Cambridge IGCSE Economics 0455 — 2008 May/June Paper 2 · Variant 1

This document consists of 3 printed pages and 1 blank page. IB08 06_0455_02/RP © UCLES 2008 [Turn over *9633334721* UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ECONOMICS 0455/02 Paper 2 Structured Questions May/June 2008 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. 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 © UCLES 2008 0455/02/M/J/08 Answer all questions. 1 UK railway operation GNER is one of a number of companies that operate trains in the UK. GNER was formed in 1996 when the national rail company was privatised. GNER states that: - it carried 40 % more passengers in 2005 than in 1996; - in 2005, 10 % of the passengers bought tickets that were cheaper in real terms than the cheapest available in 1996; - from each £1 of revenue, 50 % goes towards track costs and government charges, 46 % goes on operating costs and less than 4 % is profit; - it subsidises the less profitable parts of some of the other UK railway companies by the money it pays to the government; - since 1996 the company has faced increasingly fierce competition from domestic airlines, car and coach travel. (a) Explain what is meant by a substitute good and identify an example from the information. [2] (b) From the information given, was it cheaper to travel by train in 2005 than in 1996? [4] (c) Explain what is meant by a fixed cost and analyse whether in 2005 the fixed cost of every journey on GNER was higher than the variable cost. [4] (d) Explain what GNER means when it says it ‘subsidises the less profitable parts of some of the other UK railway companies’. [2] (e) Discuss whether it can be concluded from the information that GNER’s profits are likely to have risen by 40 % between 1996 and 2005. [8] 2 (a) Explain what is meant by a trade union and describe its functions. [5] (b) Trade unions are not often found in small enterprises. How significant might this be as a factor which influences someone in choosing to work for a small enterprise? [5] 3 In Ghana local farmers manage small plots of land for subsistence farming. However, some have benefited by selling pineapples at an agreed, fixed price to an exporter. The exporter provides finance, training, fertilizers and machinery and even building materials for the farmers’ homes. (a) Identify and explain which factors of production are mentioned above. [4] (b) In 2005, European supermarkets changed their demand to a new, sweeter pineapple not grown in Ghana. Use demand and supply diagrams to explain what happened in the market for both types of pineapple. [6]

3 © UCLES 2008 0455/02/M/J/08 4 It is stated that the richest households in a country spend under 15 % of their income on food while the poorest households spend over 30 %. (a) Do these figures mean that the actual amount spent on food by the richest households is lower than that spent by the poorest households? Explain your answer. [4] (b) Daniel recently finished training to be a dentist and started his first job. Samira works in a bank and is now in a senior position. Describe how the expenditure pattern of these two people might be different. [6] 5 (a) Using examples, describe the difference between direct and indirect taxes. [4] (b) How might a reduction in taxation help any two macro-economic aims of a government? [6]

4 BLANK PAGE Copyright Acknowledgements: Question 1 © GNER. 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. 0455/02/M/J/08

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2008 question paper 0455 ECONOMICS 0455/02 Paper 2 (Core), maximum raw mark 60 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 2008 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses. www.XtremePapers.com

Page 2 Mark Scheme Syllabus Paper IGCSE – May/June 2008 0455 02 © UCLES 2008 1 (a) Alternative products/services (1). Any combination from train, coach, air, car (1). [2] (b) For 10% of travellers in real terms it was cheaper, actual cost higher. Explanation of real. For 90% of travellers it was more expensive or the same in real terms. [4] (c) Definition (1), examples of fixed cost (1), fixed cost overall higher - 50 fixed, 46 variable, (1) but this overall. Not necessarily true for every journey (1). [4] (d) Explanation of subsidy (1). In this case it is a fee taken from GNER but this is not mentioned in the text (1). [2] (e) Passengers increased by 40%, but some had reduction in real terms in fares. Do not know what happened to costs, only know that profits are 4% of revenue in 2005, but have no comparable figure for 1996. Has to give subsidies to other companies, do not know comparable figures for 1996. Also told that competition has increased, do not know effect of revenues and costs and profits. Cannot conclude that profits have risen 40%. Maximum of 6 marks if descriptive with no attempt to arrive at a conclusion. [8] 2 (a) Group of workers linked together usually by a common occupation with the aim of improving or monitoring the welfare of the group, negotiating working conditions, wages, terms of employment, safety practices. [5] (b) Discussion of the factors that influence choice of occupation, with a comment on the relevance and significance of the existence of a union. Conclusion should be given on the relative significance. Maximum of 3 marks for choice of occupation with no reference to trade unions. [5] 3 (a) Land, labour – farmer, capital – machines, fertilizers, entrepreneurs – manages enterprise, exporters also takes risks. 2 marks for simple identification of the four factors of production. [4] (b) Two diagrams. Labels (1), shift of demand for new pineapple (1), shift of demand for original pineapple (1), explanation including comment on what happens to equilibrium (3). [6]

Page 3 Mark Scheme Syllabus Paper IGCSE – May/June 2008 0455 02 © UCLES 2008 4 (a) We do not know absolute figures so it does not mean this. Could award some marks for an attempt to discuss the difference between absolute and percentage figures. It is not certain what the absolute figures will be and the difference in the absolute incomes might mean that the absolute expenditure for each group is closer than the percentages would imply. [4] (b) Candidates should state the assumption on which they work. The most likely, although not universal, assumption is that the senior post has a higher income. Description of changes in expenditure patterns which might occur as income rises should then be explained – different types/quality of goods, services. Importance of essential, non-essential items. Meaning of what is essential as income increases. Candidates could also describe the need for savings for the future especially in the case of the new job. They could also mention that spending might be based on assumptions about changes in potential earnings, likely changes in employment, tax changes, interest rates. [6] 5 (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 of earning or on subsequent expenditure (2). [4] (b) Identification of two aims. Falling taxes might help change income distribution, might help income and spending and thus growth, might help production and thus move towards full employment. Maximum of 2 marks if the answer is in terms of an increase in taxation. [6]