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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/11
Paper 1 (Multiple Choice), maximum raw mark 30
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
www.maxpapers.com
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
Syllabus
9708
Question
Number
Key
Question
Number
Key
1
2
C
B
16
17
B
D
3
4
5
D
D
A
18
19
20
D
C
B
6
7
C
D
21
22
B
C
8
9
10
C
C
B
23
24
25
A
D
A
11
12
A
B
26
27
B
B
13
14
15
D
D
A
28
29
30
B
C
C
© University of Cambridge International Examinations 2011
Paper
11
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/12
Paper 1 (Multiple Choice), maximum raw mark 30
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
www.maxpapers.com
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
Syllabus
9708
Question
Number
Key
Question
Number
Key
1
2
B
D
16
17
D
D
3
4
5
D
A
C
18
19
20
C
B
B
6
7
D
C
21
22
C
A
8
9
10
C
B
A
23
24
25
D
A
B
11
12
B
D
26
27
B
B
13
14
15
D
A
B
28
29
30
C
C
C
© University of Cambridge International Examinations 2011
Paper
12
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/13
Paper 1 (Multiple Choice), maximum raw mark 30
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
www.maxpapers.com
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
Syllabus
9708
Question
Number
Key
Question
Number
Key
1
2
D
D
16
17
D
C
3
4
5
A
C
D
18
19
20
B
B
C
6
7
C
C
21
22
A
D
8
9
10
B
A
B
23
24
25
A
B
B
11
12
D
D
26
27
B
C
13
14
15
A
B
D
28
29
30
C
C
B
© University of Cambridge International Examinations 2011
Paper
13
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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/21
Paper 2 (Data Response and Essay – Core),
maximum raw mark 40
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
1
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
Paper
21
(a) (i) Compare the average milk price paid to farmers in the US in August 2008 with that
in August 2009?
[2]
Fell (1), by €9 or 33% approx (1)
Allow range of figures €8.7–9.5 or 32%–35%
(ii) How far does Fig. 1 suggest that the price of milk is subject to regular seasonal
influences?
[2]
No / Very little (1), supporting reference to data (1)
(b) (i) Compare the changes in milk prices in the US and in New Zealand between 2007
and 2009.
[2]
Both fell overall (1), US price fell continuously, NZ price rose then fell (1), US price fell
more in % and absolute terms. NZ prices fell more rapidly 2008–9.
Any two points
(ii) Explain two possible reasons for the different level of milk prices in the US and
New Zealand.
[4]
Allow two interpretations of the question
1.
2.
Why US prices are higher than those in NZ
The price difference may reflect productivity, costs of production / efficiency,
government action, € exchange rate, comparative advantage, demand and supply
conditions etc.
Identified reason (1), explained reason (2).
Why are prices falling in US and NZ, as above.
(c) Explain how one group, other than dairy farmers, would lose from lower milk prices
and how another group would gain from lower milk prices.
[4]
Losers:
Gainers:
Government (increased farm support expenditure, reduced tax income);
associated activities e.g. farm suppliers (lower sales); local retailers (less demand
from farmers); banks (loan defaults); farm workers (wages, employment),
producers of substitutes.
Consumers (lower prices); producers of milk-based goods (lower costs)
(d) Discuss the case for the use of government subsidies for the production of milk.
Benefits:
[6]
increase exports, reduce imports, support essential industry and employment,
lower prices for basic foodstuff for low incomes, promotion of merit good etc. to
max. (4)
Problems: financial cost (taxation), opportunity cost, misdirection of resources, inefficiency,
dependence, etc. to max. (4)
© University of Cambridge International Examinations 2011
Page 3
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
21
(a) Explain the functions of an economic system.
[8]
An economic system is the means by which a country answers the basic economic problem.
Limited resources and unlimited wants result in scarcity and choices have to be made. The
system allows the questions of what?, how?, and for whom? to be answered. It arranges for
resources to be employed to meet demands and for producers and consumers to be
satisfied. This may be done by the price system, state planning or a mixture of the two.
Understanding of the economic problem
Explanation of the role of the economic system
2 marks
6 marks
(b) Discuss possible reasons why mixed economic systems have replaced most of the
former planned economic systems.
[12]
Planned economies are based on state control and direction while a mixed economy uses
the market system supported by appropriate government intervention. Recent history
illustrates the failure of the planned economy to raise living standards and perform as well as
mixed economies. Mixed economies proved more efficient, more innovative, more flexible
and provided greater choice and higher living standards. Planned economies were unable to
coordinate economic decision making, lacked incentives, lacked quality control, were slow to
change and caused considerable environmental damage. Despite the attempts of planned
economies to provide citizens with security and a minimum standard of living, the advantages
of the mixed economy were more highly valued.
Understanding of the two types of system
Analysis of the performance of the planned system
Discussion of the relative merits of the two systems
2 marks
up to 6 marks
up to 6 marks
© University of Cambridge International Examinations 2011
max. 10
Page 4
3
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
21
(a) Explain how the effects of a devaluation on the level economic activity differ from
those of a deflation.
[8]
Devaluation is the lowering by the government of a currency’s international value under a
fixed exchange rate system. Deflation refers to a persistent fall in the general price level or a
lower level of economic activity possibly resulting from government policy. Devaluation
should improve the current account and boost the economy with higher demand, employment
and growth. Deflation harms confidence, reduces spending and increases unemployment.
Understanding of devaluation and deflation
Explanation of the different effects
4 marks
4 marks
(b) Discuss whether inflation can be both the cause and the result of fluctuations in an
economy’s exchange rate.
[12]
Higher inflation than trading partners may mean a fall in the exchange rate because of
increased supply and reduced demand for the currency. This will result from fewer exports,
more imports, reduced confidence and outflows of investment. Overall it would mean a
worsening of the balance of payments.
A fall in the exchange rate will increase the cost of imports (cost push inflation) and increase
the demand for exports (demand pull inflation). A rise in the exchange rate would reduce
inflationary pressure.
Whether these effects occur will depend upon the rate of inflation, the relative rates of
inflation, the government’s ability to control inflation, the nature of the exchange rate system
and the direction of the change in the exchange rate.
Understanding of inflation and the exchange rate
Analysis of the impact of the changes
Discussion of the conditions affecting the process
up to
up to
2 marks
6 marks
6 marks
© University of Cambridge International Examinations 2011
max. 10
Page 5
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
Paper
21
(a) Explain how the different international transactions of a country are recorded in its
balance of payments accounts.
[8]
The transactions involve trade in goods and services, incomes from work and investment,
profits and dividends (IPD), government and private transfers (remittances), direct
investment, portfolio investment and short term capital flows. The items are recorded as
inflows (+) or outflows (-) and divided between the current account (goods and services,
income and transfers) and the capital and financial accounts.
Understanding nature of international transactions
up to 3 marks
Explanation of the recording of the items in the balance of payments up to 5 marks
(b) Discuss the use of tariffs and quotas as policies to reduce a current account deficit.
