Read the source material carefully before answering Question 1. Source material: Will Germany continue to be a strong economy? Population fact file 2017 Germany world population 81 million 7.5 billion percentage of population aged over 65 22.0% 8.5% average age 47.4 years 30.6 years Germany is a country with a trade surplus and a high GDP per head. It also has a budget surplus (government tax revenue greater than expenditure), a high HDI and a low inflation rate. In recent years, German firms have exported a higher value of goods and services. This has contributed to the growth of world trade, caused partly by a fall in transport costs. A relatively large number of German firms produce both in Germany and in other countries, helped by better communications. Germany is a major producer and exporter of luxury cars. Demand for luxury cars was influenced in 2018 by increases in incomes in Germany and abroad, a rise in the price of US luxury cars and, in some countries, a fall in the price of petrol. Improvements in the quality of education and information on job vacancies have made it easier for workers to change jobs in Germany. This greater ability to change jobs has helped to reduce unemployment and to increase the country’s output. Fewer workers in the German car industry are now members of a trade union. As shown in Table 1.1, trade union membership in Germany has declined in recent years. Table 1.1 selected data on the German labour market 2013–2016 Year Trade union membership (millions) Size of labour force (millions) Unemployment rate (%) Average annual wage ($) 2013 18.0 42.2 5.4 40 567 2014 17.7 42.5 5.1 41 188 2015 17.6 42.8 4.8 42 084 2016 17.0 43.3 4.3 42 708 A challenge facing Germany is its ageing population. The effect of an older labour force is uncertain. It may mean firms become reluctant to invest in new technology, but a shortage of young workers may encourage firms to buy more capital goods. Germany’s population may fall and there will soon be fewer Germans aged under 30 than over 60 unless immigration continues at a relatively high rate. Immigration might increase both the country’s labour force and its government’s spending on education. Answer all parts of Question 1. Refer to the source material in your answers. 1 (a) Calculate the number of Germans aged over 65 in 2017. [1] (b) Identify two measures of living standards. [2] (c) Explain one cause of globalisation. [2] (d) Explain two advantages of an increase in the occupational mobility of labour. [4] (e) Analyse why the price of German luxury cars may have increased in 2018. [4] (f) Analyse whether the strength of German trade unions increased from 2013–2016. [5] (g) Discuss whether or not an ageing labour force will reduce productivity. [6] (h) Discuss whether or not immigration will increase a country’s budget surplus. [6]

