PMT
Mark Scheme (Results)
Summer 2016
Pearson Edexcel International GCSE
in Economics (4EC0) Paper 01R
PMT
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Summer 2016
Publications Code 4EC0_01R_1606_MS
All the material in this publication is copyright
© Pearson Education Ltd 2016
PMT
General Marking Guidance
• All candidates must receive the same treatment.
Examiners must mark the first candidate in exactly the
same way as they mark the last.
• Mark schemes should be applied positively.
Candidates must be rewarded for what they have shown
they can do rather than penalised for omissions.
• Examiners should mark according to the mark
scheme not according to their perception of where the
grade boundaries may lie.
• There is no ceiling on achievement. All marks on
the mark scheme should be used appropriately.
• All the marks on the mark scheme are designed to be
awarded. Examiners should always award full marks if
deserved, i.e. if the answer matches the mark scheme.
Examiners should also be prepared to award zero marks if
the candidate’s response is not worthy of credit according
to the mark scheme.
• Where some judgement is required, mark schemes
will provide the principles by which marks will be awarded
and exemplification may be limited.
• When examiners are in doubt regarding the
application of the mark scheme to a candidate’s response,
the team leader must be consulted.
• Crossed out work should be marked UNLESS the
candidate has replaced it with an alternative response.
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Question Answer Mark
Number
1(a)(i) an increased preference for tea by consumers
(1)
A
Question Answer Mark
Number
1(a)(ii) Identification of a factor (1 mark) with development
(1 mark)
Factors leading to an inward shift in supply curve e.g.
• Costs of production
• Natural factors
• Indirect tax
• Subsidies
• Change in price of other goods
Development of each factor
• Increased wages will shift supply curve inwards
leading to higher prices
• Poor weather means a smaller harvest
• If price of coffee is expected to rise the farmer
may switch production from tea to coffee beans
N.B. Answer must contain two separate factors and not (4)
two examples of one factor.
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Question Answer Mark
Number
1(b)(i) Responsiveness of demand following a change in price
(2)
or
formula eg % change quantity demand/% change in
price(2)
Vague definition (1) (2)
Question Answer Mark
Number
1(b)(ii- Price elasticity of Price change Effect on total
iv) demand revenue
Elastic Fall (ii) Rise/increase
(1)
Elastic (iii) Decrease
Rise/increase
(1)
(iv) Inelastic (1) Increase Increase
(3)
Question Answer
Number
1(b)(v) Supporting the statement (1) with development (up to 2
marks)
• Tea is elastic as there are many substitutes for tea
e.g. coffee, juice
• Fuel for cars is inelastic because it’s a necessity
with few alternatives
Arguments not supporting the statement (1) with
development (up to 2 marks)
• Tea could be considered inelastic because the
proportion spent on tea is small/substitutes may
not be acceptable
• Fuel could be considered elastic as people could
switch to public transport, electric cars, bicycles
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Further guidance
• Up to 3 marks for a one sided argument
• Up to 4 marks for a two sided argument
• Final 2 marks requires supported judgement e.g.
depends on the time scale involved, in the long
run alternatives to fuel may be
developed/alternative fuels e.g. hydrogen cells. (6)
e.g. depends on relative PED values
Question Answer Mark
Number
1(c)(i) Identification of a factor (1 mark) with development
(up to 2 marks)
Factors include:
• Change in demand for tea
• Change in cost and availability of substitutes for
labour
• Change in productivity of labour
• Change in costs linked to employing labour (eg
national insurance)
Development might include:
• Labour is a derived demand (1) therefore a
change in the demand for tea changes the demand
for labour (1)
• More sophisticated machinery such as automatic
tea harvesters (1) reduces the need for labour (1)
• Better training will lead to more efficient labour (1) (3)
which may reduce the need for as much labour (1)
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Question Answer Mark
Number
1(c)(ii)
Wage
rate
W2
W1
D2
D1
Q1 Q2
Number of tea workers employed
Up to 3 marks for correct diagram
• Original equilibrium wage and quantity of
labour shown (1)
• Demand curve shifted outwards (1)
• New equilibrium wage and quantity of labour
shown (1)
Up to 2 marks for written explanation e.g.