[12]
Current account deficit means more outflows than inflows on trade, transfers and income.
Tariffs are a tax on imports while quotas are a limit on quantity of imports. A tariff will raise
revenue and be more effective the higher the price elasticity of demand and will operate
through the market system. A quota will be effective when demand and supply are inelastic,
will work with more certainty and benefit is more likely to accrue to the importer. Both
methods involve intervention in the free market and may attract retaliation, there may be
difficulty in setting the right level, they will have administrative costs and will be ineffective if
the cause of the deficit is the performance in the income or transfer sections.
Understanding of current deficit, tariff and quota
Analysis of the operation of tariffs and quotas
Discussion of their merits and drawbacks
up to
up to
up to
3 marks
4 marks
6 marks
© University of Cambridge International Examinations 2011
max. 12
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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/22
Paper 2 (Data Response and Essay – Core),
maximum raw mark 40
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
1
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
22
(a) (i) Calculate and compare the change in the trade balance between 2008–9 and
2012–13 of the Northern Territory with that of Australia.
[4]
Both improved (1), Northern Territory (NT) has an increased surplus (1), Australia goes
from deficit to surplus (1), supporting calculation NT A$1454 to A$3193, Aus A$-41 665
to A$12 303 (2)
Comparative points without accurate calculation can be rewarded, but the points must
relate to the ‘balance’, not the change in imports or exports alone.
(ii) Explain why exports and imports are often measured at constant prices.
[2]
Constant prices exclude the effect of inflation (1), more accurate in real terms or shows
the volume of trade.
(b) Explain two additional pieces of information that would be useful in judging
Australia’s international financial position.
[4]
From net income, net transfers, capital account, financial account, foreign reserves,
exchange rate, terms of trade or alternatives, identification (1), plus 1 mark for explanation of
identified point (1)
(c) Analyse the change in average weekly earnings in Australia in real terms between
2008–9 and 2012–13.
[4]
For an understanding of meaning of ‘real terms’ (1 mark)
Real earnings will rise (1), earnings rise more rapidly than inflation (1), supporting calculation
14.6% v. 11.2% (2)
(d) With the help of the text and the table, discuss the economic prospects of the
Northern Territory.
[6]
Good prospects: trade in tourism (income elastic), minerals and oil, rising surplus, relatively
low inflation rate, higher real wages, growth of working population.
Poor prospects: rise in unemployment, dependence on narrow range of production, variable
demand, externalities of tourism and mining, lack of sustainability of natural resources.
For the identification of points that could affect the economic prospects of the Northern
Territories (2 max.)
For explanation of why the identified points are relevant to the economic prospects. (2 max.)
For comment on the economic prospects of the Northern Territories, for example a reasoned
summary or conclusion. (up to 2 marks)
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
(a) Explain the role that a government must fulfil in a mixed economy.
Paper
22
[8]
A mixed economy is based on private ownership, the profit motive, demand and supply etc.
with a role for the government. The role is to provide the environment in which the market
can operate successfully. This includes ensuring law and order, national defence, property
rights and the provision of public goods and desirable merit goods. It intervenes with taxes,
subsidies etc. to influence the behaviour of the private sector and markets and achieve a
better allocation of resources.
For a definition of the mixed economy (2 marks)
For an explanation of the role of government in a mixed economy (6 marks)
(b) Discuss the accuracy of the definition of public and merit goods as ‘goods that must
be provided by the government’.
[12]
Public goods are non-rival and non-excludable such as street lighting. Merit goods are goods
underprovided by the market system. The consumers lack full information of the
consequences of non-consumption. This might include healthcare and pension provision.
Although the government provides public goods because it is not possible for the market due
to free riders, merit goods are supplied to a greater or lesser extent by private providers.
The government also provides other goods and services which are neither public nor merit
goods. The definition fits public better than merit goods but is inadequate in itself.
For an understanding of public goods and why they are provided by the government
(up to 6 marks)
For an understanding of merit goods and why they are provided by the government
(up to 6 marks)
(10 marks max.)
Discussion of the accuracy of the definition.
© University of Cambridge International Examinations 2011
(4 marks)
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3
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
22
(a) Using economic analysis, explain the possible causes of the increase in the sales of
electronic goods such as mp3 players in recent years.
[8]
Influences have come from both the demand and supply side. Rising incomes, advertising,
changing fashion and tastes have increased demand. Innovation, the introduction of new
and improved products and the lowering of costs have increased supply. The fall in the price
of the goods has resulted in an extension of demand. More are being sold at lower prices.
Understanding the significance of demand and supply
Explanation of demand and/or supply changes
(up to 3 marks for each factor explained)
2 marks
6 marks
(b) Suggest two possible reasons why a government might increase the indirect tax on
such goods and discuss, in the light of these reasons, the likely effectiveness of such
a policy.
[12]
Possible reasons include raising revenue to finance government expenditure, cutting the
purchase of imports to help the balance of trade. It might be argued that the products are
demerit goods because of the harm to hearing and disturbance to others. An indirect tax is
imposed on spending and raises the price of the good. PED measures the responsiveness of
demand to a change in price and affects the impact of an increase in an indirect tax. A tax
will best reduce the quantity imported when demand for imports is elastic as there will be a
more than proportionate fall in demand. To raise revenue it is better for demand to be
inelastic so that the fall in demand is less than proportionate to the price rise. The
effectiveness of internalising the negative externality will depend upon setting the tax at the
appropriate rate.
For a definition of indirect tax (1 mark)
For an explanation of one reason for an indirect tax and a discussion of ‘effectiveness’ (up to
6 marks with 4 max. if only one element is considered)
For an explanation of a second reason for an indirect tax and a discussion of ‘effectiveness’
(up to 6 marks with 4 max. if only one element is considered)
© University of Cambridge International Examinations 2011
Page 5
4
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
22
(a) Explain why the successful operation of division of labour depends upon the use of
money.
[8]
Division of labour involves dividing the production process into a series of stages. This leads
to more specialised outputs which are not necessarily final products. Trading these in a
barter system would be difficult, inefficient and probably impossible. Money, anything that is
generally acceptable as a means of payment, can act as a medium of exchange and a unit of
account, so enabling trade to take place and making division of labour effective.
Understanding of division of labour and money
4 marks (one only 3 max.)
Explanation of the link between the functions of money and trade 4 marks
(b) Discuss whether it is the behaviour of producers, consumers or governments that is
most likely to cause inflation.
[12]
Inflation is a sustained rise in the general price level and is measured by the CPI or RPI.
Each of the groups can contribute to inflation although in different ways. Producers may
increase prices to raise profit levels or to respond to higher import prices (cost push);
consumers may increase their spending and reduce their saving raising AD (demand pull);
governments may increase the money supply (monetary inflation), lower direct taxation and
run budget deficits (demand pull) and raise indirect taxation (cost push inflation); they may
also manipulate the exchange rate. Candidates can argue for any group although
government influence may be most widespread.
