Poverty — Paper 2 · IGCSE Economics (9-1) 0987

2 Japan has a low immigration rate and a declining population. In recent years, it has experienced deflation and a rise in child poverty. By 2017, one in six Japanese children lived in a household with less than half of the average household income. Japan operates a national minimum wage which increased every year between 2010 and 2017. This may have affected the level of poverty in the country. (a) State two benefits a country may gain from immigration. [2] (b) Explain two consequences of deflation. [4] (c) Analyse why children from low-income families may have low incomes as adults. [6] (d) Discuss whether or not a national minimum wage will reduce poverty. [8]

20 marks

Mark scheme: 2(a) State two benefits a country may gain from immigration. 2 One mark each for two from: larger labour force, reduced dependency rate, higher demand, higher tax revenue, more skilled workers, greater utilisation of resources. 2(b) Explain two consequences of deflation. 4 Logical explanation which might include: Output may fall (1) if due to lower demand firms will cut back production (1). Unemployment may rise (1) fewer workers will be needed to produce fewer goods and services (1). Economic growth may decline / a recession may occur (1) due to lower total (aggregate) demand (1). Output may rise (1) if due to lower costs of production / advances in technology (1). Exports may increase (1) if domestic products have become more price- competitive (1). 2(c) Analyse why children from low-income families may have low incomes 6 as adults. Coherent analysis which might include: Likely to receive less education (1) likely to have lower quality healthcare (1) nutrition is likely to be poor (1) likely to gain fewer qualifications/skills (1) be less productive (1) have fewer employment opportunities (1) may be in low paid jobs (1) may be unemployed (1). 2(d) Discuss whether or not a national minimum wage will reduce poverty. 8 In assessing each answer, use the table below. Level Description Marks 3 A reasoned discussion which accurately examines both 6–8 sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other but, overall, both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 2 A reasoned discussion which makes use of economic 3–5 information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 1 There is a simple attempt at using economic definitions 1–2 and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for no creditable 0 content. Why it might: • is set above the equilibrium level, will raise the pay of the low-paid • may reduce relative poverty by reducing the gap between high and low- income earners • may reduce absolute poverty by enabling low paid workers greater access to basic necessities • may raise employment, if it motivates workers and raises productivity • may raise employment if it increases total (aggregate) demand. Why it might not: • may not have any impact if set below the equilibrium level • unemployment may rise as it may increase firms’ costs of production • will not help the poor who are unable to work • may not reduce relative poverty if it results in other workers pressing for, and getting, wage rises to maintain their wage differentials • some receiving it may not be in poor households. Reward, but do not expect, a national minimum wage diagram which shows the effect on pay and employment.

This question in 0987/21 May/June 2020

1 (a) Calculate Pakistan’s trade in goods balance in 2017. [1] (b) Identify two possible causes of demand-pull inflation in Pakistan in 2017. [2] (c) Explain the opportunity cost to Pakistan of producing consumer goods. [2] (d) Explain two reasons why education is a merit good. [4] (e) Analyse why the children of poor families tend to receive less education than the children of rich families. [4] (f) Analyse the relationship between GDP per head and imports per head. [5] (g) Discuss whether or not the supply of teachers in Pakistan is likely to increase in the future. [6] (h) Discuss whether or not an increase in its import tariffs would be likely to benefit the Pakistani economy. [6]

30 marks

Mark scheme: Question Answer Marks 1(a) Calculate Pakistan’s trade in goods balance in 2017. 1 –$36.5bn (1). 1(b) Identify two possible causes of demand-pull inflation in Pakistan in 2 2017. Any two from: Higher government spending (1) higher consumer spending / rising population (1) increased investment (1). 1(c) Explain the opportunity cost to Pakistan of producing consumer 2 goods. Logical explanation which might include: Capital goods (1) resources that could have been used to produce capital goods are being used to produce consumer goods / (next) best alternative forgone (1). 1(d) Explain two reasons why education is a merit good. 4 Logical explanation which might include: People underestimate full benefit / private benefit (1) not appreciating health and job opportunity benefits (1). People not taking into account external benefits (1) e.g. better quality products/larger quantity of products or economic growth (1). 1(e) Analyse why the children of poor families tend to receive less 4 education than the children of rich families. Coherent analysis which might include: The children of the poor may not attend school (1) they may have to work (1) to help support their families (1). Poor families are likely to have difficulty paying to have their children educated (1) some schools in Pakistan are in the private sector (1) there seems to be a lack of low-cost schools (1). The children of the poor may leave school at a younger age (1) may miss more school days due to ill health (1). 1(f) Analyse the relationship between GDP per head and imports per head. 5 Coherent analysis which might include: Generally the countries with the highest GDP per head spend the most per head on imports (1) examples e.g. Norway has the highest income per head and the highest spending on imports per head and Haiti has the lowest income and the lowest spending on imports (up to 2) exception: Russia has a higher income per head than Mexico but a lower spending per head on imports (1). Expected relationship as income rises (1) people can afford more imports (1). The four countries with above average GDP per head spend above the global average on imports (1). The two countries with below average GDP per head spend more on imports (1). 1(g) Discuss whether or not the supply of teachers in Pakistan is likely to 6 increase in the future. Generic example mark Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. 0 reverse of a previous argument. Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on 1 subsidies may stimulate the economy more than spending on education. Award up to 4 marks for logical reasons why it might, which may include: • education standards may rise (1) which may increase those qualified to be teachers (1) • working conditions may improve (1) with better buildings (1) • population is increasing (1) which may increase the size of the labour force (1). Award up to 4 marks for logical reasons why it might not, which may include: • wages may not rise (1) teachers may switch to other jobs (1) • teachers may emigrate to other countries (1) • the qualifications required to be a teacher may increase (1) by more than educational standards rise (1). 1(h) Discuss whether or not an increase in its import tariffs would be likely 6 to benefit the Pakistani economy. Award up to 4 marks for logical reasons why it might, which may include: • may reduce the trade deficit (1) by reducing demand for imports (1) • tax revenue may increase (1) enabling the government to increase its spending (1) • may help protect infant industries (1) until they can take advantage of economies of scale (1). Award up to 4 marks for logical reasons why it might not, which may include: • demand for some finished imports may be price inelastic (1) • demand for capital goods / raw materials may be inelastic (1) • incomes may rise (1), leading to higher spending on imports (1) • other countries may impose trade restrictions (1) reducing Pakistan’s ability to export (1).

