Cambridge Assessment International Education

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/41
Paper 4 Data Response and Essays October/November 2017
MARK SCHEME
Maximum Mark: 70

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the October/November 2017 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some Cambridge O Level
components.

® IGCSE is a registered trademark.

This document consists of 8 printed pages.

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9708/41 Cambridge International AS/A Level – Mark Scheme October/November
PUBLISHED 2017

LEVELS OF RESPONSE MARKING DESCRIPTIONS FOR ESSAY QUESTIONS

Please also see the mark scheme for each part of each essay, detailing the ranges of marks to be
awarded for each Level, and some illustrative content.

Knowledge and
Level Application Analysis Evaluation
understanding

relevant, apposite detailed, precise and critical evaluation of

illustrations and purposeful the issues,
detailed knowledge of specific examples are description, considering relevant
relevant facts and introduced to add explanation and information and
theory depth and fullness to analysis using economic principles
the answer appropriate economic
perceptive terms and concepts distinguishes between
L4
understanding of the recognises the correctly and fluentlyfacts, hypotheses
specific requirements underlying economic and/or value
of the question concepts and draws clear, reasoned judgements
throughout the principles and applies conclusions
answer these in relevant challenges
situations to develop a sound, well- assumptions of the
the answer structured answer question or model

straightforward, partly complete

satisfactory analysis: evaluation of the
some appropriate
generally clear issues in terms of
relevant illustration or
adequate knowledge statements, either relevant
examples seen but
of relevant facts and supported by information or
they may be quite
theory reasoned arguments economic principles
general or not very
including some
full
L3 a reasoned specific economic attempt to distinguish
understanding of the terms and concepts between facts,
applies theory and
question's hypotheses and/or
facts with accurate
requirements shown draws some value judgements
reference to the
in the answer conclusions
question to develop
attempt to comment
the answer
a functionally on assumptions
organised answer

some analysis
identifies some illustration may not be present but limited by
relevant facts and/or fully relevant and is omissions, error(s),
some evidence of an
theory superficial or irrelevant details or
ability to evaluate,
overgeneralised unclear
discriminate, or to
the answer overall communication
L2 make basic
has a general an accurate
judgements,
relevance to the application of some conclusions may not
considering some
question, showing related theory or be drawn from it
relevant information
some understanding fact(s), with little or no
development a disorganised
answer

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Knowledge and
Level Application Analysis Evaluation
understanding

barely relevant,
shows some relevant
minimal or tangential any analysis present minimal or no
knowledge
illustration is likely to have major evidence of the
errors, omissions or evaluation skills of
L1 the answer indicates
basic errors of theory be mostly irrelevant criticism, judgement
that the question has
or of fact with or discrimination in
not been correctly
inadequate the answer
understood
development

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Question Answer Marks

1(a) the value of the production of goods and services in the United States, in a 3
given period, adjusted for price changes, not taking account of depreciation

1(b) changes can affect exchange rates, demand for exports, cost of imports, level 4
of spending, examples from extract

1(c) briefly explain circular flow of income, 2, the items listed are all the major 6
components of aggregate demand. Consumption expenditure increased but
at a slower rate.1. Exports decreased.1. The overall absolute change is
uncertain as the information does not give absolute levels but it is likely that
the slow increase or fall in injections accounts for the change in GDP through
multiplier process 2.

1(d) house price rises, fall in unemployment, wage increases, lack of price rises 7
could all encourage spending. Falling oil prices may have encouraged
investment, inflation elsewhere may have made US exports comparatively
cheaper. 1 for identifying, 1 for explaining (×3) 1 for conclusion

Question Answer Marks

2 Explanation of efficiency. Competitive markets may achieve efficient 25

outcomes but individual actions are not always best for society as a whole.
Further, privatisation does not necessarily mean increased competition.
Discussion of reasons for market failure and necessity/desirability of
government intervention to achieve efficiency. This could be by persuasion
(nudge theory) rather than by enforcement. Nudge theory, originally an ethical
idea not a government manipulative tool, involves designing choices to
encourage decision making in wider positive interests of society. But it can be
used in government context.

L4 for an accurate discussion of efficiency and competition, privatisation,

market failure, with examples and a conclusion about the need for
government intervention. 18–25

L3 for a competent explanation of productive and allocative efficiency and

more limited discussion of whether privatisation necessarily results in more
competition, and of the reasons for market failure and the need for
government. 14–17

L2 for a briefer analysis of efficiency and of market failure with few examples
and no comment about whether privatisation is the same as increased
competition and no conclusion. 10–13

L1 for an answer that shows some knowledge but does not indicate that the
question has been fully grasped or where the answer is mostly irrelevant. 1–9

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Question Answer Marks

3 Explanation of indifference curves, income, substitution of a price change. 25

These can then be related to a demand curve to show the effect on demand
of a price change and determine the possible change in revenue, and maybe
profits, depending on the type of good.

L4 for a reasoned and clear discussion, logically presented dealing with income,
substitution, link to the demand curve, and clear link to importance for
manufacturers. Maximum 21 with no conclusion. 18–25

L3 for a fair but undeveloped discussion probably concentrating on income,

substitution effects without a clear link to demand, or without a clear analysis of
the possible effect on manufacturer’s revenue through elasticity. 14–17

L2 for a briefer comment on income/substitution, no link to demand, no

pertinent comment on revenue/elasticity or normal/inferior goods 10–13

L1 for an answer that shows some knowledge but does not indicate that the
question has been fully grasped or where the answer is mostly irrelevant. 1–9

Question Answer Marks

4(a) Analysis of role of mc with mr as maximum profit point. AVC significant if sub- 12
normal profits are being made.