For a definition of inflation
For an understanding of different types of inflation
Analysis of the influence of different groups
Discussion of the relative impact of the groups
1 mark
6 marks
6 marks
4 marks
© University of Cambridge International Examinations 2011
(10 marks max.)
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/23
Paper 2 (Data Response and Essay – Core),
maximum raw mark 40
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
1
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
23
(a) Compare the exchange rate of the S$ against the US$ from the beginning of 1980 to
the beginning of 2010.
[2]
It appreciated/rose (1), by approx 50% or US$0.24 (1)
(b) Analyse the possible changes in the demand for and the supply of the S$ that could
account for the trends in its exchange rate between 1997 and 2007.
[4]
A depreciation between 1997 and 2001(1) may be the result of a fall in demand and/ or a rise
in the supply of S$ (1), the appreciation between 2002 and 2007 (1) may be the result of a
rise in demand and/or a fall in supply of S$ (1)
(c) Explain two ways in which an appreciating exchange rate can help to reduce inflation.
[4]
Appreciation will reduce the price of imports (1), lessening cost-push pressure (1)
Exports are more expensive (1), reducing demand-pull pressure (1)
(d) Using the extract, consider whether Singapore has both a floating and a fixed
exchange rate system.
[4]
Elements of floating include movement within trading band (1), fluctuation of exchange rate
shown in data (1)
Fixed includes MAS intervention (1), set limits to movement (1)
(e) Discuss whether an economy will benefit from a fall in its exchange rate.
[6]
Benefits: improved balance of trade; more competitive industry; higher employment and
income; increased growth
Drawbacks: only works with Marshall-Lerner condition and elasticity of supply; generates
inflationary pressure; undermined by retaliation; reduced purchasing power of currency
Max. 4 marks for one side only
© University of Cambridge International Examinations 2011
Page 3
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
(a) Explain how resources are allocated in a free market system.
Paper
23
[8]
A free market system relies on demand and supply without government intervention.
Resources are the factors of production. Consumer and producer behaviour results in
demand and supply changes leading to price changes. Higher prices, profits and rewards
draw more resources to that use. Price falls do the opposite.
Understanding of the free market and resources
Explanation of the operation of the price mechanism
4 marks
4 marks
(b) Discuss how the market system might be influenced by government intervention to
provide appropriate quantities of goods and services.
[12]
Markets may fail by under-provision, over-provision or non-provision of goods and services.
This relates to merit goods, demerit goods and public goods. The government can undertake
state provision, subsidisation, taxation and product bans and regulation. Each method can be
judged by its cost, effectiveness and side effects. State provision will make the goods
available but may be costly and inefficient. Subsidisation will reduce the cost of the good but
will interfere with the market mechanism and be a burden to taxpayers. Taxation regulates
consumption and raises revenue but imposes burdens on producers and consumers. Bans
and regulation prevent production but may lose some benefits and create unemployment and
enforcement costs.
Understanding of the failings of market provision
Analysis of the nature of intervention
Discussion of the problems of intervention
© University of Cambridge International Examinations 2011
4 marks
4 marks
4 marks
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3
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
Paper
23
(a) Explain how and why the price elasticity of supply of agricultural goods differs from
that of manufactured goods.
[8]
Price elasticity of supply measures the responsiveness of supply to changes in price.
Agricultural goods tend to be more price inelastic (PES<1) than manufactured goods. The
influences at work are perishability of product, specialised storage, growing period, capacity
availability, ability to switch products, nature of additional costs etc.
Understanding of PES in these cases
Explanation of influences in the two cases.
4 marks
4 marks
(b) Discuss whether the payment of government subsidies to farmers is a beneficial
policy.
[12]
Subsidies are payments to producers which reduce costs. They shift the supply curve to the
right, lowering price and increasing quantity. This will raise farm incomes if PED is elastic but
not if it is inelastic. Subsidies will lower prices for consumers and help make domestic
farmers competitive with foreign producers so helping the balance of trade. They will enable
farmers to stay in business with effects on employment and the environment. The benefit will
be split between the consumer and farmer depending upon the elasticities involved. Against
this, subsidies may undermine the operation of the market, keep resources in an inefficient
use, raise the tax burden, reduce government expenditure on other groups and may be
ineffective in raising farm incomes.
Understanding of the meaning and effect of subsidies
Discussion of the benefits of subsidies
Discussion of the drawbacks of subsidies
© University of Cambridge International Examinations 2011
4 marks
4 marks
4 marks
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4
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
Paper
23
(a) Explain the limitations of the theory of comparative advantage in accounting for of a
country’s pattern of trade.
[8]
Comparative advantage is found when a country can produce at a lower opportunity cost
than another. This reflects the country’s factor endowment. It is the basis for specialisation,
increased output and the benefits of trade. The theory is based on some restrictive
assumptions which limit its explanatory value. These include bilateral rather than multilateral
trade, absence of transport costs, mobility of factors, constant returns, full employment and
reciprocal demand. These assumptions may not exist in practice.
Understanding of comparative advantage
Explanation of the limitations of the theory of comparative advantage
4 marks
4 marks
(b) Discuss whether the introduction of trade barriers to imports can be justified.
[12]
Trade barriers include tariffs, quotas, export subsidies, misaligned exchange rates,
administrative restrictions, exchange control etc. These are intended to reduce imports and
the corresponding outflow of currency. Barriers can be justified in terms of protection of
infant industries, prevention of dumping, raising revenue, short-run employment protection,
improving the terms of trade and avoiding overspecialisation. On the other hand, barriers will
prevent the benefits of international trade which include lower prices, more choice, more
efficiency and higher living standards. Barriers may face retaliation and breach international
obligations e.g. those of the World Trade Organisation.
Understanding of the types and purpose of trade barriers
Discussion of the benefits of trade barriers
Discussion of the drawbacks of trade barriers
© University of Cambridge International Examinations 2011
4 marks
4 marks
4 marks
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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/31
Paper 3 (Multiple Choice), maximum raw mark 30
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
Syllabus
9708
Question
Number
Key
Question
Number
Key
1
2
D
A
16
17
B
D
3
4
5
A
D
B
18
19
20
C
D
B
6
7
B
A
21
22
A
D
8
9
10
B
D
C
23
24
25
D
B
B
11
12
A
C
26
27
C
C
13
14
15
B
A
C
28
29
30
A
C
B
© University of Cambridge International Examinations 2011
Paper
31
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/32
Paper 3 (Multiple Choice), maximum raw mark 30
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
www.maxpapers.com
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
Syllabus
9708
Question
Number
Key
Question
Number
Key
1
2
A
A
16
17
D
C
3
4
5
D
B
B
18
19
20
D
B
A
6
7
A
B
21
22
D
D
8
9
10
D
C
A
23
24
25
B
B
C
11
12
C
B
26
27
C
A
13
14
15
A
C
B
28
29
30
C
B
D
© University of Cambridge International Examinations 2011
Paper
32
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/33
Paper 3 (Multiple Choice), maximum raw mark 30
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
www.maxpapers.com
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
Syllabus
9708
Question
Number
Key
Question
Number
Key
1
2
A
A
16
17
D
C
3
4
5
D
B
B
18
19
20
D
B
A
6
7
A
B
21
22
D
D
8
9
10
D
C
A
23
24
25
B
B
C
11
12
C
B
26
27
C
A
13
14
15
A
C
B
28
29
30
C
B
D
© University of Cambridge International Examinations 2011
Paper
33
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/41
Paper 4 (Data Response and Essays – Supplement),
maximum raw mark 70
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
41
Section A
1
(a) Do not need a formal definition to gain 3 marks. Explanation of a recession in terms of a
decline in output, a reduction in GDP, an increase in unemployment, decline in spending,
decline in investment.