Labour is a derived demand, increasing demand for
tea leads to increasing demand for workers (1) this
shifts the demand curve outwards leading to (5)
higher wages and employment (1)
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Question Answer Mark
Number
1(d) Reasons why public sector produces goods and services
in a mixed economy
• Government provides goods and services which
would either not be provided by the private sector
(or not enough would be provided) if left to
market forces (eg Health care & Education/Merit
goods/Public goods)
Reasons why private sector produces good and services
in a mixed economy
• Individuals or groups of individuals are free to set
up businesses and supply goods and services to
anyone who wants to buy them
• Profit motive
• Government policy e.g. privatisation reducing the
role of the state
Relevant examples e.g. national defence (public sector)
or mobile phones (private sector) (1 mark)
Further guidance
• Up to 3 marks for discussion of role of either
public sector or private sector in the production of
goods and services or for discussion of mixed
economy with relevant examples
• Up to 4 marks for discussion of both the public
sector and private sector or for discussion of
mixed economy with relevant examples compared
to other economic systems (eg planned/free
market)
• Final 2 marks requires some level of supported
judgement e.g. balance of private and public
provision depends on a range of factors including…
• Political ideology/government policy
• Degree of market failure
• Availability of government funds
(6)
• Availability of private sector funding
• State of the economy
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Question Answer Mark
Number
2(a)(i) Output (1) per worker (1)
Also accept equation: output/number of workers = 2
marks
(2)
Question Answer
Number
2(a)(ii) Identification of a way (1 mark) with development
(1 mark)
Ways include:
• Introduce new working practices
• Introduce incentive schemes
• Training/retraining workers
• Using new/more efficient machinery
Developments include:
• Job rotation introduces variety and increases
motivation
• Financial incentives reward workers who increase
production
• Training makes workers able to complete tasks
more efficiently (4)
Question Answer Mark
Number
2(a)(iii) • Capital (1)
• Enterprise or Entrepreneurs (1) (2)
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Question Answer Mark
Number
2(b)(i) Falling average costs (long-run) (1) as scale of output
increases (1)
The fall in average costs (long-run) (1) that an individual
firm can enjoy when it expands (1)
Falling long-run average costs (1)
N.B. Accept both AC and LRAC for average costs. (2)
Question Answer Mark
Number
2(b)(ii) Arguments supporting the statement (1) with
development (up to 2 marks)
• Merger would increase scale of production which
would lower average cost. This may mean that
the firm lowers prices which would benefit
consumers
• Merger may lead to increase in efficiency (with
cost savings passed on to consumer or savings
invested in research and development)
• Merger may lead to increase in quality of products
Arguments not supporting the statement (1) with
development (up to 2 marks)
• Merger may result in diseconomies of scale, which
would increase costs per unit which may lead to
increase in prices
• Merger may lead to reduction in service quality
• Merger may mean that some previous flights are
now discontinued
• Reduction motivation of staff may reduce quality
of the product
• Merger may lead to some flights stopping
(because it’s a duplication of a route)
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• Merger could increase monopoly power (ie by
reducing competition) this might mean prices of
flights increase.
Further guidance
• Answer can refer to any industry
• Up to 3 marks for a one sided argument
• Up to 4 marks for a two sided argument
• Final 2 marks requires supported judgement (eg
depends on whether the cost saving is passed on
to the consumer, role of the Competition and (6)
Markets Authority in controlling abuse of monopoly
power)
Question Answer Mark
Number
2(c)(i) Ingredients/or example of ingredients e.g.
sugar (1);sweet bags/wrappers/packaging (1);
electricity/delivery cost to shop (1) (1)
Question Answer Mark
Number
2(c)(ii) If the sweet shop makes more sweets (1) then they will (2)
need to buy more sugar (1)
Question Answer Mark
Number
2(c)(iii) Output Total Total Total
-(v) (bags of fixed variable cost £
sweets) costs £ costs £
100 30 (iii) 90 120
200 (iv)30 170 200
300 30 240 (v)270
(3)
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Question Answer Mark
Number
2(c)(vi) Total revenue = 300 x £1.50 = £450 (1)
Profit = £450 - £270 = £180 (1)
NB: Award mark for formula
Profit = Total Revenue – Total Cost (1)
If answer is just 180, restrict to 1 mark
(2)
Question Answer Mark
Number
2(d) Arguments supporting the statement with development
(up to 3 marks)
• Governments seek to maintain jobs in areas which
are in decline as low unemployment is an
economic objective.