This question in 0987/22 May/June 2020

3 In 2018, the US had its lowest unemployment rate for 18 years. Cyclical unemployment was very low and so was the rate of inflation. The US also experienced a rise in labour productivity. However, it did not do so well in reducing poverty. In 2018, approximately 12% of Americans were living in poverty. (a) Define cyclical unemployment. [2] (b) Explain two ways a firm could increase the productivity of its workers. [4] (c) Analyse the advantages of a low rate of inflation. [6] (d) Discuss whether or not a fall in a country’s unemployment rate will reduce poverty in that country. [8]

20 marks

Mark scheme: 3(a) Define cyclical unemployment. • Workers without jobs (1) • due to a lack or fall in total (aggregate) demand (1) • more people unemployed than there are job vacancies (1) • in a recession / economic downturn (1). 2 Nothing for a fall in demand for a product. 3(b) Explain two ways a firm could increase the productivity of its workers. Logical explanation which might include: • Raise wages / performance related pay / commissions (1) increase motivation of workers (1). • Provide training (1) increase workers’ skills / efficiency (1). • Division of labour by firm (1) enables greater specialisation (1) • Buy capital goods / invest (1) workers will be working with better equipment (1). • Reduce working hours (1) workers may feel fresher / more alert (1). • Improve working conditions (1) reduce stress (1). • Subsidise workers’ healthcare (1) making them fitter / fewer days lost through illness (1). • Working from home (1) reduce stress from travelling (1). 4 One mark each for each of two ways identified and one mark each for each of two explanations. Question Answer Marks Guidance 3(c) Analyse the advantages of a low rate of inflation. Coherent analysis which might include: • Low inflation means prices are still rising (1) but not a high rate (1). • May stop purchasing power being reduced too much / wages may keep pace with inflation (1). • May increase international price competitiveness (1) as may be below the inflation rate of other countries (1) increasing exports (1) reducing imports (1) improving the current account position (1). • May create greater certainty / stability (1) as costs may not be rising significantly (1) encouraging firms / MNCs to invest (1) increasing output / GDP (1) increasing employment / lowering unemployment (1). • May encourage saving (1) as real value may be maintained (1) provide funds for investment (1). • It may raise profit (1) if demand-pull (1) encouraging firms to expand (1) increasing employment / lowering unemployment (1). • May stop a random redistribution of income (1) protecting savers (1). • Low menu costs (1) reduce pressure on firms’ costs of production (1). 6 ‘Increasing employment / lowering unemployment’ can only be credited once. Question Answer Marks Guidance 3(d) Discuss whether or not a fall in a country’s unemployment rate will reduce poverty in that country. In assessing each answer, use the table opposite. Why it might: • increase the income of those who gain jobs • absolute poverty may be reduced with more people being able to buy basic necessities • tax revenue may rise • the government could spend more on benefits for the poor • the government could spend more on education, reducing future poverty Why it might not: • jobs may be part-time, low-paid, at national minimum wage • jobs may be seasonal • relative poverty may increase if extra jobs are gained by the well-paid • the unemployment rate may fall but unemployment may rise if there are more people in the labour force • may be more retired people living in poverty • sick and disabled people may not be able to get out of poverty • unemployment is only one of a number of factors affecting poverty • absolute poverty may remain 8 Level Description Marks 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 Question Answer Marks Guidance 3(d) Level Description Marks 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0

This question in 0987/21 May/June 2021

2 Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy housing. One reason why people lack basic necessities, including adequate housing, is unemployment. In 2019, nearly 10% of Cairo’s workers did not have a job. Other citizens of Cairo live in luxury, in houses costing more than $1 million. Many of Cairo’s rich adults grew up in rich families. (a) Identify two basic necessities, other than housing. [2] (b) Explain how frictional unemployment differs from cyclical unemployment. [4] (c) Analyse why the children of the rich tend to become rich adults. [6] (d) Discuss whether a government should provide subsidies to families to spend on housing. [8]