[3]
(b) (i) The statement means that the rise in taxes does not increase the government’s revenue
as is anticipated and does not, therefore, increase the government’s funds for
expenditure. The distribution of the tax burden is not directed more to the higher income
earners.
[3]
(ii) Evidence in the charts: In the US during the 1980s the top rate was cut from 70% to 28%
and the share of taxes paid by the top 1% rose from 17.6% to 27.5%.
– However, there is no evidence about what happened when tax rates were
increased.
– there is also no statement about what the higher tax rates were intended to achieve.
– there is no statement about what happened to production and employment when
taxes were high.
Up to 4 marks for evidence giving one side only.
[6]
(c) The bank lowered interest rates. Lower interest rates would mean a reduction in the cost of
borrowing with a potential increase in investment which would stimulate the economy.
Candidates can explain the effect of investment/injection increases. Lower rates are also
hoped to encourage spending maybe by an increase in credit. Buying bonds also puts more
money into the economy with the hope that this would stimulate demand.
[8]
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
41
Section B
General Comments for Section B:
The essay questions carry a maximum mark of 25. Try not to 'bunch' marks, but use the whole mark
range. If there is any doubt in your mind, give the benefit of doubt to the candidate.
The difference in grades should be assessed on the ability of the candidate to demonstrate the
various objectives of the examination listed in the syllabus and not purely on the ability to itemise
further facts from the content of the syllabus. Marks should be awarded for the ability to demonstrate
that aim b) of the syllabus has been achieved as well as aim a) – which refers to content knowledge.
It is the objective of the examination, as listed in the syllabus, to assess both these aims.
An overall guide for marks for individual questions is given below; these are from a total of 25. They
may be applied proportionally of course to parts of questions where the total is less than 25:
Mark 1–9 (Linked to level one in individual question notes).
1–5
where the answer is mostly irrelevant and only contains a few valid points made incidentally
in an irrelevant context. There will also be substantial omissions of analysis.
6–9
where the answer shows some knowledge but does not indicate that the meaning of the
question has been properly grasped. Basic errors of theory, or an inadequate development
of analysis may be evident.
Mark 10–13 (Linked to level two in individual question notes).
10–11 where there is evidence of an ability to identify facts or some ability at graphs and/or a fair
ability to apply known laws to new situations.
There should be an accurate although undeveloped explanation of the facts relating to the
question together with an explanation of the theory, and evidence of some ability to
discriminate and form elementary judgements. Do not expect a clear logical presentation.
There will not be much evidence of the ability to recognise unstated assumptions, nor to
examine the implications of a hypothesis, nor of the ability to organize ideas into a new unity.
12–13
where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.
14–17 (Linked to level 3 in individual question notes).
14–15 where there is a good knowledge of the facts and theory of the question, clear evidence of
the ability to use the facts and theory with accurate reference to the question that may have
presented the candidate with a novel application.
There should also be evidence, where appropriate, of the ability to examine the implications
of the question and an attempt to distinguish between facts and value judgements.
Clear statements, supported by reasoned arguments should be given and there should be
some attempt at a conclusion to the question. There should be a reasoned structure to the
whole answer. Do not expect too many extra Illustrative points which are not explicitly
referred to in the question, do not expect too much critical comment on unstated
assumptions.
16–17
for an answer showing a well reasoned understanding of the question's requirements and of
the relevant theory: the analysis should be sound though the illustration and development
may not be very full.
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
41
18–25 (Linked to level 4 in individual question notes).
18–20 where there is a thorough knowledge of the facts and theory with an excellent ability to
describe, explain or analyse this in a precise, logical, reasoned manner. There should be an
ability to query some of the assumptions in the question and clear evidence of an ability to
distinguish between fact and value judgements and to draw some conclusions on the matter
being discussed. Conclusions should be formed and expressed within a sound structured
answer so that the whole is well presented. New illustrations and apposite examples should
be introduced as further evidence of an ability to recognise the principles of the question and
their application to relevant current situations.
21–25
for an answer which, given the time constraint, could not be improved significantly: it will
have clear analysis, ample illustration and a good attempt at considered evaluation.
Be positive in your marking awarding marks for what is there without being too much influenced by
omissions. Marks should not be deleted for inaccuracies.
Corresponding marks for sub-sections.
1
2
3
4
Total Mark 10
1–3
4–5
6–7
8–10
Total Mark 12
1–4
5–6
7–8
9–12
Total Mark 13
1–4+
5–6+
7–8+
9–13
Total Mark 15
1–5
6–8
9–11
12–15
2
(a) There should be an attempt to explain the meaning of economic efficiency and of market
failure. Economic efficiency should be explained in terms of productive and allocative
efficiency, market failure can be explained by reference to possible excessive profits, the
need for very large investments, the existence of externalities, merit goods and of the need
for public goods. There should then be an attempt to discuss whether governments can
overcome these market failures in order to increase efficiency.
[25]
L4 For a thorough discussion of both efficiency and market failure and a competent
discussion of the role of the government in promoting efficiency overcoming market
failure. A reasoned conclusion should be presented.
(18–25)
L3 For a competent explanation with either a more limited comment on both efficiency and
market failure (perhaps concentrating on productive efficiency) or a full explanation of
one but little comment on the other. The role of the government will be discussed in a
more limited way but a conclusion should still be presented.
(14–17)
L2 For an undeveloped explanation of efficiency/market failure with very little discussion of
the role of the government. Mention of the government will be descriptive rather than in
the form of a discussion related to efficiency/market failure. It is likely there will be no
conclusion.
(10–13)
L1 For an answer which shows some knowledge but does not indicate that the question has
been fully grasped, or where the answer contains irrelevancies and errors of theory.
(1–9)
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
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Syllabus
9708
Paper
41
(a) Explanation of the two terms and an analysis of the link between the short run average cost
curves reflecting diminishing returns, and the long run average cost curves reflecting
economies of scale.
[12]
L4 For a good explanation of both the terms with examples and a clear link between the
short and long run. The diagram will be clear and accurate. Must provide a diagram to
gain Level 4.