1(a) Calculate the number of Germans aged over 65 in 2017. 17.82m / 17 820 000 (1). 1 Accept 17.8 m and 18 m. 1(b) Identify two measures of living standards. Two from: • GDP per head / average income • HDI • quality of education / education 2 If more than two are given, consider the first two. 1(c) Explain one cause of globalisation. Fall in transport costs (1) reducing costs of exporting and importing / increasing international trade (1). Improvement in communications (1) due to advances in technology / increasing growth in MNCs / encouraging consumers to buy from other countries / enabling branches in different countries to keep in touch (1). 2 One mark for the cause identified and one mark for the explanation. 1(d) Explain two advantages of an increase in the occupational mobility of labour. Logical explanation which might include: Lower unemployment / increase employment (1) workers losing one job will find another job more quickly / find another job more easily / maybe more skilled / reduce frictional unemployment / reduce structural unemployment (1). Higher output / higher GDP / economic growth (1) firms experiencing higher demand will be able to expand more quickly / more elastic supply / quicker adjustment to changes in market conditions / workers may be able to multitask / change roles / may be more skilled / fewer unfilled vacancies / greater use of resources / fewer idle resources (1). 4 One mark each for each of two advantages identified and one mark each for each of two explanations. Do not credit ‘more skilled’ more than once. 1(e) Analyse why the price of German luxury cars may have increased in 2018. Coherent analysis which might include: Increase in demand (1) rise in incomes (1) people buy more luxury cars as they get richer / luxury cars become more affordable (1). rise in price of US luxury cars (1) these are substitutes to German luxury cars (1). Fall in the price of petrol / gas (1) petrol / gas is a complement to cars (1) firms can raise revenue / profits by increasing price (1). Decrease in supply (1) rise in wages (1) increasing costs of production (1). 4 1(f) Analyse whether the strength of German trade unions increased from 2013–2016. Coherent analysis which might include: Overview Trade union membership fell (1) unemployment fell and / or wages rose (1). Analysis of why trade union strength may have fallen Trade union members represented a smaller proportion of labour force / proportion fell from 42.7% to 39.3% / number of members fell by approx. 5.6% (1). Fewer members so funds of / subscriptions to trade unions may have fallen (1) reduces ability to take industrial action / reduces collective bargaining strength (1). Lower unemployment / higher wages may mean workers feel less need to join a union (1). Analysis of why trade union strength may have increased Lower unemployment / higher wages may be the result of successful collective bargaining (1) firms would have found it more difficult to replace members asking for better wages / better working conditions / firms may be reluctant to dismiss staff (1) industrial action would have more effect / collective bargaining power may be stronger (1). Output / profits / demand for products may have increased (1) Comments. Other factors may have influenced trade union power e.g. government trade union legislation (1). Other factors may have influenced wages / unemployment e.g. national minimum wage / higher output /more skilled labour force (1). 5 1(g) Discuss whether or not an ageing labour force will reduce productivity. Award up to 4 marks for why it might: • May discourage investment (1) workers will have less capital equipment to work with (1). • Older workers may find it more difficult to adapt to new technology (1) may resist change (1) there may not be the time to train them (1) may be less mobile (1). • Older workers may be less fit (1) less able to do manual work (1) may have time off sick (1) may have less energy / get tired (1) work slower (1). Award up to 4 marks for why it might not: • May encourage investment because of shortage of workers / desire to rely less on labour / help workers (1). • Older workers may have more experience (1) built up more skills / qualifications (1) may need less training / have received more training (1) may train young workers (1) make fewer mistakes / produce better quality output (1). • May be more reliable (1) e.g. better punctuality (1). • May stay with the employer longer / lower rate of labour turnover (1). 6 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 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 1(h) Discuss whether or not immigration will increase a country’s budget surplus. Award up to 4 marks for reasons why it might: • May increase size of the labour force (1) quality of the labour force may rise (1) employment may rise (1) more people with incomes (1) higher tax revenue (1) more income tax / direct tax revenue (1) more spending / higher total demand (1) more indirect tax revenue (1) higher profits may increase corporate tax revenue (1). Award up to 4 marks for reasons why it might not: • Some immigrants may be dependents (1) some may be unemployed (1) increase government spending on state benefits / unemployment benefits (1) pensions (1). • The government may have to spend more on education (1) healthcare (1) housing / infrastructure (1). • Labour force / population may not increase if matched by emigration (1), • Larger population size may result in the government having to spend more on measures to reduce pollution (1). 6 Increase in the size of the labour force linked to why it might.

Read the source material carefully before answering Question 1. Source material: Chilean cherries Producing just a few products can be risky for a country. Fig. 1.1 Population pyramids of Chile and Haiti 2018 Content removed due to copyright restrictions. Content removed due to copyright restrictions. There is, however, evidence of market failure and inequality in how resources are allocated. Answer all parts of Question 1. Refer to the source material in your answers. 1 (a) Calculate Chile’s agricultural output in 2017. [1] (b) Identify two disadvantages of a country specialising. [2] (c) Explain one reason why demand for cherries is price-elastic. [2] (d) Explain how Chile’s population structure differs from Haiti’s population structure. [4] (e) Analyse why China buys most of its cherries from Chile. [4] (f) Analyse why Chilean astronomers are paid more than Chilean farm workers. [5] (g) Discuss whether or not Chilean consumers would benefit from more government intervention in the economy. [6] (h) Discuss whether or not the Haitian economy would benefit from fewer of its people working in Chile. [6] Content removed due to copyright restrictions.