20 marks

Mark scheme: 2(a) Identify two basic necessities, other than housing. Two from e.g.: Food, water, clothing, healthcare and education. 2 Accept any relevant basic necessity e.g. heating or electricty. If more than two examples given, only consider the first three. 2(b) Explain how frictional unemployment differs from cyclical unemployment. Logical explanation which might include: Frictional unemployment arises from people being in between jobs (1) may be waiting for a better paid job / may be seasonally unemployed / may have worked on a short-term contract / may lack information about vacancies (1) may exist even when there is full employment / may be self-correcting (1). Cyclical unemployment is caused by a lack of total (aggregate) demand (1) more people unemployed than there are job vacancies (1) may arise from a recession / economic downturn (1) may need government action to reduce it (1). Frictional unemployment would be reduced by a rise in labour mobility (1) cyclical unemployment would not be (1). Frictional unemployment may be short term (1) cyclical unemployment may be long term (1). 4 Up to 2 marks for each type of unemployment. Question Answer Marks Guidance 2(c) Analyse why the children of the rich tend to become rich adults. Coherent analysis which might include: The children of the rich tend to receive a good education (1) may not have to take part-time jobs / not have to help in family business when studying / not have to leave school early (1) become well qualified / well educated / gain high level of knowledge (1) become highly skilled / productive / efficient (1) find it is relatively easy to find employment / get a good job (1) well-paid (1). The children of the rich tend to receive good health care (1) good nutrition (1) have good housing (1) unlikely to miss time at school (1) unlikely to miss time at work (1) income will be high (1). The children of the rich tend to have high expectations (1) apply for better jobs (1). The children of the rich may inherit e.g. property (1) may gain income from e.g. inherited property / business / savings (1). Rich parents may have connections with e.g. bosses of major employers (1) more likely to gain high paid work (1). 6 Note the focus here is on the children of the rich so no marks for e.g. the children of the poor may lack education. Reference to highly skilled / productive or efficient may be linked to education, healthcare or nutrition but can only be credited once. Question Answer Marks Guidance 2(d) Discuss whether a government should provide subsidies to families to spend on housing. In assessing each answer, use the table opposite. Why it might: • will increase the spending power of families who receive it • may increase quantity supplied • may give low-income families access to a basic necessity, reducing poverty • may enable families to spend more on e.g. education • may increase employment / reduce unemployment, creating jobs building housing / increase labour mobility • may increase quality of housing and so improve health Why it might not: • rich can already afford housing • some families may not spend it on housing • may be inflationary, demand increasing for housing and e.g. furniture, carpets • opportunity cost • taxes may be raised to finance subsidy • building more houses may result in environmental damage 8 Level Description Marks 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sided of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at u sing economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0

This question in 0987/22 May/June 2021

4 Uganda specialises in agricultural products and has a relatively small secondary sector. In the 1990s, the Ugandan government privatised most of its firms, including banks and railways. Some economists thought this privatisation was unsuccessful because poverty increased and unemployment remained high. In recent years, the Ugandan government has used supply-side policy measures to reduce unemployment. (a) Define privatisation. [2] (b) Explain the difference between absolute poverty and relative poverty. [4] (c) Analyse how specialisation can benefit firms. [6] (d) Discuss whether or not the use of supply-side policy measures will reduce unemployment. [8]

20 marks

Mark scheme: 4(d) Explain the difference between absolute and relative poverty. Logical explanation which might include: Absolute poverty is a lack of basic necessities (1) e.g., food, clothing or housing / e.g. $1.90 a day (1).  Relative poverty is being poor in comparison to other people (in their country) (1) example of a measure such as less than 60 of average income / not able to participate fully in normal activities in their country (1). their basic needs but not their wants. 4(d) Analyse how specialisation can benefit firms. Coherent analysis which might include: Understanding of specialisation of a firm / workers become skilled at producing a particular product (1) lower cost of production (1) gain a good reputation / high quality of good or service (1) increase demand (1) increase output (1) raise revenue (1) increase profit (1). May enable firms to gain advantage of economies of scale (1) example (1) become (internationally) competitive (1). Easier to mechanise / improve technology (1) speeds up / faster production / become more efficient (1). 6 Maximum of one mark for any number of examples of economies of scale. Note that some students only write about division of labour which is not the question but some of the features also apply to specialisation of firms.

This question in 0987/21 May/June 2022

4 The South Korean government thinks that Japan is dumping steel. South Korean firms trade with, and produce in, other countries. Some South Korean multinational companies (MNCs) claim to reduce poverty in their host countries. In 2019, South Korean firms were affected by a depreciation in South Korea’s foreign exchange rate. Some firms also experienced a shortage of workers, which was influenced by the country’s very low birth rate. (a) Define dumping. [2] (b) Explain two reasons why a country’s foreign exchange rate may depreciate. [4] (c) Analyse how a MNC could reduce poverty in a host country. [6] (d) Discuss whether or not a very low birth rate would be a cause for concern for a government. [8]