(9–12)
L3 For a competent analysis of the terms maybe concentrating on economies of scale with
a weaker link between the short run and long run, or no diagram of the link.
(7–8)
L2 For a more limited analysis with no link or no diagram.
(5–6)
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
(1–4)
(b) Discussion of the aims which are assumed for perfect competition, profit maximisation, and
the aims which are possible for imperfect competition. One of these is profit maximisation
but there are also other behavioural and managerial aims.
[13]
L4 For a good discussion and comparison of the aims between the different market
structures with a range of aims in imperfect markets.
(9–13)
L3 For a competent explanation with either an undeveloped comment on a range of aims in
imperfect markets or a fuller explanation of two aims.
(7–8)
L2 For a limited discussion and only a brief comparison.
(5–6)
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
(1–4)
4
Discussion of determinants of wages. Candidates should discuss the theoretical analysis and
how it is moderated by the existence of unions and government regulations. Theoretical analysis
without marginal revenue productivity approach has, in the past, not merited the full range of
marks.
[25]
L4 For a thorough analysis of theoretical wage determination with a clear discussion of the role
of unions and/or government policy.
(14–17 for demand and supply only with institutional factors and government policy) (18–25)
L3 For a competent explanation but with limited discussion of unions and/or government factors.
(10–13 for demand and supply)
(14–17)
L2 For a correct but undeveloped theoretical analysis with no institutional factors or only very
brief mention of these factors.
(6–9 for demand and supply)
(10–13)
L1 For an answer which contains inaccuracies and only a few correct points.
(1–5 for demand and supply only)
© University of Cambridge International Examinations 2011
(1–9)
Page 6
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
(a) Explanation of meaning of GDP and description of methods of calculation.
Paper
41
[12]
L4 For a sound explanation with good application and a clear understanding of the
principles involved in the three methods of calculation.
(9–12)
L3 For an accurate reference to the question but with a more limited explanation or minor
errors in the analysis of three methods or a full account of two methods of calculation.
(7–8)
L2 For an explanation of two methods perhaps with minor errors not necessarily logically
presented.
(5–6)
L1 For an answer which has some basic correct facts but includes irrelevancies and errors
of theory.
(1–4)
(b) Evaluation of comment. Consideration of the value of GDP but also of other factors which
might be important but which are not included directly in GDP – health, housing, education,
crime, income distribution etc.
[13]
L4 For a reasoned and clear discussion, logically presented.
(9–13)
L3 For a fair but undeveloped discussion but with accurate reference to the question. (7–8)
L2 For a limited discussion with little comment.
(5–6)
L1 For an answer which has some basic correct facts but includes irrelevancies and errors
of theory.
(1–4)
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
(a) Explanation of the multiplier.
Paper
41
[12]
L4 For a sound explanation with good application and a clear understanding of the
principles involved. An explanation of G and T and I and E should be given and a
comment on the overall balance on the multiplier should be mentioned.
(9–12)
L3 For an accurate explanation of the multiplier but with a more limited comment on the
possible overall balance once G, T, X, M are included.
(7–8)
L2 For a weaker explanation of the multiplier or with either G (but not T) or X (but not M)
and no comment on the overall change.
(5–6)
L1 For an answer which has some basic correct facts but includes irrelevancies and errors
of theory.
(1–4)
(b) Discussion of the effect of a change in the equilibrium through an injection. An increased
injection could increase demand and put pressure on the use of resources which could
cause inflation. A decrease in injections could reduce demand resulting in fall in sales and a
possibility of increased unemployment.
[13]
L4 For a reasoned and clear discussion with the analysis logically presented and a
conclusion drawn.
(9–13)
L3 For a fair but undeveloped discussion (possibly concentrating in one direction only). (7–8)
L2 For a limited discussion with little comment and no conclusion.
(5–6)
L1 For an answer which has some basic correct facts but includes irrelevancies and errors
of theory.
(1–4)
7
The candidates should present an argument which considers the criteria which distinguish
developed from developing countries; which discusses the significance of the protection of
domestic industry and the role of investment; and which comments on the proposition that
governments should place an emphasis on protection and investment.
[25]
L4 For a thorough discussion of the range of distinguishing criteria, a competent discussion of
the role of protection and investment and a reasoned conclusion.
(18–25)
L3 For a competent discussion but with a more limited comment on the relative importance of
protection and investment (to other alternatives). A conclusion should still be presented.
(14–17)
L2 For an accurate though undeveloped discussion, limited attempt to mention the relative
importance of protection and investment and no conclusion.
(10–13)
L1 For an answer which shows some knowledge but does not indicate that the question has
been fully grasped, or where the answer contains irrelevancies and errors of theory.
(1–9)
© University of Cambridge International Examinations 2011
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/42
Paper 4 (Data Response and Essays – Supplement),
maximum raw mark 70
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
42
Section A.
1
(a) The Gross Domestic Product (GDP) measures the value of economic activity within a
country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods
and services produced in an economy during a period of time.
[3]
(For stating Gross Domestic Product 1 mark only)
(b) It means more available credit, easier to get; or credit at lower interest rates. This would be
likely to increase national income by the multiplier process. (A descriptive reference to the
process is sufficient; there is no need to use the actual term)
[3]
(c) Use the figures for specific exchange rates, and figures for GDP – expect to see examples of
emerging/developing countries compared with developed countries. But they are only
selected countries, and for only two years and they are projections not actual figures.
Exchange rate figures may mean exports become more difficult to sell.
[6]
[Maximum 4 for one side of the argument only]
(d) An increase in domestic demand to encourage growth and export-led growth.
2 marks
Conflict? Different approaches but same aim of growth
2 marks
increase exports improves balance of payments and increases injections and GDP; increase
domestic demand will also increase injections and help increase GDP. No conflict. 2 marks
Increase domestic demand may increase incomes and increase imports which may need to
be offset by further export growth. A possible conflict.
2 marks
[8]
[A general description of fiscal and monetary policy; 2 maximum]
© University of Cambridge International Examinations 2011
Page 3
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
42
Section B.
General Comments for section B:
The essay questions carry a maximum mark of 25. Try not to 'bunch' marks, but use the whole mark
range. If there is any doubt in your mind, give the benefit of doubt to the candidate.
The difference in grades should be assessed on the ability of the candidate to demonstrate the various
objectives of the examination listed in the syllabus and not purely on the ability to itemise further facts
from the content of the syllabus. Marks should be awarded for the ability to demonstrate that aim b) of
the syllabus has been achieved as well as aim a) – which refers to content knowledge. It is the objective
of the examination, as listed in the syllabus, to assess both these aims.
An overall guide for marks for individual questions is given below; these are from a total of 25. They may
be applied proportionally of course to parts of questions where the total is less than 25:
Mark 1–9 (Linked to level one in individual question notes).
1–5
where the answer is mostly irrelevant and only contains a few valid points made incidentally in
an irrelevant context. There will also be substantial omissions of analysis.