1(a) Calculate Chile’s agricultural output in 2017. $11.76bn / $11 760 000 000 / $11 760m (1). 1 Accept $11.8bn and $12bn. $ is not essential. 1(b) Identify two disadvantages of a country specialising. Two from: • demand may fall / new competitors may appear • supply/output may fall / diseases / natural disasters / bad weather may affect agricultural output / costs may rise • non-renewable resources may run out • structural unemployment may occur • reliance on imports no longer produced by home country / overdependency on other countries 2 One mark each for each of two disadvantages. Rely on a small number of industries is not sufficient. 1(c) Explain one reason why demand for cherries is price-elastic. A luxury product (1) they do not have to be purchased / not essential / not a necessity (1). Has close substitutes (1) example / rise in price will cause some people to switch to rival products (1). 2 In terms of close substitutes, also accept: fall in price will cause some people to switch towards this product and away from rival products. One mark for the reason identified and one mark for the explanation. A candidate who writes a luxury product and has close substitutes and no more has identified two reasons, so just one mark. If a candidate identifies one of the two reasons but does not explain it and then identifies the second reason and explains it, the second reason can be taken and with the explanation, 2 marks. 1(d) Explain how Chile’s population structure differs from Haiti’s population structure. Logical explanation which might include: Chile has a higher proportion of its population aged over 65 / Haiti a lower proportion aged over 65 (1). Chile has a lower proportion of the population aged under 15 / Haiti has a higher proportion aged under 15 (1). Chile is likely to have a lower birth rate / Haiti is likely to have a higher birth rate (1). Chile likely to have a lower death rate / Haiti is likely to have a higher death rate (1). Chile’s population pyramid indicates a relatively high level of development/high income country / Haiti’s population pyramid indicates a relatively low level of development/low income country (1). Chile’s population pyramid is less pyramid shaped / more stationary / constrictive / bulges out in the middle / more egg-shaped / Haiti’s is more pyramid shaped / more expansive (1). Lower dependency ratio in Chile / higher dependency ratio in Haiti (1). Higher proportion of population of working age in Chile / lower proportion of population of working age in Haiti (1). Higher population size in Chile / lower population size in Haiti (1). 4 Accept for the first and second points other relevant age ranges e.g. over 60, under 10. Accept longer life expectancy for lower death rate and shorter life expectancy for higher death rate. Note that each country overall has more females than males, so not a difference. 1(d) Chile has a higher average age / older population / Haiti has a lower average age population / younger population (1). 1(e) Analyse why China buys most of its cherries from Chile. Coherent analysis which might include: Chile has high production standards (1) cherries are likely to be of a high quality (1). China does not impose tariffs on Chilean cherries (1) may keep their price low (1). 4 Free trade agreement on its own is not sufficient. 1(f) Analyse why Chilean astronomers are paid more than Chilean farm workers. Coherent analysis which might include: Most astronomers have a university degree (1) high cost of training/ long period of training (1) well qualified / well educated / high level of knowledge (1) highly productive / highly skilled / efficient (1) in short supply (1) high demand (1) more inelastic demand (1) more inelastic supply (1). Most work in the public sector (1) government may be more willing / able to pay higher wages (1) public sector workers are more likely to belong to a trade union (1) have stronger bargaining power (1). 5 Also accept an approach based on an analysis of why Chilean farm workers are paid less than Chilean astronomers. This may include reference to immigrant farm workers who may be prepared to accept relatively low wages and Chilean farm workers being replaced by capital equipment / more replaceable than astronomers. 1(g) Discuss whether or not Chilean consumers would benefit from more government intervention in the economy. Award up to 4 marks for why they might: • evidence of market failure (1) • merit goods may be underproduced (1) as under- consumed (1) • demerit goods may be overproduced (1) as overconsumed (1) • external costs could be reduced (1) external benefits may be increased (1) external costs / external benefits are not taken into account by the private sector (1) • public goods may not be produced (1) no profit incentive to make them (1) as there can be free riders (1) • inequality (1) poor consumers may lose out / there may be poverty (1) resources may not be devoted to producing what the poor need (1) may not be able to afford prices charged (1) • government subsidies (1) can lower prices (1) • government could set maximum prices (1) lower prices of necessities (1) • government could control (private sector) monopoly power (1) prevent abuse of market power (1) • government investment in education (1) could lower prices / raise quality of output (1). Award up to 4 marks for why they might not: • government failure may occur (1) e.g. government may lack information (1). • market forces can provide wide choice of products (1) may be consumer sovereignty (1) 6 Apply this example to all questions with the command word DISCUSS (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) Not taking lower taxes, lower subsidies or reduced immigration controls as a form of government intervention. 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 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 1(g) • profit incentive (1) industries may respond to changes in consumer demand (1) • efficient industries (1) prices may be low (1) quality may be high (1) • government intervention in the form of nationalisation (1) may reduce competition (1). • government taxes / tariffs / regulation / minimum wages (1) may increase costs (1) raise prices (1) • maximum prices could reduce availability of products (1) • government limits on immigration (1) may reduce availability of products / raise prices (1) 1(h) Discuss whether or not the Haitian economy would benefit from fewer of its people working in Chile. Award up to 4 marks for why it might: • wages may be low in Chile (1) work involves unskilled labour (1) • employment may be rising in Haiti (1) the country could keep more of its skilled workers (1) • larger labour force / more workers (1) higher total demand (1) increase GDP / increase economic growth / increase productive potential (1) increase living standards (1) increase exports (1) • rise in the numbers employed in Haiti could increase tax revenue (1) may enable more spending on e.g. education (1) • fewer parents may leave behind dependent relatives (1) reduce burden on the government (1) • jobs could be found in other countries (1) Award up to 4 marks for why it might not: • wages may be higher in Chile (1) fewer emigrant workers may send money home (1) living standards may be lower (1) lower spending (1) • less money coming into the country (1) may increase a current account deficit (1) • job opportunities may be higher in Chile (1) unemployment may rise in Haiti (1) • if unemployment rises in Haiti, cost of unemployment benefits may rise (1) opportunity cost / higher taxation (1) • opportunities to gain new skills may be reduced (1) these skills could be brought back into the country (1) 6 For an approach which discusses whether or not the Haitian economy benefits from its people working in Chile, award a maximum of 3 marks. 1(h) • may reduce pressure to invest / spend on capital equipment (1) reduce advances in technology / reduce increases in efficiency / productivity (1) • may increase overcrowding / overpopulation (1) increase external costs / pollution (1) pressure on resources (1).

