Cambridge IGCSE Economics 0455 — 2013 Oct/Nov Paper 3 · Variant 2

1 (a) (i) Using information from the extract, calculate the percentage change in the price of coffee from June 2010 to May 2011. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Using a demand and supply diagram, explain why the price of coffee rose in 2011. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[6] (b) (i) What evidence is there in the extract of specialisation? .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Explain one disadvantage of a country specialising. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (c) Using information from the extract, explain whether the price elasticity of supply of coffee is likely to be elastic or inelastic. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (d) Discuss what factors will influence how much coffee Brazil will export in the future. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[6] [Total: 20] The extract ‘Australia’s economic record’ will be needed for this question.

Mark scheme: 1 The changeable coffee market (a) (i) Using information from the extract, calculate the percentage change in the price of coffee from June 2010 to May 2011. [2] 2 marks for 66.67%/66.7%/67%/66.6%. 1 mark for correct working i.e. $1.20/$1.80 × 100/2/3%/0.67%. (ii) Using a demand and supply diagram, explain why the price of coffee rose in 2011. [6] Price of D1 S1 S Coffee D P1 P S1 D1 S D 0 Q/Q1 Quantity of Coffee 1 mark for correct labels – P, Q, D and S. 1 mark for shift in the supply curve to the left. 1 mark for shift in the demand curve to the right. 1 mark for original and new equilibriums. (Note: the effect on quantity is uncertain. Accept new quantity as unchanged, lower or higher depending on relative shifts.) 1 mark for explaining why demand increased: increased consumption in Brazil, China and India/rise in global demand. 1 mark for explaining why supply decreased: bad weather/natural disasters. IGCSE – October/November 2013 0455 32 (b) (i) What evidence is there in the extract of specialisation? [2] 1 mark for coffee accounting for a high proportion (of Ethiopia’s) export revenue. 1 mark for a relatively high proportion (of Ethiopia’s) labour force employed in growing coffee. (ii) Explain one disadvantage of a country specialising. [2] 1 mark for identifying a disadvantage – risk of demand falling/costs rising/disruption to supplies/increased dependency/depletion of natural resources. 1 mark for explaining either the cause or the consequence of the disadvantage, e.g. tastes changing/rivals increasing or supply difficulties/lower employment/ lower export revenue. Examiner’s note: no marks for a disadvantage of workers specialising, e.g. boredom. (c) Using information from the extract, explain whether the price elasticity of supply of coffee is likely to be elastic or inelastic. [2] 1 mark for stating it is inelastic. 1 mark for explanation i.e. it takes approximately three years to adjust the supply of coffee/long time to produce coffee. (d) Discuss what factors will influence how much coffee Brazil will export in the future. [6] Up to 3 marks for identifying relevant factors, e.g. • level of demand at home and abroad • relative price of Brazilian coffee • weather conditions • import restrictions • quality of Brazilian coffee • exchange rate changes. Up to 4 marks for explanation, e.g. • if incomes abroad rise, demand is likely to increase • higher Brazilian consumption may reduce the amount which can be exported • if Brazilian coffee rises in price by more than rival producers, demand may fall • adverse weather conditions would reduce the ability to export • the imposition of tariffs etc. would reduce Brazil’s ability to export • a rise in the quality of Brazilian coffee is likely to result in higher demand • higher productivity could reduce costs and increase price competitiveness • a rise in Brazil’s exchange rate may make it more difficult to export as export prices would rise. Examiner’s note: 3 × 2. IGCSE – October/November 2013 0455 32

More questions on Price changes

2 (a) (i) Define a trade in goods deficit. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) What effect does a rise in a country’s foreign exchange rate have on its export prices and on its import prices? .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (b) (i) Using information from Table 1, explain whether agriculture or manufacturing in China had the higher labour productivity in 2010. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Using information from Table 1 and the extract, explain which country had more people employed in the services sector. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (c) (i) Calculate how many people were unemployed in Australia in 2011. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Explain the two benefits of the low unemployment referred to in the extract. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[4] (d) Discuss whether an economy will always benefit from net immigration. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ..........................................................................................................................................

Mark scheme: 2 Australia’s economic record (a) (i) Define a trade in goods deficit. [2] 2 marks for import expenditure exceeding export revenue/value of imports exceeding value of exports. 1 mark for imports exceeding exports. (ii) What effect does a rise in a country’s foreign exchange rate have on its export prices and on its import prices? [2] 1 mark for export prices will increase. 1 mark for import prices will fall. (b) (i) Using information from Table 1, explain whether agriculture or manufacturing in China had the higher labour productivity in 2010. [2] 1 mark for manufacturing. 1 mark for explaining that a smaller percentage of the labour force in manufacturing contributed a higher percentage of the country’s GDP than in the case of agriculture/idea that fewer workers in manufacturing contributed a greater output. (ii) Using information from Table 1 and the extract, explain which country had more people employed in the services sector. [2] 1 mark for China. 1 mark for explaining that 25.8% of 800 million is greater than 75.1% of 12 million/ 206.4 m is greater than 9.012 m/idea that as China’s population is much larger, a smaller percentage will give a larger number. IGCSE – October/November 2013 0455 32 (c) (i) Calculate how many people were unemployed in Australia in 2011. [2] 2 marks for 600 000/0.6 million. 1 mark for correct working i.e. 5/100 × 12 m. (ii) Explain the two benefits of the low unemployment referred to in the extract. [4] 1 mark for identifying good use of resources. 1 mark, dependent on 1st mark, for explaining output is high when unemployment is low/producing on or near its PPC/high living standards, experiencing economic growth. 1 mark for identifying low government spending on unemployment benefits. 1 mark, dependent on 3rd mark, for explaining that with fewer people being out of work, less tax revenue has to be spent on benefits/tax revenue can be used for other purposes. (d) Discuss whether an economy will always benefit from net immigration. [6] Up to 4 marks for why it might: • population may be low relative to resources • potential output may increase • tax revenue may increase • immigrants are of working age • immigrants are skilled • immigrants do not have many dependents. Up to 4 marks for why it might not: • the economy may already be overpopulated • immigrants may be low skilled • a high proportion may be dependents • immigrants may send a high proportion of their earnings back to their country of origin. Examiner’s note: 3 × 2.

More questions on Firms and production