6–9
where the answer shows some knowledge but does not indicate that the meaning of the
question has been properly grasped. Basic errors of theory, or an inadequate development of
analysis may be evident.
Mark 10–13 (Linked to level two in individual question notes).
10–11
where there is evidence of an ability to identify facts or some ability at graphs and/or a fair ability
to apply known laws to new situations.
There should be an accurate although undeveloped explanation of the facts relating to the
question together with an explanation of the theory, and evidence of some ability to discriminate
and form elementary judgements. Do not expect a clear logical presentation. There will not be
much evidence of the ability to recognise unstated assumptions, nor to examine the implications
of a hypothesis, nor of the ability to organise ideas into a new unity.
12–13
where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.
© University of Cambridge International Examinations 2011
Page 4
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
42
Mark 14–17 (Linked to level 3 in individual question notes).
14–15
where there is a good knowledge of the facts and theory of the question, clear evidence of
the ability to use the facts and theory with accurate reference to the question that may have
presented the candidate with a novel application.
There should also be evidence, where appropriate, of the ability to examine the implications of
the question and an attempt to distinguish between facts and value judgements.
Clear statements, supported by reasoned arguments should be given and there should be
some attempt at a conclusion to the question. There should be a reasoned structure to the
whole answer. Do not expect too many extra Illustrative points which are not explicitly referred
to in the question, do not expect too much critical comment on unstated assumptions
16–17
for an answer showing a well reasoned understanding of the question's requirements and of the
relevant theory: the analysis should be sound though the illustration and development may not
be very full.
Mark 18–25 (Linked to level 4 in individual question notes).
18–20
where there is a thorough knowledge of the facts and theory with an excellent ability to describe,
explain or analyse this in a precise, logical, reasoned manner. There should be an ability to
query some of the assumptions in the question and clear evidence of an ability to distinguish
between fact and value judgements and to draw some conclusions on the matter being
discussed. Conclusions should be formed and expressed within a sound structured answer so
that the whole is well presented. New illustrations and apposite examples should be introduced
as further evidence of an ability to recognise the principles of the question and their application
to relevant current situations.
21–25
for an answer which, given the time constraint, could not be improved significantly: it will have
clear analysis, ample illustration and a good attempt at considered evaluation.
Be positive in your marking awarding marks for what is there without being too much influenced
by omissions. Marks should not be deleted for inaccuracies.
Corresponding marks for sub-sections.
Total Mark 10
1
1–3
2
4–5
3
6–7
4
8–10
Total Mark 12
1–4
5–6
7–8
9–12
Total Mark 13
1–4+
5–6+
7–8+
9–13
Total Mark 15
1–5
6–8
9–11
12–15
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
42
Candidates need to explain the two terms, market failure and the meaning of the efficient use of
resources, and then consider the argument. Market failure can be explained by reference to
possible excessive profits, the need for very large investments, the existence of externalities and
of merit goods, and of the need for public goods. Economic efficiency should be explained in
terms of productive and allocative efficiency.
Government intervention can be through regulation, taxation or subsidies.
There are negative and positive externalities from car use. Negative externalities include
pollution. Positive externalities include less crowded public transport with greater comfort;
benefits from the expenditure of the tax receipts. Unlike other positive externalities where
subsidies have been used, it has never been suggested that subsidies ought to be used to
increase the positive externalities from private car use. Any subsidies given are used to make
alternative public transport more attractive. However, taxes have been used to decrease
negative externalities. Taxing the use of cars is usually presented in the context of negative
externalities to achieve allocative efficiency. Taxing production might not result in productive
efficiency.
[25]
L4 For a thorough explanation of both efficiency and market failure and a competent discussion
of the role of the government in promoting efficiency overcoming market failure. A reasoned
conclusion should be presented
[18–25]
L3 For a competent explanation with either a more limited comment on both efficiency and
market failure (perhaps concentrating on productive efficiency) or a full explanation of one
but little comment on the other. The role of the government will be discussed in a more
limited way but a conclusion should still be presented.
[14–17]
(L3 maximum if there is no mention of production and use of cars)
L2 For an undeveloped explanation of efficiency/market failure with very little discussion of the
role of the government. Mention of the government will be descriptive rather than in the form
of a discussion related to efficiency/market failure. It is likely there will be no conclusion.
[10–13]
L1 For an answer which shows some knowledge but does not indicate that the question has
been fully grasped, or where the answer contains irrelevancies and errors of theory.
[1–9]
3
(a) A rise in the price of a good: a demand schedule has price and quantity of one good bought
against price; budget line diagrams have quantities of two goods – price is not on the axis;
one cannot tell how demand will change with budget line unless you also show preference
lines.
A rise in a consumer’s income: similarity, both move parallel out for a rise in income; but
cannot tell what will be bought unless have supply line – with demand – or preference lines
with budget line.
[12]
L4 For a sound discussion indicating the similarities/differences
[9–12]
L3 For an accurate explanation but with a less clear comparison
[7–8]
L2 For a general undeveloped explanation with little comparison.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies and errors of
theory
[1–4]
© University of Cambridge International Examinations 2011
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Syllabus
9708
Paper
42
(b) Analysis of equi-marginal principle which underlies an individual demand curve. The sum of
individual demand curves form the market demand curve. Whether individual utilities can be
added is debatable.
[13]
L4 For a reasoned discussion linked to more than one good and clearly structured answer
with a conclusion
[9–13]
[Low L4 maximum if there is no mention of market demand]
L3 For a fair discussion but undeveloped answer but still with a conclusion
[7–8]
L2 For a limited attempt which does not clearly determine the equilibrium position for more
than one good and no conclusion.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[1–4]
4
(a) Discussion of possible reasons for growth including large market demand, economies of
scale, possible future profits, with a contrasting comment on reasons why it might not be
advantageous to grow in size; diseconomies of scale, small market demand, specialised
products/services. Allow a wider interpretation which discusses effects on consumers and in
the economy.
[12]
L4 For a sound discussion with contrasting explanations.
[9–12]
L3 For an accurate explanation but with an emphasis on one side – possibly of economies of
scale only.
[7–8]
L2) For a general undeveloped explanation.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies and errors of
theory
[1–4]
(b) Explanation of the theory of profit maximisation. Candidates should then consider not only
whether it is possible to calculate marginal revenue and marginal cost to achieve profit
maximisation but also whether the firm might have alternative aims. Sales maximisation,
behavioural, managerial, satisficing, market share aims might be mentioned.
[13]
L4 For a reasoned discussion and clearly structured answer with a conclusion
[9–13]
L3 For a fair discussion but undeveloped answer mentioning either only one part of the
question or both parts but only limited mention of alternative aims, but still with a conclusion
[7–8]
L2 For a limited but acceptable attempt to consider the question with very limited development
of either part and no conclusion.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[1–4]
© University of Cambridge International Examinations 2011
Page 7
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
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42
Candidates should explain the economic theory of wage determination (marginal revenue
product) and compare the situation in perfect and imperfect competition. The theory indicates
that wages are lower in an imperfect labour market especially if there is monopsony. The extent
of the reduction varies depending on whether the labour market is considered with a perfect or
imperfect product market. However, the comparative reduction in wage rates may be corrected,
at least in part, by the strength of unions or by government legislation.
