Economics · Oct / Nov 2020 · Paper 22 · Question 1

Calculate the percentage of total world output of palm oil produced by Indonesia in 2017. 60% (1). 1 Accept 60.

Identify two variable costs of producing palm oil.

Explain one opportunity cost of conserving forests in Indonesia. Logical explanation which might include: Palm oil not produced / rice not produced / tourism lost as a result of building fewer hotels / lost opportunity to Norwegian government to spend on e.g. education (1)

(next) best alternative forgone (1).

Explain two external costs of the destruction of forests in Indonesia. Logical explanation which might include: Loss of wildlife habitats (1)

extinction of species / harmful effect on animals not involved in the economic decision (1). Harmful gases/air pollution/pollution (1)

unpleasant atmosphere for local residents / illnesses / global warming (1). 4 One mark for each of two costs identified and one mark for each of two explanations.

Draw a demand and supply diagram to show the effect of a ban on burning stubble on the market for rice. Axes correctly labelled – price and quantity or p and q (1). Demand and supply curves correctly labelled (1). Supply curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2, or by labelling equilibrium points as E1 and E2 (1). For quantity label accept Q, quantity demanded, quantity supplied. Do not reward a completely macro diagram. O S2 P2 Q2 Q1 P1 S1 D1 price of rice quantity of rice

Analyse the relationship between countries’ GDP per head ranking and HDI ranking. Coherent analysis which might include: Expected relationship: Generally, the higher the GDP per head ranking, the higher the HDI ranking / positive relationship / direct relationship (1). Supporting evidence: The top country, the top two or top three countries with the highest GDP per head ranking have the highest HDI ranking (1)

the country, two countries with the lowest GDP per head ranking have the lowest HDI ranking (1). Exception: Cuba or Indonesia (1)

supportive data – Cuba has a lower GDP per head ranking than Indonesia but a higher HDI ranking than Indonesia (1). Analysis: It is the expected relationship (1). GDP is a component of HDI / HDI ranking influenced by additional factors – education and/or life expectancy / higher GDP per head enables more to be spent on education and healthcare (1). 5 HDI now includes years of schooling but accept an idea that it includes education - adult literacy rate was included in the old measure. 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.

Discuss whether or not the immigration of workers would be likely to benefit the Indonesian economy. Up to 4 marks why it might:

who may be more productive (1)

to improve quality of life (1)

improving production methods / use advanced technology (1)

enabling the government to spend more (1)

increase productive capacity (1)

reduce dependency ratio (1)

may result in economic growth / increase output (1). Up to 4 marks why it might not:

immigration may take it above the optimum level / lead to overpopulation / put pressure on resources (1)

may replace Indonesian workers / cause unemployment (1)

lowering living standards (1)

increasing firms’ costs (1)

may have to import more e.g. rice (1)

negative impact on the current account of the balance of payments (1). 6 For an answer that examines the effects of migration of workers from Indonesia, a maximum of 2 marks. 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 mark Tax revenue may decrease … ... because of reason e.g. incomes may be lower. Tax revenue may increase because incomes may be higher i.e. 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 subsidies may stimulate the economy more than spending on education.

Discuss whether or not the Indonesian tourism industry will increase in the future. Up to 4 marks for why it might:

may preserve forests (1)

enabling foreigners to afford more holidays (1)

raise quality of tourism (1).

lowering costs of production (1).

air travel is a complement to holidays (1)

Up to 4 marks for why it might not:

worried about health (1)

Indonesia has competition from neighbouring countries (1)

by e.g. new palm oil plantations / natural disasters (1)

may mean there are not enough workers (1).