20 marks

Mark scheme: 4(a) Define dumping. The sale of a product at less than cost price (1) in a foreign country (1) to gain a larger market share (1) to get rid of surplus stock / to prevent price falling on the domestic market (1). 2 Accept the sale of a product at a low price. 4(b) Explain two reasons why a country’s foreign exchange rate may depreciate. Logical explanation which might include: Inflation / fall in productivity (1) may make domestic products less internationally competitive / reducing net exports / reducing exports / increasing imports (1). Income at home may rise (1) increasing demand for imports / diverting products from the home market (1). Incomes abroad may have fallen (1) reducing demand for exports (1). The rate of interest may have fallen (1) discouraging an inflow of funds from other countries / encouraging an outflow of funds to other countries (1). There may be speculation that the currency will fall in value (1) selling the currency before it falls in value (1) Inward foreign direct investment may fall / outward fdi may increase (1) due to changes in economic activity (1). A central bank/government may sell the currency (1) to increase exports / reduce imports / improve the balance of payments (1). Increase in supply of currency (could be shown by a diagram) (1). Decrease in demand for the currency (could be shown on a diagram) (1). 4 One mark for each of two reasons identified and one mark for each explanation. A common response may be an increase in the supply of the currency (1) to buy more imports (1); A decrease in demand for the currency (1) if less exports are sold (1). Total = 4. Question Answer Marks Guidance 4(c) Analyse how a MNC could reduce poverty in a host country. Coherent analysis which might include: A MNC could increase employment / create job opportunities (1) some of the unemployed could gain jobs / unemployment could fall (1). It may pay higher wages / incomes may rise (1) increasing workers’ ability to buy products / buy basic necessities (1). It may provide accommodation (1) and healthcare for workers (1). It may provide infrastructure (1) making e.g. transport/energy more affordable (1). It may provide training / invest in education (1) enabling people to earn higher wages in the long run (1). It may sell products at a cheaper price (1) enabling more goods and services to be purchased (1). It may pay taxes to the government / tax revenue may rise (1) enabling the government to spend on measures to reduce poverty (1). 6 Question Answer Marks Guidance 4(d) Discuss whether or not a very low birth rate would be a cause for concern for a government. In assessing each answer, use the table opposite. Why it might:  may create an ageing population  may reduce size of the labour force in the future  may increase dependency ratio  may reduce tax revenue  may take population below the optimum level. Why it might not:  may maintain the size of the labour force in the short run as parents do not have to leave the labour force  may reduce overcrowding  may reduce pollution  may reduce depletion of non-renewable resources. 8 Level Description Marks 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall, both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 68 Question Answer Marks Guidance 4(d) 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 35 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 12 0 A mark of zero should be awarded for no creditable content. 0

This question in 0987/22 May/June 2022

3 In 2019, Russia had an unemployment rate of 4.6%. Russia experienced full employment in the past. Its government wants unemployment to be lower. In 2018, the Russian government cut its spending which may have increased poverty. In both 2018 and 2019, the government did not change its income tax rate. Russia operates a proportional tax rate system. (a) Define full employment. [2] (b) Explain the difference between a proportional income tax system and a progressive income tax system. [4] (c) Analyse why a cut in government spending might increase poverty. [6] (d) Discuss whether or not a fall in a country’s unemployment rate always benefits workers. [8]

20 marks

Mark scheme: 3(a) Define full employment. 2 One mark for idea of full employment of resources e.g. all workers in employment. The lowest unemployment possible (very low percentage) / job vacancies matching the number unemployed (2). Low unemployment (1). May still be some workers in between jobs / some frictional unemployment (1). Zero unemployment (1). 3(b) Explain the difference between a proportional income 4 Three marks maximum for proportional income tax system tax system and a progressive income tax system. and three marks maximum for progressive income tax system. Logical explanation which might include: Proportional income tax system takes the same percentage / proportion of income (1) from all income groups (1). In a proportional income tax rate system, the tax rate does not change (1) as income changes (1) has no effect on the distribution of income (1). Progressive income tax system takes a larger percentage / smaller percentage (1) of the income of the rich / the poor / places a larger burden on the rich (1) helps redistribute income from the rich to the poor / reduces the gap between rich and poor / may be used to promote equity (1). In a progressive income tax rate system, the tax rate increases (1) as income increases (1). 3(c) Analyse why a cut in government spending might 6 increase poverty. Coherent analysis which might include: A cut in government spending might reduce total demand (1) increasing unemployment (1) reducing incomes (1). Government spending on subsidies to firms might be reduced (1) which may raise prices (1). Government spending on education might be reduced (1) this might cause a decrease in skills (1) reducing wages (1) may lead to vicious cycle of poverty (1). Government spending on healthcare might be reduced (1) lowering productivity and wages (1). Government spending on state / unemployment benefits might be reduced (1) reducing goods and services that can be bought (1). Government spending on state pensions might be reduced (1) the old may not be able to buy basic necessities (1). 3(d) Discuss whether or not a fall in a country’s 8 Level Description Marks unemployment rate always benefits workers. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use of Why it might be: economic information and clear and • increase choice of jobs logical analysis to evaluate economic • increase wages issues and situations. One side of the argument may have more depth than • raise living standards the other, but overall both sided of the • increase job security argument are considered and • competition for workers may raise working conditions developed. There is thoughtful • more may be spent on training. evaluation of economic concepts, terminology, information and/or data Why it might not be: appropriate to the question. The • may be result of workers leaving the labour force e.g. discussion may also point out the emigrating possible uncertainties of alternative • may not benefit all workers as some may still be decisions and outcomes. unemployed • may not be high quality jobs 2 A reasoned discussion which makes 3–5 • may be low-paid jobs use of economic information and clear • may be temporary jobs analysis to evaluate economic issues and situations. The answer may lack • may cause inflation reducing real wages. some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0987/22 Oct/Nov 2022

2 Living standards, including education, have improved for most people in South Africa in recent years. Most households have more money and the government has more tax revenue. There is, however, considerable income inequality. In 2020, 36% of the population were living in poverty. An increase in unemployment benefit payments might reduce this poverty. (a) Identify two functions of money. [2] (b) Explain how improved education may affect the demand for cigarettes and for fresh fruit. [4] (c) Analyse the causes of an increase in a government’s tax revenue. [6] (d) Discuss whether or not an increase in unemployment benefit payments would reduce poverty. [8]