[25]
L4 For a thorough explanation of the analysis of wage determination with a clear comparison of
the two markets and a comment on trade unions and/or government policy.
[18–25]
(14–17 for demand and supply only with institutional factors and/or government policy)
L3 For a competent explanation of the two markets but with a limited discussion and application.
(10–13 for demand and supply)
[14–17]
L2 For a correct but undeveloped explanation with only brief application
(6–9 for demand and supply)
L1 For an answer which contains inaccuracies and only a few correct points
(1–5 for demand and supply only)
6
[10–13]
[1–9]
(a) Candidates should explain the different effects of an injection of investment and a withdrawal
through saving by use of the multiplier process. Possible use of ‘paradox’ of thrift idea. [12]
L4 For a sound explanation with good application and a clear understanding of the principles
involved.
[9–12]
L3 For an accurate explanation of the multiplier but with a more limited contrast of the
difference between the investment and saving.
[7–8]
L2 For a general explanation probably in descriptive form.
[Maximum L2 if there is no mention of the multiplier]
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies and errors of
theory
[1–4]
(b) Candidates should analyse how lowering interest rates might help increase national income
through increased investment or increased spending and then discuss whether lowering
interest rates is the only policy available.
[13]
L4 For a sound discussion with good explanation of the analysis of interest rate changes and a
consideration of alternative fiscal measures with a conclusion
[9–13]
L3 For a competent comment but with limited development of the analysis or undeveloped
alternative policies and a weaker conclusion.
[7–8]
L
For a brief explanation and with a weak discussion of interest rates or weak alternative
policy measures with no conclusion.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial
[1–4]
© University of Cambridge International Examinations 2011
Page 8
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
42
(a) The usual division of production is into primary, secondary and tertiary sectors. Developing
economies move from a dependence on the agricultural sector through industrialisation.
Along with this there is a growth in the service sector – industries relying on IT, call centres,
tourism. The changes reflect changes in demand, income, urbanisation, government policy,
comparative advantage and competitiveness.
[12]
L4 For a clear explanation of why the relative importance of the productive sectors of the
economy might change with good illustration or examples
[9–12]
L3 For a less developed explanation with fewer examples
[7–8]
L2 For a more general descriptive account with lack of comment on the causes of the
change and with few examples
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[1–4]
(b) Economic growth involves greater production measured by changes in GDP/GNP. This could
cause an increase in the standard of living, improved health, education and employment
opportunities. There may be disadvantages. Poor working conditions, the growth of
externalities, the careless depletion of resources. There may also still be questions of
inequality in the distribution of income or whether the increased GDP is spent on things
which might not give direct benefit e.g. military research.
[13]
L4 For a discussion of the overall effect of growth on development presenting both positive
and negative aspects with a conclusion.
[9–13]
L3 For an analysis of the contribution of growth to development but with a concentration on
either the positive or the negative aspects with a conclusion.
[7–8]
L2 For a more descriptive account without much evaluation and without a conclusion. [5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial
[1–4]
© University of Cambridge International Examinations 2011
www.maxpapers.com
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2011 question paper
for the guidance of teachers
9708 ECONOMICS
9708/43
Paper 4 (Data Response and Essays – Supplement),
maximum raw mark 70
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
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43
Section A.
1
(a) The Gross Domestic Product (GDP) measures the value of economic activity within a
country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods
and services produced in an economy during a period of time.
[3]
(For stating Gross Domestic Product 1 mark only)
(b) It means more available credit, easier to get; or credit at lower interest rates. This would be
likely to increase national income by the multiplier process. (A descriptive reference to the
process is sufficient; there is no need to use the actual term)
[3]
(c) Use the figures for specific exchange rates, and figures for GDP – expect to see examples of
emerging/developing countries compared with developed countries. But they are only
selected countries, and for only two years and they are projections not actual figures.
Exchange rate figures may mean exports become more difficult to sell.
[6]
[Maximum 4 for one side of the argument only]
(d) An increase in domestic demand to encourage growth and export-led growth.
2 marks
Conflict? Different approaches but same aim of growth
2 marks
increase exports improves balance of payments and increases injections and GDP; increase
domestic demand will also increase injections and help increase GDP. No conflict. 2 marks
Increase domestic demand may increase incomes and increase imports which may need to
be offset by further export growth. A possible conflict.
2 marks
[8]
[A general description of fiscal and monetary policy; 2 maximum]
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
Paper
43
Section B.
General Comments for section B:
The essay questions carry a maximum mark of 25. Try not to 'bunch' marks, but use the whole mark
range. If there is any doubt in your mind, give the benefit of doubt to the candidate.
The difference in grades should be assessed on the ability of the candidate to demonstrate the various
objectives of the examination listed in the syllabus and not purely on the ability to itemise further facts
from the content of the syllabus. Marks should be awarded for the ability to demonstrate that aim b) of
the syllabus has been achieved as well as aim a) – which refers to content knowledge. It is the objective
of the examination, as listed in the syllabus, to assess both these aims.
An overall guide for marks for individual questions is given below; these are from a total of 25. They may
be applied proportionally of course to parts of questions where the total is less than 25:
Mark 1–9 (Linked to level one in individual question notes).
1–5
where the answer is mostly irrelevant and only contains a few valid points made incidentally in
an irrelevant context. There will also be substantial omissions of analysis.
6–9
where the answer shows some knowledge but does not indicate that the meaning of the
question has been properly grasped. Basic errors of theory, or an inadequate development of
analysis may be evident.
Mark 10–13 (Linked to level two in individual question notes).
10–11
where there is evidence of an ability to identify facts or some ability at graphs and/or a fair ability
to apply known laws to new situations.
There should be an accurate although undeveloped explanation of the facts relating to the
question together with an explanation of the theory, and evidence of some ability to discriminate
and form elementary judgements. Do not expect a clear logical presentation. There will not be
much evidence of the ability to recognise unstated assumptions, nor to examine the implications
of a hypothesis, nor of the ability to organise ideas into a new unity.
12–13
where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
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Syllabus
9708
Paper
43
Mark 14–17 (Linked to level 3 in individual question notes).
14–15
where there is a good knowledge of the facts and theory of the question, clear evidence of
the ability to use the facts and theory with accurate reference to the question that may have
presented the candidate with a novel application.
There should also be evidence, where appropriate, of the ability to examine the implications of
the question and an attempt to distinguish between facts and value judgements.
Clear statements, supported by reasoned arguments should be given and there should be
some attempt at a conclusion to the question. There should be a reasoned structure to the
whole answer. Do not expect too many extra Illustrative points which are not explicitly referred
to in the question, do not expect too much critical comment on unstated assumptions
16–17
for an answer showing a well reasoned understanding of the question's requirements and of the
relevant theory: the analysis should be sound though the illustration and development may not
be very full.
