Cambridge IGCSE Economics 0455 — 2011 Oct/Nov Paper 3 · Variant 2

1 (a) (i) Calculate Sierra Leone’s Human Development Index (HDI) value in 2008. .................................................................................................................................. ..............................................................................................................................[1] (ii) Identify two components of the HDI. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (b) (i) What is the formula for calculating price elasticity of demand? .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Explain whether the extract suggests that the demand for diamonds is price elastic or price inelastic. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (c) Using a demand and supply diagram, analyse the effect of the change in the number of diamond mines in 2008 on the market for diamonds. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[4] (d) Identify from the extract two examples of factors of production changing their use. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (e) Discuss whether a successful, domestic diamond industry would benefit the economy of Sierra Leone. .......................................................................................................................................... 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.......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[7] [Total: 20] The extract ‘The changing fate of the Philippines’ will be needed for this question.

Mark scheme: 1 (a) (i) Human Development Index (HDI) value in 2008 = 0.32. [1] (ii) 1 mark each for identifying two components of HDI from: • GDP (GNI) (per capita) • life expectancy • adult literacy (mean years of schooling) • school enrolment (expected years of schooling). Note: if adult literacy (mean years of schooling) and school enrolment (expected years of schooling) are not given, can accept education for 1 mark. [2] (b) (i) Formula for price elasticity of demand (PED): PED = % change in quantity demanded/% change in price (2). PED = change in quantity demanded/change in price (1). [2] (ii) Price elastic (1) as it states demand for diamonds is very sensitive to price (1). [2] (c) Price of diamonds Quantity of diamonds 1 mark for correct labels. 1 mark for shift of the supply curve to the left. 1 mark for correct equilibriums. 1 mark for mentioning the quantity traded would have fallen. 1 mark for mentioning that a decrease in supply would increase price. Note: maximum mark of 4. [4] (d) 1 mark for workers changing jobs – mining to agriculture (1). 1 mark for firms changing the products they produce – diamonds to gold/other minerals/capital. Enterprise or land if the change is identified (1). [2] IGCSE – October/November 2011 0455 32 (e) Reasons why it might: • generate employment • earn foreign currency • improve the current account position • contribute to economic growth • increase tax revenue. Reasons why it might not: • may push up the exchange rate and make other products less internationally competitive • may damage areas of natural beauty • lower demand for diamonds in the future • risk of overspecialisation. Up to 4 marks for a one-sided approach or a list-like approach. [7]

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2 (a) Define labour productivity. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[1] (b) (i) What has happened to a country’s real GDP if its economic growth rate has fallen from 7.3% to 4.6%? .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Using information from the extract, explain why the Philippines’ economy was not seriously affected by the global recession (economic downturn) in 2008. 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..............................................................................................................................[2] (c) Explain how a government subsidising house-building may reduce poverty. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... 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.......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[4] (d) (i) Using Table 1, calculate which country had the highest GDP per head in 2007. Show your workings. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Why might GDP per head in a country rise at a time when its GDP is falling? .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[1] (e) Discuss the factors which may influence whether tax revenue will increase in the Philippines in the future. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ..........................................................................................................................................

Mark scheme: 2 (a) 1 mark for output per worker/output per time period/output per worker hour. [1] (b) (i) It has risen (1) more slowly (1). [2] (ii) Increased government spending (on infrastructure and social services) (1) and remittances (1). 2 marks if two reasons are identified or one reason is identified and explained. [2] (c) A subsidy is a payment to firms/reduces costs of production (1). A subsidy would be expected to increase the supply of housing (1), higher supply would lower price (1) making it more accessible to the poor (1) and raise living standards (1). A rise in house-building may create jobs (1), some of which may be undertaken by the previously unemployed (1) higher employment may generate other jobs/have a multiplier effect (1) and so raise living standards (1). Note: credit multiplier approach but not required. Note: maximum mark of 4. [4] (d) (i) Malaysia (1), $7000/relevant workings (1). (ii) 1 mark for its population falls further than its GDP/fall in population size. [3] (e) Up to 4 marks for identification of factors, for example: • changes in rates • coverage • tax evasion • GDP • price elasticity of demand • rise in population • level of imports. Up to 5 marks for commenting on factors, for example: • tax revenue may rise if rates increase/decrease, • if the tax base is increased, • if tax evasion is reduced and GDP increases. Note a maximum of 8 marks. [8]

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