Read the source material carefully before answering Question 1. Source Material: Laos, a land-locked country Laos fact file 2017 GDP $16.85 billion total exports $2.04 billion percentage of Laos’ exports sold to China 58% GDP growth rate 6.9% adult literacy rate 85% Laos is a land-locked country, surrounded by Vietnam, Cambodia, Thailand, Myanmar and China. Access to seaports helps an economy take full advantage of international trade. The economy of Laos has grown rapidly since the government initiated free market reforms, with an average growth rate of approximately 7% annually in the last 10 years. The free market reforms have encouraged Laos to sell their abundant raw materials internationally and also attracted foreign investment. Laos has large deposits of copper which are in high demand by global manufacturing industries. A new rail link connecting China and Laos is expected to make such transactions easier. The government of Laos has also put a lot of emphasis on education. The adult literacy rate of both males and females has increased from 60% to 85% over the last 20 years. The financial sector, including commercial banks, is growing. This has enabled local entrepreneurs to borrow money and encouraged more households to save. However, investors are still uncertain about investing in Laos. There are strict rules and regulations for foreign investors, especially in industries such as mining. The government says the regulations are needed to avoid market failures, such as external costs, and abuse of monopoly power. However, these rules and regulations are sometimes unclear. Laos is one of the lowest in the World Bank’s Ease of Doing Business index, which measures how easy it is to start up and run a business in a country. Fig. 1.1 shows the Ease of Doing Business ranking (1 = easy) and GDP per head of selected countries in 2018. Country Ease of Doing Business ranking GDP per head ($) Singapore 2 64 581 South Korea 5 31 362 Malaysia 15 11 239 Brunei 55 31 627 Laos 154 2567 Timor-Leste 178 2035 Fig. 1.1 The Ease of Doing Business ranking and GDP per head ($) of selected countries in 2018 The recent economic slowdown of China may have harmful effects on Laos. China is Laos’s largest trading partner and also the largest source of foreign investment into Laos. Answer all parts of Question 1. Refer to the source material in your answers. 1 (a) Calculate, in $, the total exports of Laos to China in 2017. [1] (b) Identify two roles of commercial banks. [2] (c) Explain how access to seaports may benefit an economy. [2] (d) Explain two benefits of the free market reforms introduced by the government of Laos. [4] (e) Analyse the impact of improved education on the economy of Laos. [4] (f) Analyse the relationship between a country’s Ease of Doing Business ranking and its GDP per head. [5] (g) Discuss whether or not strict rules and regulations benefit an economy. [6] (h) Discuss whether or not a slowdown of China’s economy will be harmful to the economy of Laos. [6]