20 marks

Mark scheme: 2(a) Identify two functions of money. Two from:  Medium of exchange  Unit of account / measure of value  Store of value  Standard of deferred payments 2 Note: a description of the function, without the term, gets a mark e.g. money can be used to buy and sell products, may be used to trade. Nothing for characteristics of money. If more than two functions are given, consider the first three. 2(b) Explain how improved education may affect the demand for cigarettes and for fresh fruit. Logical explanation which might include: It may reduce demand for cigarettes (1) people may be better informed about harmful effects / cigarettes are a demerit good (1). It may increase demand for fresh fruit (1) people may be better informed about beneficial effects / fresh fruit is a merit good / may gain better paid jobs and so able to afford fresh food (1). 4 Only accept demand for cigarettes may increase if linked to higher income (resulting from improved education). One mark for each of two reasons identified and one for each of two explanations. Question Answer Marks Guidance 2(c) Analyse the causes of an increase in a government’s tax revenue. Coherent analysis which might include: Tax revenue is government income / part of government fiscal policy (1) which can be spent on government objectives e.g. education (1) Increase in employment (1) increase in income (1) More convenient (1) easier to pay (1) and collect the tax (1) higher income tax revenue (1) Increase in spending (1) higher indirect tax revenue (1) Increase in profits (1) higher corporation tax (1) Increase in population (1) more people to pay taxes (1) Change in tax rates (1) higher tax rates can increase revenue without a change in income / spending / profits (1) lower tax rates may reduce tax avoidance / evasion (1) increase incentives (1) Greater efficiency in tax collection (1) reduction in corruption / simpler forms (1) Wider tax base (1) more products / more people taxed (1) Increase in imports (1) higher revenue from tariffs (1). 6 Question Answer Marks Guidance 2(d) Discuss whether or not an increase in unemployment benefit payments would reduce poverty. In assessing each answer, use the table opposite. Why it might:  raise incomes of those on low incomes  may enable them to buy more basic necessities  may reduce absolute poverty  may increase total demand  higher total demand may reduce unemployment  Also enable them to seek education / become more employable Why it might not:  may be a disincentive to find employment  people may become dependent on benefits  will not help all those on low incomes e.g. the retired and the sick  may not reduce relative poverty  some of the unemployed may not claim benefits  opportunity cost – government could spend on e.g. education which might be more effective.  Size of unemployment benefit may be small and may be less than inflation 8 Level Description Marks 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall, both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and / or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0

This question in 0987/21 May/June 2023

1 (a) Calculate the number of people who were living in poverty in Guyana in 2020. [1] (b) Identify two causes of the decrease in the output of sugar in 2020. [2] (c) Explain how economic growth is measured. [2] (d) Explain two reasons why labour mobility may increase in Guyana in the future. [4] (e) Draw a demand and supply diagram to show the effect of a decrease in the price of rail transport on the market for car transport. [4] (f) Analyse the relationship between GDP per head and internet access. [5] (g) Discuss whether or not the discovery of oil is likely to increase living standards in Guyana. [6] (h) Discuss whether or not Guyana would benefit from an increase in the size of its population. [6]

30 marks

Mark scheme: 1(a) Calculate the number of people who were living in poverty in Guyana in 2020. 276 500 (1). 1 1(b) Identify two causes of the decrease in the output of sugar in 2020. Bad weather (1) falling (global) demand (1). 2 If more than two causes given, consider the first three. 1(c) Explain how economic growth is measured. Real (1) GDP / national / country’s output / income / expenditure (1). 2 If more than two ways given, consider the first three. Not accepting GDP per head for GDP. 1(d) Explain two reasons why labour mobility may increase in Guyana in the future. Logical explanation which might include: Increased government spending on education / improved education (1) improved skills / productivity / occupational mobility (1). Improved / cheaper rail travel / increased spending on infrastructure / improved infrastructure (1) easier to work further away / increased ability to work in other areas / increased geographical mobility (1). Increased government spending on the internet (1) people learn new skills / gain information about job opportunities / increase occupational mobility (1). May be net immigration (1) migrants may be skilled / may be more willing to move to different areas of the country (1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations. If more than two reasons given, consider the first three. Question Answer Marks Guidance 1(e) Draw a demand and supply diagram to show the effect of a decrease in the price of rail transport on the market for car transport. Demand and supply diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). Demand curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). 