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Economics · May / June 2026 · Paper 21 · Question 5

0455

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The question as text

Temperatures continue to rise throughout the world. This affects the health of those who work outside and their productivity. Higher temperatures can also reduce the hours they work and their incomes. However, there are benefits for some entrepreneurs and their firms. For example, demand for air conditioners continues to increase. Higher output of a range of products can affect economic growth and poverty.

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  • 5(a)[2]

    Identify two causes of an increase in the quality of enterprise.

    increased incentives / profit (1)
    improved education / skills / training (1)
    improved health (1)
    increased use of artificial intelligence / improved technology (1)
    increased competition (1)

    2 If more than two causes are given, consider the first three.

  • 5(b)[4]

    Explain two reasons why a person may be prepared to work outside in high temperatures. Logical explanation which might include:

    May be paid high wages (1)

    leading to high purchasing power / increase ability to buy goods and services (1)

    Working hours may be short (1)

    increasing leisure time (1)

    Job satisfaction (1)

    some workers may prefer to work outside / have adequate protective clothing (1)

    Fringe benefits (1)

    e.g. subsidised housing (1)

    Holidays (1)

    long holidays can enable workers to rest (1)

    Lack of alternative / other job opportunities (1)

    due to low qualifications/skills/information/unemployment benefits / e.g. for migrants (1)

    Some people are younger / fitter / come from warmer countries (1)

    can tolerate higher temperatures/poor working conditions / used to working outside (1)

    4 One mark each for each of two factors identified and one mark for each of two explanations. If more than two factors are given, consider the first three.

  • 5(c)[6]

    Analyse how a decrease in productivity could affect a government’s macroeconomic aims. Coherent analysis which might include:

    Lower productivity could increase costs of production (1)

    reduce quality (1)

    increase price / decrease competitiveness (1)

    lower exports (1)

    increase imports (1)

    increase current account deficit / reduce current account surplus (1).

    Decrease output/supply (1)

    reduce economic growth/GDP (1)

    raise unemployment / reduce employment (1)

    lower incomes / higher poverty (1)

    Raise prices (1)

    cause cost-push (1)

    inflation (1).

    Decrease in productivity only in certain groups (1)

    those with lower productivity would be earning less (1)

    leading to redistribution of income (1)

    6 Maximum 3 marks for only identification Accept but do not expect:

    increase welfare spending (1)

    increase budget deficit (1)

  • 5(d)[8]

    Discuss whether or not economic growth reduces poverty. In assessing each answer, use the table opposite. Why it might:

    may raise incomes
    may increase employment
    may increase tax revenue
    higher tax revenue can be spent on education and healthcare Why it might not:
    population may increase by more than output, reducing GDP per head
    income may be unevenly distributed
    relative poverty may rise
    may reduce non-renewable resources, increasing poverty in the long run. 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 sided 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 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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