1(a) Calculate, in $, the total exports of Laos to China in 2017. 1.1832 billion / 1 183 200 000. 1 Accept 1.18 or 1.2 billion. 1(b) Identify two roles of commercial banks. Helps local entrepreneurs to borrow money (1). Encourages households to save / enables households to save (1). 2 Accept loan / lending 1(c) Explain how access to seaports may benefit an economy. Enables an economy to take full advantage of international trade / take greater advantage of international trading opportunities (1) enables immigration of skilled workers (1) Can export and import goods (1) goods can be transported more cheaply (than by rail or air / over longer distances) / may encourage specialisation (1) increases consumer choice (1). May encourage investment (1) attract MNCs (1) create economic growth (1) 2 1(d) Explain two benefits of the free market reforms introduced by the government of Laos. The free market reforms have enabled Laos to sell their abundant raw materials internationally (1) increases export revenue / improves current account balance / creates employment / encourages firms to expand / increases GDP (1). Encourages foreign investment (1) may lower costs of production / increases total demand / improves current account balance / creates employment / increase tax revenue (1). 4 One mark each for each of two benefits identified and one mark each for each of two explanations. Accept improved infrastructure. 1(e) Analyse the impact of improved education on the economy of Laos. Increased adult literacy rate (1) better skills/qualifications (1) increase productivity (1) / increase productive capacity / total supply (1) increase demand for labour (1) reduce unemployment / raise employment (1) raise wages (1) reduce poverty (1). More attractive for entrepreneurs / new businesses / investment (1) increase output / GDP (1) leading to higher living standards (1). Improvements in technology (1) due to workers having higher IT skills (1) Increase the consumption of merit goods / decrease the consumption of demerit goods (1) 4 1(f) Analyse the relationship between a country’s Ease of Doing Business ranking and its GDP per head. Expected relationship: Positive / direct (1) if ease of doing business (EDB) rank is high, GDP per capita is high (1). Supporting evidence: Singapore has the highest EDB rank and GDP per capita is highest (1) Timor-Leste has the lowest EDB rank and GDP per capita is the lowest (1). Exception: Brunei / Malaysia (1) has lower EDB rank than Malaysia but higher GDP per head (1). Alternatively South Korea / Brunei (1) Brunel has lower EDB rank but higher GDP per head (1). Analysis: The greater the ease of doing business, the more investment there is likely to be (1) higher investment is likely to increase GDP (1). 5 1(g) Discuss whether or not strict rules and regulations benefit an economy. Award up to 4 marks for logical reasons why they might, which could include: • Environmental rules (1) e.g. cap on carbon emission, tax on polluting industries (1) reduce market failure (1) reduce external costs (1) e.g. could decrease pollution / protect natural resources (1) less health problems for the society (1) better standards of living (1). • Anti-competition rules (1) e.g. restrictions on monopoly power (1) improved consumer choice / lower prices / better quality (1) foreign companies will not dominate the market (1) opportunities for domestic firms to develop (1) increased future economic growth (1). • Restrictions on imports (1) may protect domestic industries / allow growth of domestic industries (1). • Bans e.g. prohibiting smoking in public places (1) may reduce market failure / reduce external costs (1). • Labour market legislation (1) protecting workers’ rights (1). Award up to 4 marks for logical reasons why they might not, which could include: • Strict regulation discourages business (1) Laos ranks one of the lowest in the World Bank’s Ease of Doing Business index (1) lack of investment / MNCs discouraged (1) lower productivity (1) lack of competition (1) lack of employment opportunities (1) decreased total demand (1) decreased economic growth / lower GDP (1) lower standards of living (1). 6 Apply this example to all questions with the command word Discuss (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) 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 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 1(g) • Bureaucracy / red tape increases the time and effort of doing business (1) increases cost of production (1) lowers profit (1). • Rules and regulations may lack clarity (1) causing them to be implemented incorrectly (1) • Takes time for the government to administer rules and regulations (1) opportunity cost of government spending (1). • Import restrictions reduce competition (1) may result in higher prices (1) lower quality (1) 1(h) Discuss whether or not a slowdown of China’s economy will be harmful to the economy of Laos. Award up to 4 marks for logical reasons why it might, which might include: • China is Laos’s largest trading partner / 58% of Laos’s exports are sold to China (1) China slowing down will lead to less demand for Laos’s exports (1) less export revenue / worsen current account (1) less total demand (1) less economic growth (1) may not be able to buy more, irreplaceable imports (1). • China is the largest source of foreign investment into Laos (1) less foreign investments will lead to less job creation (1) less employment / higher unemployment (1) lower standards of living (1). Award up to 4 marks for logical reasons why it might not, which might include: • Reduce dependence on China (1) find new markets and investors (1) other countries’ economies could be expanding (1) which could generate more exports (1) and jobs (1). • May lead to fewer environmental problems (1) less pollution (1) higher standard of living (1). • Domestic investors and firms could fill the gap (1) more employment (1) higher GDP (1). 6