• Government often provides incentives (eg grants,
tax breaks) to firms to relocate in areas of high
unemployment so that jobs will move to the area
Arguments not supporting the statement with
development (up to 3 marks)
• Discussion of other reasons why governments try
to influence the location of firms eg to reduce
congestion, to reduce income inequality
Further guidance
• Up to maximum of 3 marks for a one sided
argument
• Up to maximum of 4 marks for a two sided
argument
Final 2 marks requires supported judgement e.g.
candidate reaches a conclusion based on examination of
evidence and quality of argument.
eg it may not just be for one particular reason, but for a
combination of reasons influenced by political and social
factors. The nature of the industry may also be a (6)
consideration.
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Question Answer Mark
Number
3(a)(i) Unemployment caused by a fall in demand (1) as a result (2)
of a downturn/slump/recession in the economic cycle (1)
Question Answer Mark
Number
3(a)(ii) Unemployment which occurs for a short/brief/temporary (2)
period of time (1) as workers move from one job to
another (1)
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Question Answer Mark
Number
3(a)(iii) Arguments supporting the statement with development
(up to 3 marks)
• Increasing government spending or reducing
taxation will lead to an increase in demand in the
economy, which will in turn reduce the level of
unemployment as firms will produce more and will
therefore employ more workers as labour is a
derived demand
• Lowering taxes will increase the incentive to work
• More government spending on building roads,
hospitals, schools will mean there are more jobs
for construction worker/The construction industry
is labour intensive
Arguments not supporting the statement with
development (up to 3 marks)
• It depends on the type of unemployment eg
increase in demand might not help to reduce
structural unemployment
• Increase in government spending or reduction in
taxation might not reduce seasonal unemployment
or frictional unemployment
• If households lack confidence then they may
choose not to increase spending following tax cuts,
which means expansionary fiscal policy may not
lead to an increase in employment as firms do not
get an increase in orders.
Further guidance
• Up to maximum of 3 marks for a one sided
argument
• Up to maximum of 4 marks for a two sided
argument
Final 2 marks requires supported judgement eg
Depends on other economic variables e.g. exchange rate
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Depends on size of the fiscal stimulus
Depends on monetary policy/supply side policy
Depends on time lags and global recession (6)
Question Answer Mark
Number
3(b)(i) Prices have been increasing (1) at a decreasing rate (1)
Data reference (up to 2 marks) eg prices rose by approx
7.5% in 2014 (1) but rose by just under 4% in 2015 (1)
(3)
Question Answer Mark
Number
3(b)(ii) The CPI is a measure of the general(or average) price
level (1)
The CPI will rise (1) because food is included in the index
(1) (2)
Question Answer Mark
Number
3(b)(iii) Identification (1 mark), development (up to 2 marks)
Factors include:
• Increase in costs of production – increase in prices
reduces standard of living for workers who want
higher wages
• Suppliers also face rise in prices and so increased
cost of raw materials
• Increase in menu costs – ie firms may have to
reprint price lists/brochures/update websites more
often
• Increase in shoe leather costs – ie firms may have
to spend time looking for the lowest prices and (3)
best value for money, this takes times which
increases costs
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Question Answer Mark
Number
3(c)(i) Identification of reason (1) development (1)
damage to the environment (1) protect the earth for
future generations (1)
Sustainability (1) shrinking supply of natural resources
(1)
Political pressure (1) increasing public awareness forcing (2)
government action (1)
Question Answer Mark
Number
3(c)(ii) Identification of method (1) development of method (1)
Methods include:
• Regulation (1) use of legislation and legal force to
control behaviour (1)
• Taxation (1) increases price of polluting
products/activities (1)
• Subsidies (1) reduces cost of environmentally
friendly products/activities (1)
N.B. accept any relevant method
(4)
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Question Answer Mark
Number
3(c)(iii) Arguments supporting the statement with development
(up to 3 marks)
• To protect the environment world production must
be reduced – this would lead to closure of
production facilities which would lead to increase
in unemployment and a reduction in economic
growth
• Cleaner air requires people to travel less – this
may mean people will not go out as often which
could lead to the closure of small businesses and
retail outlets and reduce the level of demand in
the economy
• Regulation may mean that output is restricted –
this will lead to job losses and reduce the level of
demand in the economy
Arguments not supporting the statement with
development (up to 3 marks)
• New types of industries, businesses and jobs will
be created, which will lead to economic growth
• Environmental protection will encourage
development of new technologies which will mean
that output can still increase
• Less congestion and pollution could increase
productivity leading to economic growth,
investment in green growth.
