Economics · Oct / Nov 2022 · Paper 21 · Question 1

Calculate the total value of the tertiary sector in Mauritius in 2019. $10.79 billion 1 $ sign not essential.

Explain the meaning of a change from an economy based on the primary sector to one based on the tertiary sector. When an economy moves from mainly primary industries e.g. agriculture / fishing (1)

to mainly tertiary industries e.g. tourism. (1)

2 Accept any examples of primary sector industry for 1 mark and any examples of tertiary sector-based industry for 1 mark.

Identify two indicators of improving healthcare in Mauritius. Life expectancy increased (1)

and infant mortality rate fallen. (1)

Explain two reasons why millions of tourists visit Mauritius each year. Coherent analysis which might include: Mauritius has tourist attractions (1)

such as its beautiful beaches (1). Easy to travel to Mauritius (1)

as the government does not require visa / just need passport (1). Good infrastructure (1)

such as good airports / ports and public transport around the island (1).

Explain two advantages of setting up a firm in Mauritius. Fast growth (1)

higher incomes which leads to higher consumption of good and services (1). Political stability (1)

which reduces risk / increases confidence (1). Low levels of regulations to start and run a business (1)

lower cost of start up / easier to register for a business (1). Better infrastructure (1)

more efficient / lower cost of production (1).

Analyse the relationship between the percentage of international trade to GDP and GDP per head. Coherent analysis which might include: Overview Generally, as percentage of international trade to GDP increases, GDP per head is increasing as well / positive relationship between percentage of international trade to GDP and GDP per head (1). Supporting Evidence Kenya has the lowest percentage of international trade to GDP and lowest GDP per head (1)

while Luxembourg has the highest percentage of international trade to GDP and highest GDP per head (1). Exception Mauritius (1)

where percentage of international trade to GDP is higher than Qatar but GDP per head is lower (1). Comments This is because trade brings gains from specialisation / enables exploitation of economies of scale (1)

increases earnings from exports / total demand / economic growth (1)

Discuss whether or not outward investment might benefit a Mauritian firm. Award up to 4 marks for logical reasons why it might be beneficial, which might include:

increase export (1)

increase revenues (1)

achieve economies of scale (1)

e.g. of economies of scale (1)

increase output (1)

increase profits (1).

lower cost of production (1).

better quality / higher productivity (1)

decrease average cost (1). Award up to 4 marks for logical reasons why it might not be beneficial, which might include:

to help the firm in the home country (1)

lower firm’s potential productivity (1)

decrease profits (1).

recession in another country will affect export earnings (1)

may create recession domestically as well (1)

decrease output (1).

or Mauritian government could impose restrictions on outward investment (1)

cost might be higher (1). 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 mark Tax revenue may decreases 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 government infrastructure spending benefits the Mauritian economy. Award up to 4 marks for logical reasons why it might be beneficial, which might include:

decrease cost of production for firms (1)

increase profits (1)

increase investment (1)

increase output (1).

decrease market failure (1)

easier for workers to move from one place to another in the economy (1)

decrease structural unemployment (1).

increase total demand (1)

increase output (1)

economic growth (1).

decrease unemployment (1). Award up to 4 marks how why it might not be beneficial, which might include:

could lead to increase demand-pull (1)

inflation (1).

opportunity cost of the government (1)

cannot spend on other projects such as education and healthcare (1)

which may be more beneficial than infrastructure spending (1).

domestic demand too low (1)

white elephant projects (1).