Section A Read the source material carefully before answering Question 1. Source material: India’s airline industry Air India fact file total revenue 2018 $2.2 bn total cost 2018 $2.9 bn number of passengers carried in 2018 16.4 m number of passengers carried in 2017 14.8 m share of India’s international and national air travel market in 2018 13% share of India’s international and national air travel market in 1994 100% Air India is owned by the Indian government. The entry of new firms into India’s air travel market has reduced Air India’s ability to set price. The state-owned firm faces competition not only from other airlines but also from other forms of transport including trains and ships. In 2017 the Indian government tried, unsuccessfully, to sell Air India to the private sector. A successful sale would have raised money for the Indian government and might have increased the airline’s efficiency. It is predicted that India will have the third largest airline industry by 2025. The growth in the industry may affect the current account position of India’s balance of payments. Table 1.1 shows the current account position in India and four other countries. Table 1.1 The current account position of the balance of payments of selected countries in 2017 Country Current account ($ bn) Current account % of GDP Brazil –9.8 –0.5 China 164.9 1.4 India –48.7 –1.9 Kenya –5.4 –6.8 Russia 35.4 2.2 A rise in both the number of routes flown and the quality of the passenger experience may increase the number of tourists visiting India. A larger Indian airline industry is likely to increase the ease of movement of people and goods into and out of India. This might attract more multinational companies (MNCs) and reduce firms’ costs of production. India’s air travel market faces a number of challenges. India has Asia’s highest airline fuel tax. Some economists suggest that this should be increased further to increase tax revenue and to reduce market failure. The airlines’ other costs are rising but it is difficult for them to raise prices. This is because India’s air passengers are among the most price-sensitive in the world. Some airlines stop their costs rising any further by improving their staff training, introducing new technology and improving their pilots’ working conditions. The airlines’ ability to hire pilots is influenced by, among other factors, the quality of education and other job opportunities. Answer all parts of Question 1. Refer to the source material in your answers. (a) Calculate, in $, Air India’s loss in 2018. [1] (b) Identify two substitutes for air travel. [2] (c) Explain one characteristic that suggests that Air India was a monopoly in 1994. [2] (d) Explain two reasons why a government may privatise an industry. [4] (e) Analyse how India’s position on the current account of its balance of payments in 2017 compares with the other four countries. [4] (f) Analyse how a successful airline industry can promote economic growth. [5] (g) Discuss whether the Indian government should increase the tax on airline fuel. [6] (h) Discuss whether more people will apply to be pilots for Indian airlines in the future. [6]