4 Question Answer Marks Guidance 1(f) Analyse the relationship between GDP per head and internet access. Coherent analysis which might include: Expected relationship: Direct / positive (1) the higher the GDP per head, the higher the internet access (1) Supporting evidence: Up to two marks E.g. Iceland with the highest GDP per head had the highest % of the population with internet access Eritrea with the lowest GDP per head had the least internet access France with the second highest GDP per head has the second highest % of population with internet access Analysis of expected relationship: Higher GDP per head increases household’s ability to pay for internet access / higher internet access may increase productivity/efficiency / increase job opportunities (1) higher GDP per head increases tax revenue, some of which can be spent on the provision of internet access / higher productivity/efficiency could increase wages (1). Exception: Guyana / Morocco (1) Guyana had a higher GDP per head but low internet access (1). Analysis of exception: Internet access is determined by other influences e.g. education levels (1). 5 Responses do not have to be in the format suggested but they should address the expected / normal relationship, offer supporting evidence of that, highlight any exceptions to that, and analyse the overall data. In terms of supporting evidence: no marks for just description of the figures e.g. Brazil had a GDP per head of $8717 and 72% of the population with internet access / Eritrea had a GDP per head of $643 and 2% of population with internet access. France had a GDP of $40 494 and 83% of the population with internet access etc. In terms of supporting evidence one mark maximum for an indirect comparison e.g. Iceland had a GDP per head of $66 945 and 99% population with internet access whereas in Zambia with a GDP per head of $1,305, only 29% of the population had access to the internet. Question Answer Marks Guidance 1(g) Discuss whether or not the discovery of oil is likely to increase living standards in Guyana. Award up to 4 marks for logical reasons why it might, which may include:  increase exports (1) increase economic growth / higher national output (1) and raise incomes / increase GDP per head (1) increase purchasing power / able to buy more goods and services / able to buy basic necessities (1) could reduce poverty (1)  create jobs / reduce unemployment / increase employment (1) discourage emigration / encourage immigration (1).  raise tax revenue (1) allowing the government to spend more on e.g. education and healthcare (1) MNCs may spend on e.g. improving infrastructure / training (1). Award up to 4 marks for logical reasons why it might not, which may include:  may create pollution (1) create external costs / damage the environment (1) which will harm people’s health / reduce life expectancy (1)  may be poor working conditions in the industry (1) affecting health of workers (1)  the foreign MNC may send much of the profit back to its country (1) it may drive domestic oil firms out of business (1) may deplete the country’s oil reserves (1)  the foreign MNC may employ workers from its own country (1)  global demand for oil may fall /may be overdependence on oil / other countries may impose trade restrictions on oil. (1) 6 3rd bullet point: increase in government spending should be linked to a form of spending that could increase living standards. Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Mark Tax revenue may decrease … 1 ... because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Marks Guidance 1(h) Discuss whether or not Guyana would benefit from an increase in the size of its population. Award up to 4 marks for logical reasons why it might, which may include:  population is below the optimum level / move to the optimum level (1), could make better use of resources (1)  if rise due to immigration (1) may bring in new ideas / new production methods / new skills / new technology (1)  an increase in the size of the labour force (1) if the number of people of working age increases (1) rise in tax revenue (1) allowing the government to spend more on e.g. education and healthcare (1)  consumer expenditure may increase (1) total (aggregate) demand may increase (1)  output could increase / cause economic growth / increase productive potential (1)  dependency ratio could fall (1) Award up to 4 marks for logical reasons why it might not, which may include:  larger population could result in pollution / congestion / overcrowding (1) damage the environment / increase external costs (1)  if rise due to fall in death rate or rise in the birth rate / increase in young / old population (1), the dependency ratio will increase (1) some of the extra population may be unemployed (1) 6 Question Answer Marks Guidance 1(h)  pressure may be put on e.g. housing / welfare payments (1) increasing need for government expenditure (1)  there may be inflation (1)  population may increase to the extent that there is overpopulation (1) resources may be depleted (more quickly) (1). 6

