Cambridge IGCSE Economics 0455 — 2010 Oct/Nov Paper 3 · Variant 2

1 (a) Give two possible causes of an increase in the supply of mobile phones. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (b) Using the information in the table, compare the ownership of mobile phones and computers in the three African countries with that in the three Western countries. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[4] (c) Using a demand diagram in each case, illustrate the effect on the demand for mobile phones of: (i) a fall in the price of mobile phones [2] (ii) an increase in the awareness of the benefits of mobile phones. [2] (d) Explain how the use of mobile phones may reduce market failure in agricultural markets. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[3] (e) Describe two characteristics of a private limited company such as Globacom. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (f) (i) Are corporate taxes direct or indirect taxes? Explain your answer. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Discuss whether imposing corporate taxes on the profits of mobile phone companies will discourage multi-national phone companies from setting up in a country. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. 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.................................................................................................................................. ..............................................................................................................................[7] [Total: 24] The extract ‘United States (US) unemployment reaches new heights’ will be needed for this question.

Mark scheme: 1 (a) Two from: advances in technology, fall in costs of production, rise in labour productivity, government subsidies, fall in indirect taxation, entry of new firms, creation of joint ventures. [2] (b) Ownership of mobile phones is higher than computers in both areas (1). The gap between the ownership of mobile phones and computers in percentage terms was significantly higher in the African countries (1). Ownership of computers is significantly lower in the African countries than in the Western countries (1). Generally, ownership of mobile phones was higher per 100 population in Western countries (1) but it is interesting to note that ownership was higher per 100 population in South Africa than in the United States (1). Note: maximum mark is 4. [4] (c) (i) Price D of mobile phones P P1 D 0 Q Q1 Quantity of mobile phones 1 mark for labels. 1 mark for movement downwards along the demand curve. [2] (ii) Price D1 of mobile D phones D1 D 0 Quantity of mobile phones 1 mark for labels. 1 mark for shift of the demand curve to the right. [2] IGCSE – October/November 2010 0455 32 (d) Mobile phones help to bring buyers and sellers together/improve communication (1); this should reduce the risk of surpluses and shortages occurring/provides information about demand and supply (1); reduces risk of information failure (1); reduces travel time (1); helps producers to allocate resources according to consumer demand (1); so allow the markets to work efficiently (1). Note: maximum mark of 3. [3] (e) 1 mark for each of two characteristics e.g. has limited liability, can only sell shares to known individuals. [2] (f) (i) Direct taxes (1) as they are taxes on income/profit (1). [2] (ii) 1 mark for agreeing it may discourage. Up to 4 marks for explaining why it may discourage, e.g. reduce profits, reduce competitiveness. Up to 7 marks if acknowledge may discourage but then considers factors why it might not, e.g. corporate taxes may be lower, demand in the market may be increasing, there may be government subsidies, availability of cheap labour, high labour productivity, companies will compare market conditions in the country with other countries. [7]

More questions on Fiscal policy

2 (a) Explain what is meant by the unemployment rate. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (b) What could have explained the difference in the number of Americans losing their jobs and the rise in US unemployment in December 2008? .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... 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......................................................................................................................................[3] (c) Using information from the extract, identify three reasons why the number of hours worked fell in the US in 2008. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[3] (d) Discuss what other information you would need to assess whether economic performance in the US was stronger than Japan’s at the start of 2009. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... 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Mark scheme: 2 (a) Percentage of labour force/working population (1) without a job or those registered as unemployed (1). [2] (b) Up to 3 marks for explaining any reason why they may have left the labour force, e.g. entered further education, retired early, gave up looking for work, emigrated or; 1 mark for each of the three reasons identified. 1 mark for recognising that some of those made redundant may have found other employment straight away. Up to 3 marks for really good development of one point. Note: maximum mark is 3. [3] (c) Fewer people working/rise in unemployment (1); reduction in full-time hours (1) and more people working part-time (1). [3] (d) Up to 4 marks for identification of information needed, e.g. economic growth rate, inflation rate, current account position, distribution of income, living standards, technological advances, level of poverty. Up to 5 marks for commenting on what would indicate a strong performance, e.g. stable growth rate, sustainable growth rate, low inflation rate, stable inflation rate, current account balance, trends in economic growth rate, inflation rate, current account position. A well-developed comment can receive two marks. 1 mark for a good conclusion. [8]

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