Economics · May / June 2025 · Paper 22 · Question 2
0455
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The world’s four largest accountancy firms experienced a decline in demand for their services at the start of 2023. One cause of this lower demand was a decline in mergers in other industries, including the chocolate industry. Three of the accountancy firms reduced the number of new workers they hired and the other accountancy firm announced job losses. The ability of workers to gain new jobs is influenced by their mobility.
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2(a)[2]
Identify two advantages a firm may gain from merging with another firm. Two from:
reduce competition / increase market power / increase market share / may become a monopoly / become a price maker / higher barriers to entrygain economies of scale / reduce (average) cost / increased efficiency / higher productivitygain control over outletsgain control over raw materialsrationalisationgreater profit / revenuenew ideas / access to improved technologyspread risksmore resources / more labour / more capital / more enterprise / more landhigher demand / more sales / larger size of firmgain consumer data 2 If more than two advantages given, consider the first three. Mark2(b)[4]
Explain two disadvantages workers may experience as a result of losing their jobs. Logical explanation which might include: Loss of income (1)
resulting in lower living standards / lower quality of life / poverty / inability to buy necessities / lower purchasing power / lower spending / lower consumption / lower spending on a particular good or services e.g. education/healthcare/housing/holidays (1). Loss of skills (1)
may need to gain new skills / as miss out on training / make it more difficult to get another job / lower paid job / reduced mobility of labour (1). May be more likely to get into debt (1)
harder to repay any past loans (1). Harder to get a loan (1)
banks may not expect them to be able to repay loan (1). Loss of fringe benefits (1)
example e.g. health insurance / home (1). Less attractive to future employers / bad reputation (1)
make it more difficult to get another job (1). Mental health problems / stress / illness / divorce (1)
loss of self-esteem / loss of self-confidence / making it more difficult to get another job / reduced life expectancy / due to difficulty/time to find another job (1). May have to sell possessions (1)
to gain money / to meet bills (1). Demotivation (1)
give up looking for work / become a discouraged worker / become voluntarily unemployed (1). Reduced ability to save (1)
reduced ability to cope with unexpected events / to finance e.g. education / healthcare / retirement (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. Reward ‘making it more difficult to get another job’ only once. Mark
2(c)[6]
Analyse the advantages of an increase in labour mobility. Coherent analysis which might include:
An increase in the ability of workers to change jobs / provide more choice of jobs (1)occupational mobility of labour (1)
improve skills / productivity / experience by changing jobs (1).
An increase in the ability of workers to move from one area to another (1)geographical mobility of labour (1)
move to a more pleasant area (1).
Can reduce structural / regional / frictional (1)unemployment (1)
enable workers to get new jobs more quickly / reduce long term unemployment (1)
may enable some workers to find higher paid jobs / gain higher wages / reduce poverty / higher standard of living / better working conditions (1)
raise tax revenue / reduce government spending on benefits (1).
It can reduce labour shortages (1)reduce costs / cost- push inflation (1)
increase output / increase GDP / cause economic growth (1).
It can enable firms to respond more quickly/more fully to changes in consumer demand / increase flexibility / change in size (1)reduce surpluses and shortages of products (1). 6 Reward but do not expect reference to reduce labour market failure. Mark
2(d)[8]
Discuss whether or not the demand for chocolate is likely to be price elastic. In assessing each answer, use the table opposite. Why it might:
may have substitutesmay be seen as a luxuryPED of particular brands will be more elastic than demand for chocolate as a wholethe longer the time period, the easier it will be for consumers to change their spending patterns. Why it might not:may be addictivemay be seen as a necessitymay take up a small % of income. 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 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 Mark 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. Mark
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