This question in 0987/22 May/June 2023

1 (a) Calculate what percentage of Honduran people did not have access to electricity in 2020. [1] (b) Identify two benefits the Honduran economy could gain from a growth in the US economy. [2] (c) Explain one advantage of an economy specialising. [2] (d) Explain two ways a government could redistribute income. [4] (e) Draw a demand and supply diagram to show how a report stating that bananas are good for health would affect the market for bananas. [4] (f) Analyse the relationship between the percentage of population living in poverty and life expectancy. [5] (g) Discuss whether or not the cost of producing clothes in Honduras will fall in the future. [6] (h) Discuss whether or not a fall in unemployment in Honduras is likely to cause inflation. [6]

30 marks

Mark scheme: Question Answer Marks Guidance 1(a) Calculate what percentage of Honduran people did not 1 Accept 8.0 or 8.3. have access to electricity in 2020. 8.3%. 1(b) Identify two benefits the Honduran economy could gain 2 If more than two benefits are given, consider the first three. from a growth in the US economy. Accept increase trade for more exports. Sell more exports to the US (1). Receive more money from Honduran workers in the US (1). Accept increase employment / lower unemployment for More job opportunities for Honduran workers in the US (1). more job opportunities. 1(c) Explain one advantage of an economy specialising. 2 One mark for an advantage identified and one mark an explanation. Gain skills (1) raise productivity / raise efficiency / ‘practice Identification mark must come directly from the source makes perfect’ / lower costs of production / raise quality / material. increase output / supply / less waste (1). A relevant explanation mark can be given even in the Gain a good reputation (1) increase demand (1). absence of an identification. 1(d) Explain two ways a government could redistribute 4 One mark each for each of two ways identified and one income. mark each for each of two explanations. Logical explanation which might include: If more than two reasons given, consider the first three. Provision of unemployment benefit / state benefit / welfare benefit / benefits (1) raise income of those on low or no One mark for taxing the rich and giving to the poor. income / enable the unemployed to buy basic necessities / reduce absolute poverty (1). Progressive income tax system (1) takes a higher proportion of the income of the rich / use some of tax revenue raised to increase spending to help those on low incomes (1). 1(e) Draw a demand and supply diagram to show how a 4 report stating that bananas are good for health would affect the market for bananas. Coherent analysis which might include: Demand and supply diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). Demand curve shifted to the right (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). If a candidate draws two diagrams, they may be able to get 3 marks: 1 mark for axes 1 mark for D & S labelled correctly 1 mark for the demand curve shifted to the right. They would not get the mark for the equilibriums as the two diagrams are likely to conflict on this. 1(f) Analyse the relationship between the percentage of 5 Responses do not have to be in the format suggested but population living in poverty and life expectancy. they should address the expected/normal relationship, offer supporting evidence of that, highlight any exceptions to that, Coherent analysis which might include: and analyse the overall data. Expected relationship: Inverse / negative (1) the higher the level of poverty, the lower the life expectancy / the lower the level of poverty, the higher the life expectancy (1). Supporting evidence: Sweden has the lowest % of population living in poverty and the highest life expectancy / The country / two countries / three countries / four countries with the lowest levels of poverty head had the longest life expectancy (1) the two countries, Chad and South Sudan, with the highest level of poverty had the lowest life expectancy (1). Analysis of expected relationship: A high level of poverty is likely to mean poor healthcare (1) low nutrition / poor housing / poor sanitation / low levels of education (1). Exception: Chad / South Sudan (1) Chad had a lower level of poverty but also a lower level of life expectancy than South Sudan (1) Analysis of exception: Life expectancy is determined by other influences e.g. wars (1). 1(g) Discuss whether or not the cost of producing clothes in 6 Allow higher productivity / efficiency once either in Honduras will fall in the future. connection with labour or capital. Some points may be given in reverse e.g. price of raw Award up to 4 marks for logical reasons why it might, which materials may fall. may include: Not accepting subsidising the clothes industry as the source • more training (1) better working conditions (1) may material indicates that it is a successful industry. increase labour productivity / efficiency / skills (1) reduce labour costs (1) Apply this example to all questions with the command • more use of capital goods (1) may reduce disruption to word DISCUSS production / make fewer mistakes / less waste (1) speed (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) up production / increase productivity / efficiency (1) • improved working conditions (1) may reduce industrial Each point may be credited only once, on either side of an action (1) more motivation (1) argument, but separate development as to how/why the • successful clothes industry so firms may grow in size (1) outcome may differ is rewarded. more able to take advantage of economies of scale (1). Generic example Mark Award up to 4 marks for logical reasons why it might not, which may include: Tax revenue may decrease… 1 • price of raw materials may rise (1) may be subject to bad weather (1) exchange rate may fall / tariffs may be ...because of reason e.g. incomes 1 imposed on imported raw materials (1) reduce supply may be lower. (1) country has experience of inflation (1) • unemployment may fall (1) making it more difficult for Tax revenue may increase 0 the clothes industry to recruit labour (1) strengthening because incomes may be higher the bargaining power of workers (1) raising wages / i.e. reverse of a previous increasing labour costs (1) argument. • providing training (1) and better working conditions will involve a cost (1) Tax revenue may increase 1 • more use of capital goods may involve initial high because of a different reason i.e. not the reverse of a previous spending on equipment (1) firms may experience argument e.g. government diseconomies of scale (1) • higher indirect tax / tax may be imposed (on clothes / spending on subsidies may stimulate the economy more than clothes firms) (1). spending on education. 1(h) Discuss whether or not a fall in unemployment in 6 Honduras is likely to cause inflation. Award up to 4 marks for logical reasons why it might, which may include: • unemployment is already low (1) may move towards full employment (1) may push up wages (1) increase (average) costs (1) cause cost-push inflation / total supply less than total demand (1) • lower unemployment may increase incomes (1) causing a rise in consumer spending / purchasing power (1) increasing total demand (1) causing demand-pull inflation / total demand higher than total supply (1). • inflation already exists (1) which may lead workers to expect it to continue (1) increasing wage claims (1). Award up to 4 marks for logical reasons why it might not, which may include: • may be higher investment (1) could increase total supply / total supply may rise in line with total demand (1) reducing cost-push inflation (1) • lower unemployment could reduce spending on unemployment benefit (1) increase tax revenue (1) reduce the budget deficit (1) reduce the growth in total demand (1) some of higher tax revenue could be spent on supply-side policy / unemployment may have fallen due to supply-side policy (1) • the extra income may be saved / spent on imports (1) due to uncertainty about the future (1) • A fall in unemployment does not necessarily mean a rise in employment (1) the unemployed could have e.g. retired / emigrated (1).

This question in 0987/22 Oct/Nov 2023

2 In 2020, wages paid to Mexican workers, including those in the primary sector, fell. This fall contributed to a 9% rise in poverty in the country. In the same year, many small and medium-sized firms closed down. The country also suffered from traffic congestion. Its capital, Mexico City, is the world’s most congested city. (a) Identify two possible opportunity costs of producing primary sector products. [2] (b) Explain two policy measures which may reduce poverty. [4] (c) Analyse how the closure of firms may harm consumers. [6] (d) Discuss whether or not a government should encourage people to walk to school and work. [8]