1(a) Calculate, in $, Air India’s loss in 2018. 0.7bn, 700m, 700 000 000. 1 7 × 10 to the power 8. 7 × 10ˆ8. 1(b) Identify two substitutes for air travel. Trains (1) ships (1). 2 For ‘ships’ accept water travel. 1(c) Explain one characteristic that suggests that Air India was a monopoly in 1994. Share of the market was 100% (1) only firm / share above 25% of the market / share above 40% / a complete/pure monopoly / no competition (1). Able to set price (1) a price-maker (1). 2 1(d) Explain two reasons why a government may privatise an industry. Logical explanation which might include: Raise (tax) revenue (1) which could be spent on e.g. education, healthcare / increase government spending (1). Increase efficiency / may perform better in the private sector / higher productivity (1) introduce a profit motive / increase output/GDP / reduce costs of production (1). Increase competition (1) lower price / increase quality / increase choice (1). Industry may be loss making / costly to run (1) reduce need to use tax revenue to finance industry / tax revenue can be used for other purposes e.g. education / increase government spending / reduce national debt / tax rates might be cut (1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations. 1(e) Analyse how India’s position on the current account of its balance of payments in 2017 compares with the other four countries. Coherent analysis which might include: Brazil, India and Kenya had a current account deficit (1) while China and Russia had a current account surplus (1). India’s current account deficit is the largest in terms of $s (1) but the second largest in % terms (1). China’s current account had a larger impact on its economy in terms of $s (1) and Kenya’s in percentage terms (1). Russia’s current account surplus is larger than China’s in terms of % of GDP (1). China has the largest surplus in $s (1). 4 Up to 2 marks maximum for idea of size of current account balance without reference to deficit or surplus e.g. China has the largest current account balance and India the lowest. So maximum of 2 marks without reference to deficit/s or surplus/es. No marks for writing about a budget balance. 1(f) Analyse how a successful airline industry can promote economic growth. Coherent analysis which might include; May increase number of tourists (1) raise revenue from tourism / increase the size of the tourist industry (1) may increase exports / imports / increase the ease of movement of people and goods into and out of the country (1). May attract more MNCs (1) these will increase the country’s output/GDP (1) introduce new technology / new methods of production (1). May lower costs of production (1) raising firms’ profits (1) providing the incentive/finance to expand (1) increase the country’s output/GDP (1). May increase employment (1) raise incomes (1) increase total demand (1) increase tax revenue (1) more could be spent on e.g. education (1). May increase (geographical) mobility of labour (1) making it easier for expanding firms to recruit workers (1). 5 1(g) Discuss whether the Indian government should increase the tax on airline fuel. Award up to 4 marks for why it should: • Raise revenue (1) can be used to finance e.g. education / training of pilots / increase government spending (1) burden more likely to fall on the rich / may enable tax on basic necessities to be reduced (1). • May reduce market failure (1) air travel causes external costs / social cost exceeds social benefit (1) air/noise pollution (1) a tax may reduce air travel / lower demand for air travel (1) by raising price (1) encourage people to switch to other forms of transport (1). Award up to 4 marks for why it should not: • Will increase airlines’ costs / reduce airlines’ profits / cause a loss (1) airlines’ other costs are rising (1) difficult for them to cover higher costs / raise prices (1) due to elastic demand / price sensitive demand (1) may go out of business (1) may discourage investment (1) causing unemployment (1). • May reduce tourism in the country (1) harming the current account position (1). • Airline fuel is already highly taxed (1) may be difficult to tax further (1). • Ait travel is safer than car travel in many countries (1) so injuries may increase if there is a switch between the two (1). 6 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 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 1(h) Discuss whether more people will apply to be pilots for Indian airlines in the future. Award up to 4 marks for logical reasons why they might: • Introduction of new technology (1) will make the job easier (1) • Improved staff training (1) improve/increase skills (1) improve motivation / satisfaction (1) • improve working conditions (1) airlines want to retain staff (1) • More routes are being flown / size of industry is increasing (1) demand for pilots may increase / more job opportunities (1) may raise wages (1). • More fringe benefits may be provided (1) example (1). • Being a pilot is a highly regarded occupation in many countries (1). Award up to 4 marks for logical reasons why they might not: • There may not be more people qualified to become pilots (1) education standards may fall / qualifications may be high (1). • Period of training may increase / cost of training may increase (1). • Other jobs may offer higher wages / better working conditions / wages of pilots may fall (1) example of other jobs (1). • Advances in technology may reduce the need for pilots (1) may increase skills needed (1). • Increased tax on fuel may reduce the size of the airline industry (1) causing people to expect fewer job opportunities / unemployment of pilots (1). • Price of substitute forms of transport may reduce (1) lowering demand for pilots (1). 6 Note: some points may be given in reverse e.g. education standards may rise. 1(h) • Job may require workers to be away from their families (1) people may want to stay close to home (1). • Working hours may be unsociable (1) people may want to spend more time with their families (1). • May be considered in some cases to be a risky job (1).