Further guidance
• Up to maximum of 3 marks for a one sided
argument
• Up to maximum of 4 marks for a two sided
argument
• Final 2 marks requires supported judgement eg
depends on how severe protection methods are
and how quickly they are implemented. (6)
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Question Answer Mark
Number
4(a)(i) £500 000 x $1.50 (1) = $750 000 (1)
N.B. if just 750 000 award 1 mark (2)
Question Answer Mark
Number
4(a)(ii)- Changes affecting exchange
Appreciate Depreciate
(iv) rate
(ii) The demand for
□
imports falls
(iii) The rate of interest
falls □
(iv) Currency
speculators expect
□
the exchange rate (3)
to rise
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Question Answer Mark
Number
4(a)(v)
Exchange rate
supply
ER2
ER1
new demand
demand
Q1 Q2 quantity of currency
Diagram marks Up to 3 marks for correct diagram
• Original equilibrium exchange rate and quantity of
currency shown (1)
• Demand curve shifted outwards (1)
• New equilibrium exchange rate and quantity of
currency shown (1)
Up to 2 marks for written explanation
e.g. currency speculators will increase demand for the
currency because they will expect to make a profit on the
sale of the currency in the future (1) this leads to
demand curve shifting outwards (1) (5)
Question Answer Mark
Number
4(b)(i) The pace of growth or development (1) between (2)
developed and developing nations (1)
The gap between rich and poor nations (1)
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Question Answer Mark
Number
4(b)(ii) Identification of disadvantage (1), development of
disadvantage (1)
Disadvantages include:
• Overuse of resources (1) which damages growth
prospects of future generations (1)
• Higher commodity prices (1) as countries grow
demand for commodities such as oil increases
therefore pushing up prices (1)
• Impact of MNCs (1) local businesses may not be
able to compete with more developed MNCs (1) (4)
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Question Answer Mark
Number
4(b)(iii) Definition of development aid (up to 1 mark) eg
development aid is money and other forms of assistance
that is given to less developed countries by developed
countries
Arguments supporting the statement with development
(up to 3 marks)
• Aid can support countries in developing their
natural resources and power supplies.
• Aid can encourage industrial development which
can create jobs and improve transport
infrastructure.
• Projects that develop clean water and sanitation
can lead to improved health and living standards
which improves productivity
• Aid which supports education and training will
increase skills of population which improves
productivity
• Aid which improves infrastructure eg road building,
bridges, which improves productivity
Arguments not supporting the statement with
development (up to 3 marks)
• Corruption may lead to local politicians using aid
for their own means rather than promoting
economic growth.
• Aid may be used for inappropriate projects that do
not yield expected benefits of economic growth
(‘white elephant’ projects)
Further guidance
• Up to maximum of 3 marks for a one sided
argument
• Up to maximum of 4 marks for a two sided
argument
PMT
• Final 2 marks requires supported judgement e.g.
Aid can increase the dependency of developing
nations on donor countries which might
compromise future growth prospects
e.g. trade rather than aid may be a better way to
increase economic growth.
e.g. it may be a condition of the investment that
the projects are run by foreign companies or that
a proportion of the resources or profits will be sent (6)
abroad.
Question Answer Mark
Number
4(c)(i) International trade (1) without restriction/barriers (1) (2)
Question Answer Mark
Number
4(c)(ii) Positive effects on the US economy
• Protects domestic jobs
• Raises revenue for the government
• Improves balance of trade
Negative effects on the US economy
• Retaliation by China
• Increases prices for US businesses
• Domestic tyre industry may become less efficient
over time
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Further guidance (6)
• Up to maximum of 3 marks for a one sided
argument
• Up to maximum of 4 marks for a two sided
argument
• Final 2 marks requires supported judgement eg
depends on extent of Chinese retaliation
e.g. depends on size and scope of tariffs
e.g. depends on price elasticity of demand
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