Economics · Oct / Nov 2022 · Paper 21 · Question 2
0455
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Medan is the third largest city in Indonesia by population. It is sometimes known as the city of a million shop-houses as many people start small firms at the street level of their homes. This has led to an increase in the market supply of industries such as cafes and clothes shops. Also, due to the growth in demand for food delivery, the unemployment rate has fallen. However, mobility of labour is limited both within Medan and within Indonesia.
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2(a)[2]
Identify the difference between individual supply and market supply. Individual supply is the amount that a single firm is willing and able to supply at a specific price (1)
while market supply is the total of all individual supply / the amount that all the firms in the market is willing and able to supply at a specific price (1).
2(b)[4]
Explain two influences on the mobility of labour. Logical explanation which might include: Good transport links (1)
such as public transport / highways (1)
ease of workers moving from one place to another to take up a job (1). Cheap cost of living / relocation (1)
such as good access to affordable homes in different places (1). Similar culture (1)
such as similar languages / work culture (1). Ease of workers moving from one job to another job (1)
lots of re-training opportunities (1)
good quality education (1)
skills/qualification needed between different jobs are similar (1). 4 Also accept answers based on influences for low mobility of labour.
2(c)[6]
Analyse the reasons for the existence of small firms Coherent analysis which might include: Barriers to entry may be low (1)
easy for firms to enter (1)
e.g. low capital start-up cost / low government regulations (1). Small firms can be monopolist (1)
small / niche market (1). Lots of government support for small firms (1)
e.g. subsidies to SME (1)
to maintain competition (1). Firms desire to remain small (1)
keep it within family members (1)
easy to control (1)
satisfied with amount of profit (1). Difficult for firm to grow (1)
as there are dominant firms in the market (1)
or difficult to get enough capital to grow large (1). Economies of scale may be very small (1)
low long average costs at low levels of output (1)
e.g. not much bulk discount, not much expensive equipment (1). Diseconomies of scale may be achieved at low levels of output (1)
due to the productive inefficiency (1).
2(d)[8]
Discuss whether or not a reduction in the unemployment rate benefits an economy. In assessing each answer, use the table opposite. Why it might be beneficial:
increase in output, increase economic growth / GDPincrease in tax revenuedecrease cost of unemployment benefitsincrease income for individualsdecrease inequalitydecrease crime ratesdecrease stress level, decrease occurrence of homelessness and family breakdowndecrease indebtedness. Why it might not be beneficial:wages increasing, higher cost of production, increase cost-push inflationincrease consumption, increased total demand, increase demand-pull inflationdecrease competitiveness of exportsdecrease attractiveness to foreign investors. Level Description A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 Guidance Level Description There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 A mark of zero should be awarded for no creditable content.
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