Cambridge IGCSE Economics · 0455

IGCSE Economics (0455) The allocation of resources past paper questions

These questions test demand and supply, how price is determined, and price elasticity.

342 free questions from 2016–2021, each with its marking scheme. Open the full topical bank to filter by subtopic, paper, and year.

The allocation of resources in IGCSE Economics 0455 exams, 2020–2025

Across 2020–2025, The allocation of resources accounted for 376 questions worth 3,112 marks in Cambridge IGCSE Economics (0455) papers.

By year
Year	Questions	Marks
2020	48	517
2021	52	406
2022	61	453
2023	74	581
2024	78	661
2025	63	494

Most-tested subtopics

2.2 Demand1190 marks
2.3 Supply960 marks
2.9 Market failure870 marks

Appears in

Paper 1 · 252 qs
Paper 2 · 124 qs

All most-tested Economics topics

2021 Feb/Mar · Paper 2 · Q1 · 30 marks
Marking scheme
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2021 May/Jun · Paper 2 · Q1 · 30 marks
Marking scheme
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2021 Oct/Nov · Paper 2 · Q1 · 30 marks
Marking scheme
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2021 Oct/Nov · Paper 2 · Q1 · 30 marks
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2021 May/Jun · Paper 1 · Q1 · 1 mark
Marking scheme
Mark scheme — 2021 Paper 1 Q1
Answer: B
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