Cambridge IGCSE Economics 0455 — 2005 Oct/Nov Paper 2 · Variant 1

This document consists of 2 printed pages. SP (NF) S94484 © UCLES 2005 [Turn over UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ECONOMICS 0455/02 Paper 2 Structured Questions October/November 2005 1 hour 30 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 on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. 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. www.XtremePapers.com

2 0455/02/O/N/05 Answer all questions. 1 Lesotho National Development Corporation Since its establishment the Lesotho National Development Corporation (LNDC) has been the Lesotho Government’s main means of promoting industrial development. The LNDC is now expanding its job creation programme by promoting exports and encouraging firms to grow in size. It also encourages and supports local entrepreneurs. Two of the projects it has supported are local chicken farms and the building of a private hospital. The slogan of the LNDC is ‘We build industry’. (a) Describe the main role of an entrepreneur. [2] (b) Identify from the passage one project in the primary sector and one project in the secondary sector. [2] (c) Explain what is meant by industrial development. [4] (d) Explain the policies that a government might use to encourage private businesses. [6] (e) Why might a government wish to create jobs? [6] 2 In the UK four large supermarket companies dominate the sale of food but there are also many small food shops. (a) Define a fixed cost and a variable cost, and identify one fixed cost and one variable cost that the supermarket might have. [4] (b) Discuss why a small food shop might survive when there are very large supermarkets. [6] 3 (a) Using examples, contrast a direct tax with an indirect tax. [4] (b) Discuss how a government might use taxation to affect the distribution of income. [6] 4 The rate of inflation in some developed countries has remained low for several years. (a) What is meant by inflation? [3] (b) Explain how a retail price index (index of consumer prices) is calculated. [7] 5 (a) Explain why specialisation in international trade might benefit a country. [6] (b) Some countries use protective measures in international trade. Describe two types of protection a government can use in international trade. [4] © UCLES 2005 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 University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the November 2005 question paper 0455 ECONOMICS 0455/02 Paper 2 Maximum mark 60 This mark scheme is published as an aid to teachers and students, to indicate the requirements of the examination. It shows the basis on which Examiners were initially instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began. Any substantial changes to the mark scheme that arose from these discussions will be recorded in the published Report on the Examination. 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. The minimum marks in these components needed for various grades were previously published with these mark schemes, but are now instead included in the Report on the Examination for this session. • CIE will not enter into discussion or correspondence in connection with these mark schemes. CIE is publishing the mark schemes for the November 2005 question papers for most IGCSE and GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses. www.XtremePapers.com

Page 1 Mark Scheme Syllabus Paper IGCSE EXAMINATIONS – NOVEMBER 2005 0455 2 © University of Cambridge International Examinations 2005 1 (a) Explanation of role of co-ordination of other factors of production (1 mark), taking risks or making profits (1 mark). [2] (b) Farming in primary sector (1 mark), the building of a private hospital in secondary sector (1 mark – need reference to the building of the hospital).[2] (c) Explanation of meaning of industrial development with reference to businesses, new premises, machines, capital goods. [4] (d) Government could use subsidies, tax reductions, grants, changes in planning controls, relaxation of regulations, encouragement of foreign investment, or changes in labour/wage policy. [6] (e) Job creation causes increase in incomes, production, employment. This might help government’s aims full employment, growth; possible result is better balance of payments through increased exports. [6] 2 (a) 2 for definition mentioning changes, or not, in output. 2 for examples. Wage may be considered either a fixed or variable cost, but not both in the same script. [4] (b) Description of benefits of availability in local area, personal service, possible longer hours, less queues, convenience. Max 4 marks for benefits of a small firm with no reference to small food shops. [6] 3 (a) Expect one example of each type of tax (2) and a comment on whether the tax is levied on a person at the source or earning or on subsequent expenditure (2). [4] (b) Discussion of the use of both indirect and direct taxes. Could mention progressive, regressive direct taxes. Could also discuss the likely effect of imposing indirect tax on different products depending on whether the product is likely to be bought by low or high income groups. [6] 4 (a) Persistent rise in general level of prices. [3] (b) Explanation of use of base year, average household, basket of goods, weighted items, change from one period to another. [7] 5 (a) Brief explanation of benefits of specialisation in terms of efficient production, more economic use of resources. Full range can be used without any mention of comparative advantage. This term is not on the syllabus but specialisation and exchange is. [6] (b) Description of two types of protection - quota, regulation, tariff. (2 marks each) [4]