20 marks

Mark scheme: 2(a) Identify two possible opportunity costs of producing primary sector products. Secondary sector products / capital goods / manufactured goods (1) tertiary sector products / services (1) Wildlife habitats/quality of the ecosystem (1) 2 If more than 2 are given, consider the first 3. 2(b) Explain two policy measures which may reduce poverty. Logical explanation which might include: Introduce / increase minimum wage (1) help low-paid workers / raise income of low-paid workers (1). Provide state benefits (1) e.g. unemployment benefit can enable those who have lost their jobs to purchase basic necessities (1). Reduce indirect taxation (1) tax on goods and services tends to fall more heavily on the poor (1). Provide education / training (1) increase earning potential / income / employment opportunities (1). Job creation schemes / increase jobs in the public sector (1) e.g. expanding state-owned firms / increase employment / raise incomes / subsidising private sector firms (1) lower prices (1). Reduction in interest rate / expansionary monetary policy (1) encouraging firms to expand / take on more workers (1). Increase in government spending (1) increase employment opportunities (1). Reduce direct taxation / expansionary fiscal policy (1) which may encourage firms to expand and take on more workers / increase disposable income (of the poor) (1). Progressive taxes (1) reduce relative poverty (1). Provide job information (1) reduce frictional unemployment (1). Introduce a maximum price (1) to make necessities more affordable (1). 4 One mark each for each of two policy measures identified and one mark for each of two explanations. If more than 2 policy measures are given, consider the first 3. Explanation marks e.g. reduce unemployment can be given without identification of policy measure as a candidate may write e.g. use a policy measure that will reduce unemployment. Question Answer Marks Guidance 2(c) Analyse how the closure of firms may harm consumers. Coherent analysis which might include: May reduce competition (1) increase monopoly power / market share (1) may result in higher prices (1) may not innovate / spend on R&D / become inefficient / complacent (1) lower quality (1) slower to respond to changes in consumer demand (1). May mean that consumers have to travel further to purchase products (1) may take time to find alternatives (1) there may be a reduction in the range of products available / less choice / less variety (1) lower quantity / it may not be possible to buy some products (1). May reduce consumer confidence (1) lowering quality of life / reduce consumer welfare / living standards (1). May reduce external economies of scale (1) example (1) raise average cost (1) which may raise price (1). 6 Focus should be on consumers. One mark in total for higher price. Question Answer Marks Guidance 2(d) Discuss whether or not a government should encourage people to walk to school and work. In assessing each answer, use the table opposite. Why it might:  may make people healthier  may raise productivity  may reduce healthcare costs  may reduce pollution and traffic congestion  may be less need for car parking space. Why it might not:  may not be safe  may make people late  may increase stress and lower productivity  may reduce demand for bus and train use  may cause some bus and train drivers to lose their jobs  may restrict job choice due to distance from home. 8 Level Description Marks 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 Question Answer Marks Guidance 2(d) Level Description Marks 0 A mark of zero should be awarded for no creditable content. 0

This question in 0987/22 May/June 2024

2 The shape of Colombia’s population pyramid is changing. The income distribution of this South American country, however, is not changing significantly. The country has one of the most unequal income distributions in the world. Some Colombians work in its footwear industry which produces shoes, sandals and boots. Although footwear is produced in the private sector, Colombia has a mixed economic system. (a) Define population pyramid. [2] (b) Explain two reasons why income may become more unevenly distributed. [4] (c) Analyse the influences on whether demand for shoes is elastic or inelastic. [6] (d) Discuss whether or not a mixed economic system will benefit the people who live in that economy. [8]

20 marks

Mark scheme: 2(a) Define population pyramid. 2 If more than two factors given, consider the first three. age (1) gender (1) 2(b) Explain two reasons why income may become more 4 One mark each for each of two reasons identified and one unevenly distributed. mark each for each of two explanations. Logical explanation which might include: If more than two reasons given, consider the first three. A rise in: MAX of two marks if not identifying what changes. • Unemployment (1) those who lose their jobs are likely to experience a fall in their income (1). • Illness (1) the sick may not be able to earn an income (1). • Profits (1) benefitting entrepreneurs (1). • Interest rates (1) benefitting those with a high value of savings (1). • Wealth (1) with rich people gaining more interest/profit (1). • Regressive taxation (1) reducing the income of the poor/placing greater burden on poor (1). • Discrimination of workers (1) example e.g. reducing income of women • Education provision / attainment (1) but only for some (1). A fall in: • National minimum wage (1) the low-paid experience a fall in income (1). • Progressive taxation (1) increases the income of the rich (1). • Welfare / state benefits (1) reduce the income of the poor (1). 2(b) Growth: 4 • Economic growth (1) benefits go more to skilled than to unskilled workers (1). • Changes in growth rate of different industries (1). workers in expanding industries may earn more in wages than workers in declining industries (1). • Changes in growth rate of different regions (1) workers in high growth areas may earn higher wages than in low growth / declining regions (1). • Changes in growth rate of private and public sector (1) private sector earn higher increase in wages (1). 2(c) Analyse the influences on whether demand for shoes is 6 elastic or inelastic. Coherent analysis which might include: • Shoes have substitutes in the form of sandals and boots (1) may make demand (price) elastic (1) as a change in price will cause consumers to switch between different forms of footwear (1) especially if the types are close substitutes / close in price (1). • PED of particular brands of shoes will be more elastic than demand for shoes as a whole (1) • Proportion of income spent on the shoes (1) the lower the proportion, the more inelastic the demand (1) as a change in price will not have such a significant impact on demand (1). • Whether shoes are considered to be a necessity or a luxury (1) shoes are likely to be considered a necessity (1) and therefore inelastic (1). • It may not be possible to delay the purchase of shoes (1) making demand inelastic (1). • Durability of shoes (1) the more durable the more inelastic (1). • Demand for some shoe may be addictive (1) making demand inelastic (1). 2(d) Discuss whether or not a mixed economic system will 8 Level Description Marks benefit the people who live in that economy. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use of Why it might: economic information and clear and • public goods may be provided logical analysis to evaluate economic • production of demerit goods may be discouraged issues and situations. One side of the • production of merit goods may be encouraged argument may have more depth than • state benefits may be provided the other, but overall both sides of the • income may be redistributed to help the poor argument are considered and • unemployment may be kept low by government policies developed. There is thoughtful • private sector benefits e.g. generate high incomes / evaluation of economic concepts, lower prices. terminology, information and/or data appropriate to the question. The Why it might not: discussion may also point out the • may be market failure in the private sector possible uncertainties of alternative • rich may lose if there is high progressive taxation decisions and outcomes. • high taxation may discourage enterprise • state-owned enterprises may be inefficient 2 A reasoned discussion which makes 3–5 • may be less choice in the public sector. use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 2(d) 8 Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0987/21 May/June 2025