Economics · May / June 2021 · Paper 22 · Question 1

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.

Identify two disadvantages of a country specialising. Two from:

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.

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. Guidance Chile has a higher average age / older population / Haiti has a lower average age population / younger population (1).

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.

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.

Discuss whether or not Chilean consumers would benefit from more government intervention in the economy. Award up to 4 marks for why they might:

as under- consumed (1)

as overconsumed (1)

external benefits may be increased (1)

external costs / external benefits are not taken into account by the private sector (1)

no profit incentive to make them (1)

as there can be free riders (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)

can lower prices (1)

lower prices of necessities (1)

prevent abuse of market power (1)

could lower prices / raise quality of output (1). Award up to 4 marks for why they might not:

e.g. government may lack information (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 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. Guidance

industries may respond to changes in consumer demand (1)

prices may be low (1)

quality may be high (1)

may reduce competition (1).

may increase costs (1)

raise prices (1)

may reduce availability of products / raise prices (1)

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:

work involves unskilled labour (1)

the country could keep more of its skilled workers (1)

higher total demand (1)

increase GDP / increase economic growth / increase productive potential (1)

increase living standards (1)

increase exports (1)

may enable more spending on e.g. education (1)

reduce burden on the government (1)

Award up to 4 marks for why it might not:

fewer emigrant workers may send money home (1)

living standards may be lower (1)

lower spending (1)

may increase a current account deficit (1)

unemployment may rise in Haiti (1)

opportunity cost / higher taxation (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. Guidance

reduce advances in technology / reduce increases in efficiency / productivity (1)

increase external costs / pollution (1)

pressure on resources (1).