Economics · May / June 2025 · Paper 21 · Question 2

0455

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The shape of Colombia’s population pyramid is changing. The income distribution of this South American country, however, is not changing significantly. The country has one of the most unequal income distributions in the world. Some Colombians work in its footwear industry which produces shoes, sandals and boots. Although footwear is produced in the private sector, Colombia has a mixed economic system.

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2(a)[2]
Define population pyramid. age (1)
gender (1)
2 If more than two factors given, consider the first three.
2(b)[4]
Explain two reasons why income may become more unevenly distributed. Logical explanation which might include: A rise in:
Unemployment (1)
those who lose their jobs are likely to experience a fall in their income (1).
Illness (1)
the sick may not be able to earn an income (1).
Profits (1)
benefitting entrepreneurs (1).
Interest rates (1)
benefitting those with a high value of savings (1).
Wealth (1)
with rich people gaining more interest/profit (1).
Regressive taxation (1)
reducing the income of the poor/placing greater burden on poor (1).
Discrimination of workers (1)
example e.g. reducing income of women
Education provision / attainment (1)
but only for some (1). A fall in:
National minimum wage (1)
the low-paid experience a fall in income (1).
Progressive taxation (1)
increases the income of the rich (1).
Welfare / state benefits (1)
reduce the income of the poor (1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations. If more than two reasons given, consider the first three. MAX of two marks if not identifying what changes. Guidance Growth:
Economic growth (1)
benefits go more to skilled than to unskilled workers (1).
Changes in growth rate of different industries (1). workers in expanding industries may earn more in wages than workers in declining industries (1).
Changes in growth rate of different regions (1)
workers in high growth areas may earn higher wages than in low growth / declining regions (1).
Changes in growth rate of private and public sector (1)
private sector earn higher increase in wages (1).
2(c)[6]
Analyse the influences on whether demand for shoes is elastic or inelastic. Coherent analysis which might include:
Shoes have substitutes in the form of sandals and boots (1)
may make demand (price) elastic (1)
as a change in price will cause consumers to switch between different forms of footwear (1)
especially if the types are close substitutes / close in price (1).
PED of particular brands of shoes will be more elastic than demand for shoes as a whole (1)
Proportion of income spent on the shoes (1)
the lower the proportion, the more inelastic the demand (1)
as a change in price will not have such a significant impact on demand (1).
Whether shoes are considered to be a necessity or a luxury (1)
shoes are likely to be considered a necessity (1)
and therefore inelastic (1).
It may not be possible to delay the purchase of shoes (1)
making demand inelastic (1).
Durability of shoes (1)
the more durable the more inelastic (1).
Demand for some shoe may be addictive (1)
making demand inelastic (1).
2(d)[8]
Discuss whether or not a mixed economic system will benefit the people who live in that economy. In assessing each answer, use the table opposite. Why it might:
public goods may be provided
production of demerit goods may be discouraged
production of merit goods may be encouraged
state benefits may be provided
income may be redistributed to help the poor
unemployment may be kept low by government policies
private sector benefits e.g. generate high incomes / lower prices
Why it might not:
may be market failure in the private sector
rich may lose if there is high progressive taxation
high taxation may discourage enterprise
state-owned enterprises may be inefficient
may be less choice in the public sector.

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