic growth is good for an economy. [13] 6 ‘There is no point in calculating figures for GNP. They are never an accurate estimate of welfare, and people are more concerned about crime, pollution and health than GNP.’ Do you agree with this argument? [25] 7 (a) Explain what distinguishes a developing country from a developed country. [12] (b) When a country achieves ‘developed’ status does this mean that it has solved all its economic problems? [13]

4 BLANK PAGE Copyright Acknowledgements: Question 1 Developments, p.25, Issue 38, Department for International Development, 2007 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. 9708/41/O/N/09

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS GCE Advanced Level MARK SCHEME for the October/November 2009 question paper for the guidance of teachers 9708 ECONOMICS 9708/41 Paper 41 (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, which would have considered the acceptability of alternative answers. 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 October/November 2009 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2 Mark Scheme: Teachers’ version Syllabus Paper GCE A LEVEL – October/November 2009 9708 41 © UCLES 2009 Section A 1 (a) Explanation of increase in production in manufacturing and reduction in significance of agriculture with consequent effect on GDP. [2] (b) The forests will be lost, people will lose their existing homes, the wildlife will suffer, the rivers will be contaminated, there will be air pollution and acid-rain, not everyone will be employed in the factory but the farm land will be destroyed. These changes could be given a monetary value and the effect on the whole economy given an economic cost. [5] (c) They will not be dependent on rain so there will be constant work, they are likely to become more skilled – there is college training, the product produced is worth more so their value is higher. So, if they get a job their income is likely to be higher. But they have been displaced from their home and their community. The factory is not labour intensive and not everyone who has been displaced will be employed; supply of labour is high which will could depress wages. The overall balance will vary according to the individual concerned. One side only maximum 3. [5] (d) Evidence for: 48% poverty, low literacy, high debts, disease, hunger, floods. Against this there has been some industrialisation, improved employment, use of natural resources, steel production, increased incomes. Need better figures of comparative living standards before and after development in the area, comparisons with other states, other information which is usually included in standard of living comparisons involving social and economic indicators. [8]

Page 3 Mark Scheme: Teachers’ version Syllabus Paper GCE A LEVEL – October/November 2009 9708 41 © UCLES 2009 Section B General Comments for section B: 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: Teachers’ version Syllabus Paper GCE A LEVEL – October/November 2009 9708 41 © UCLES 2009 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 Explanation of meaning of efficient allocation and explanation of the analysis which ensures an efficient optimum may be reached. Distinction between productive and allocative efficiency. Discussion of reasons for market failure and necessity/desirability of government intervention to achieve efficiency. L4 For a thorough explanation and a reasoned discussion dealing with both aspects of efficiency and possible reasons for government intervention. [18–25] L3 For a competent explanation of terms with accurate but limited discussion. [14–17] L2 For a correct but undeveloped explanation with some attempt at analysis but only brief discussion. [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 is mostly irrelevant. [1–9]

Page 5 Mark Scheme: Teachers’ version Syllabus Paper GCE A LEVEL – October/November 2009 9708 41 © UCLES 2009 3 (a) Explanation of economies of scale suggesting which of the economies might be significant in a public utility industry. L4 For a sound explanation of each the different economies and a clear link to the industry mentioned. [9–12] L3 For a competent explanation of economies of scale but with limited application. [7–8] L2 For a correct but limited explanation and little or no application. [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 the meaning of contestable markets and a consideration of what competition might be likely in the market for gas. Substitute alternative energy sources should be mentioned. L4 For a reasoned and well argued discussion with accurate development of the analysis and a good application. [9–13] L3 For a clear but undeveloped discussion but one which still tries to make an application. [7–8] L2 For a limited attempt to consider the theory but with little application. [5–6] L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis are substantial. [1–4] 4 Discussion of determinants of wage rates using either demand and supply or marginal revenue productivity. In the past we have not used the full range of marks for a demand and supply approach only with no mention of marginal revenue productivity. This question does refer to public and private sectors so the influence of government in determining wage rates could be mentioned although the actual question does not ask for a comparison. L4 For a thorough explanation of the analysis of wage determination with a clear link to the explanation of low wages with discussion of institutional factors and government policy. [18–25] (14–17 for demand and supply only with institutional factors and government policy.) L3 For a competent explanation but with limited discussion and application. [14–17] (10–13 for demand and supply.) L2 For a correct but undeveloped explanation with only brief application. [10–13] (6–9 for demand and supply.) L1 For an answer which contains inaccuracies and only a few correct points. [1–9] (1–5 for demand and supply only.)

Page 6 Mark Scheme: Teachers’ version Syllabus Paper GCE A LEVEL – October/November 2009 9708 41 © UCLES 2009 5 (a) Explanation of the link between interest and growth which is usually through lower rates causing increased investment or spending and subsequent multiplier effects on the national income. L4 For a sound explanation of the meaning of growth and of the link between interest and growth and explicit reference to the contradiction. [9–12] L3 For a competent explanation of growth but with a limited attempt to see the contradiction implied or a sound explanation with no attempt to see the contradiction. [7–8] L2 For a correct but weak explanation of growth. [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 the benefits of economic growth in terms of income, employment, standards of living but a consideration of the drawbacks in terms of externalities, short-term v. long-term use of resources, distribution of income and opportunity costs involved. L4 For a reasoned and well argued discussion with accurate development of the analysis and a reasoned conclusion. [9–13] L3 For a clear but undeveloped discussion but one which still tries to make a conclusion. [7–8] L2 For a limited attempt to consider the theory but with no conclusion. [5–6] L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis are substantial. [1–4] 6 Question requires both a comment on the measurement of GNP – difficulties in collecting data, of unofficial economy, of double counting etc. – as well as a comment on the interpretation of the figures and the use to which they might be put when forming policy. Candidates should consider whether GNP figures can take some account of crime, pollution and health. Some of the alternative approaches which use GNP may include reference to part of the concerns stated. Candidates could also consider whether there is a link between GNP and crime or pollution or health. L4 For a thorough explanation of the difficulties of measuring GNP, an analysis of how GNP might be effectively used and a discussion of the link with the issues mentions. Conclusion should refer to the proposition in the stimulus. [18–25] L3 For a competent explanation which does not fully analyse the difficulties of calculating or using GNP but makes some attempt at evaluation and tries to link the discussion to the issues raised. A brief conclusion will be stated. [14–17] L2 For an accurate though undeveloped explanation with some attempt at analysis but no real attempt to link to the issues stated. [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 is mostly irrelevant [1–9]

Page 7 Mark Scheme: Teachers’ version Syllabus Paper GCE A LEVEL – October/November 2009 9708 41 © UCLES 2009 7 (a) Explanation of the characteristic differences between a developing country and a developed country. L4 For a sound explanation and explicit comparison of the characteristics giving a good range of indicators both economic and social. [9–12] L3 For a competent explanation but with a limited development, or a fuller development of only a few characteristics but still with an explicit comparison. [7–8] L2 For a correct but weak explanation of the characteristics and little development. No explicit comparison given and reader is left to draw conclusions. [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 economic problems facing developed countries and a consideration of whether they are similar. Candidates could mention possible unemployment, possible pollution, possible inflation, possible over-crowding, negative externalities, exploitation of resources with lack of consideration for the long term. L4 For a reasoned and well argued discussion with accurate development of the discussion and a reasoned conclusion. [9–13] L3 For a clear but undeveloped discussion but one which still tries to make a conclusion. [7–8] L2 For a limited attempt to consider the theory but with no conclusion. [5–6] L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis are substantial. [1–4]