L4 for a sound explanation and a clear understanding of the principles

involved for both mc and avc. 9–12

L3 for a competent comment but with limited elaboration probably concentrating

on mc but with brief reference to avc 7–8

L2 for a correct but brief reference to both aspects or fuller reference to one
aspect and no comment on the other. 5–6

L1 for an answer that has some basic correct facts but includes irrelevancies
and errors of theory 1–4

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Question Answer Marks

4(b) Meaning of prisoner’s dilemma. Firms that are interdependent cannot act 13
independently of each other. A firm operating in a market with just a few
competitors must take the potential reaction of its closest rivals into account
when making its own decisions and anticipate the likely response of a rival to
any given change in their price, or non-price activity. They need to devise
possible options based on how they think rivals might react. Oligopolists have
to make strategic decisions, such as -whether to compete/collude with rivals,
raise/lower/keep price constant. Introduce new strategy or follow others.

L4 for a sound explanation with good illustrations and a clear understanding

and discussion of the principles involved of both 9–13

L3 for a competent comment on either the dilemma but with limited

development of the application to oligopoly, or vice versa. 7–8

L2 for an undeveloped comment on the dilemma with only a brief application

to oligopoly. 5–6

L1 for an answer that has some basic correct facts but includes irrelevancies
and errors of theory 1–4

Question Answer Marks

5(a) Explanation of perfect market demand (mrp) supply and determination of 12

wage rate in the market and also for the firm.

L4 for a sound explanation and a clear understanding of the principles

involved 9–12
(7–8 D&S)

L3 For a competent comment but with limited elaboration. No mrp

maximum L3 7–8

L2 for a briefer explanation, probably not fully explaining the equilibrium. 5–6

L1 for an answer that has some basic correct facts but includes irrelevancies
and errors of theory 1–4

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Question Answer Marks

5(b) Wage rate likely to be reduced, unless collective bargaining raises it, mrp will 13
move left as MR no longer = to AR, so MPP x MR is lower. Employment
probably reduced unless union negotiates or there is a government wage.
Really need mrp analysis show the changes.

L4 for a thorough analysis of wage determination with a clear comparison of

perfect and imperfect markets. 9–13

L3 for a weaker analysis and critique of the possibility of the changes

probably concentrating on wage level. 7–8

L2 for a correct but undeveloped analysis with only a brief discussion and no
real conclusion 5–6

L1 for an answer that has some basic correct facts but includes irrelevancies
and errors of theory 1–4

Question Answer Marks

6 Each part of the statement should be considered. There should be a 25

discussion of whether there are many difficulties in measuring living
standards and reasons given for the conclusion on this part of the question.
There should then be a consideration of whether it is possible to compare one
country with another and discuss what use the statistics might be. There
should be an overall conclusion.

L4 for a thorough explanation of the difficulties of measuring living standards

and a clear conclusion to the assertion followed by a consideration of the
usefulness of using the statistics to make comparisons. 18–25

L3 for a competent explanation of the difficulties but with a limited conclusion.

There will be some consideration of comparison between countries but this
will not be fully developed or extensive. 14–17

L2 for an accurate though undeveloped explanation with some attempt at

analysis but only limited evaluation. No real conclusion. 10–13

L1 for an answer that shows some knowledge but does not indicate that the
question has been fully grasped or where the answer is mostly irrelevant. 1–9

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Question Answer Marks

7(a) There is a distinction between monetary policy and fiscal policy. Monetary 12
policy involves measures to influence economic activity, specifically by
manipulating the supplies of money and credit and by altering rates of
interest. Fiscal policy influences the economy by the use of taxation and
government spending. Supply side policy aims to influence aggregate supply.
Supply side policies refer to factors affecting the quantity or quality of goods
and services produced. This includes the level of productivity, investment in
research, the training of labour. This can be linked to fiscal policy through tax
incentives, government subsidies, government spending, or monetary policy
through interest rate changes. Provision of information, wage legislation,
regulation, deregulation, trade incentives do not overlap as much.

L4 for a sound explanation of the analysis and a clear understanding of the

three types of policy. 9–12

L3 for a competent comment but with more limited explicit explanation of the
distinction 7–8

L2 for a brief explanation and with no explicit comment on any distinction 5–6

L1 for an answer that has some basic correct facts but includes irrelevancies
and errors of theory 1–4

7(b) Fiscal policy can be used through tax changes, direct and indirect, or through 13
government spending – welfare payments, grants. Monetary policy can be
used to affect savings and potential future earnings, investment and potential
employment. Supply-side policies can be used to encourage training and
skills and potential increases in wages, competition an regulation to keep
prices lower, minimum wages to encourage people to work.

L4 for a reasoned and well-argued discussion with clear explanation of

possible income changes and the relevance of each policy group, with a
conclusion. 10 maximum if no conclusion. 9–13

L3 for a clear but undeveloped discussion of possible influences on income

from all three groups of policy, or a fuller discussion of two groups. 7–8

L2 For a limited attempt to consider the question but without a balanced

approach, limited to one or two groups and with no conclusion. 5–6

L1 for an answer that has some basic correct facts but includes irrelevancies
and errors of theory 1–4

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