Mark 18–25 (Linked to level 4 in individual question notes).
18–20
where there is a thorough knowledge of the facts and theory with an excellent ability to describe,
explain or analyse this in a precise, logical, reasoned manner. There should be an ability to
query some of the assumptions in the question and clear evidence of an ability to distinguish
between fact and value judgements and to draw some conclusions on the matter being
discussed. Conclusions should be formed and expressed within a sound structured answer so
that the whole is well presented. New illustrations and apposite examples should be introduced
as further evidence of an ability to recognise the principles of the question and their application
to relevant current situations.
21–25
for an answer which, given the time constraint, could not be improved significantly: it will have
clear analysis, ample illustration and a good attempt at considered evaluation.
Be positive in your marking awarding marks for what is there without being too much influenced
by omissions. Marks should not be deleted for inaccuracies.
Corresponding marks for sub-sections.
Total Mark 10
1
1–3
2
4–5
3
6–7
4
8–10
Total Mark 12
1–4
5–6
7–8
9–12
Total Mark 13
1–4+
5–6+
7–8+
9–13
Total Mark 15
1–5
6–8
9–11
12–15
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
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Syllabus
9708
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43
Candidates need to explain the two terms, market failure and the meaning of the efficient use of
resources, and then consider the argument. Market failure can be explained by reference to
possible excessive profits, the need for very large investments, the existence of externalities and
of merit goods, and of the need for public goods. Economic efficiency should be explained in
terms of productive and allocative efficiency.
Government intervention can be through regulation, taxation or subsidies.
There are negative and positive externalities from car use. Negative externalities include
pollution. Positive externalities include less crowded public transport with greater comfort;
benefits from the expenditure of the tax receipts. Unlike other positive externalities where
subsidies have been used, it has never been suggested that subsidies ought to be used to
increase the positive externalities from private car use. Any subsidies given are used to make
alternative public transport more attractive. However, taxes have been used to decrease
negative externalities. Taxing the use of cars is usually presented in the context of negative
externalities to achieve allocative efficiency. Taxing production might not result in productive
efficiency.
[25]
L4 For a thorough explanation of both efficiency and market failure and a competent discussion
of the role of the government in promoting efficiency overcoming market failure. A reasoned
conclusion should be presented
[18–25]
L3 For a competent explanation with either a more limited comment on both efficiency and
market failure (perhaps concentrating on productive efficiency) or a full explanation of one
but little comment on the other. The role of the government will be discussed in a more
limited way but a conclusion should still be presented.
[14–17]
(L3 maximum if there is no mention of production and use of cars)
L2 For an undeveloped explanation of efficiency/market failure with very little discussion of the
role of the government. Mention of the government will be descriptive rather than in the form
of a discussion related to efficiency/market failure. It is likely there will be no conclusion.
[10–13]
L1 For an answer which shows some knowledge but does not indicate that the question has
been fully grasped, or where the answer contains irrelevancies and errors of theory.
[1–9]
3
(a) A rise in the price of a good: a demand schedule has price and quantity of one good bought
against price; budget line diagrams have quantities of two goods – price is not on the axis;
one cannot tell how demand will change with budget line unless you also show preference
lines.
A rise in a consumer’s income: similarity, both move parallel out for a rise in income; but
cannot tell what will be bought unless have supply line – with demand – or preference lines
with budget line.
[12]
L4 For a sound discussion indicating the similarities/differences
[9–12]
L3 For an accurate explanation but with a less clear comparison
[7–8]
L2 For a general undeveloped explanation with little comparison.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies and errors of
theory
[1–4]
© University of Cambridge International Examinations 2011
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Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
43
(b) Analysis of equi-marginal principle which underlies an individual demand curve. The sum of
individual demand curves form the market demand curve. Whether individual utilities can be
added is debatable.
[13]
L4 For a reasoned discussion linked to more than one good and clearly structured answer
with a conclusion
[9–13]
[Low L4 maximum if there is no mention of market demand]
L3 For a fair discussion but undeveloped answer but still with a conclusion
[7–8]
L2 For a limited attempt which does not clearly determine the equilibrium position for more
than one good and no conclusion.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[1–4]
4
(a) Discussion of possible reasons for growth including large market demand, economies of
scale, possible future profits, with a contrasting comment on reasons why it might not be
advantageous to grow in size; diseconomies of scale, small market demand, specialised
products/services. Allow a wider interpretation which discusses effects on consumers and in
the economy.
[12]
L4 For a sound discussion with contrasting explanations.
[9–12]
L3 For an accurate explanation but with an emphasis on one side – possibly of economies of
scale only.
[7–8]
L2) For a general undeveloped explanation.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies and errors of
theory
[1–4]
(b) Explanation of the theory of profit maximisation. Candidates should then consider not only
whether it is possible to calculate marginal revenue and marginal cost to achieve profit
maximisation but also whether the firm might have alternative aims. Sales maximisation,
behavioural, managerial, satisficing, market share aims might be mentioned.
[13]
L4 For a reasoned discussion and clearly structured answer with a conclusion
[9–13]
L3 For a fair discussion but undeveloped answer mentioning either only one part of the
question or both parts but only limited mention of alternative aims, but still with a conclusion
[7–8]
L2 For a limited but acceptable attempt to consider the question with very limited development
of either part and no conclusion.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[1–4]
© University of Cambridge International Examinations 2011
Page 7
5
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
43
Candidates should explain the economic theory of wage determination (marginal revenue
product) and compare the situation in perfect and imperfect competition. The theory indicates
that wages are lower in an imperfect labour market especially if there is monopsony. The extent
of the reduction varies depending on whether the labour market is considered with a perfect or
imperfect product market. However, the comparative reduction in wage rates may be corrected,
at least in part, by the strength of unions or by government legislation.
[25]
L4 For a thorough explanation of the analysis of wage determination with a clear comparison of
the two markets and a comment on trade unions and/or government policy.
[18–25]
(14–17 for demand and supply only with institutional factors and/or government policy)
L3 For a competent explanation of the two markets but with a limited discussion and application.
(10–13 for demand and supply)
[14–17]
L2 For a correct but undeveloped explanation with only brief application
(6–9 for demand and supply)
L1 For an answer which contains inaccuracies and only a few correct points
(1–5 for demand and supply only)
6
[10–13]
[1–9]
(a) Candidates should explain the different effects of an injection of investment and a withdrawal
through saving by use of the multiplier process. Possible use of ‘paradox’ of thrift idea. [12]
L4 For a sound explanation with good application and a clear understanding of the principles
involved.
[9–12]
L3 For an accurate explanation of the multiplier but with a more limited contrast of the
difference between the investment and saving.
[7–8]
L2 For a general explanation probably in descriptive form.
[Maximum L2 if there is no mention of the multiplier]
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies and errors of
theory
[1–4]
(b) Candidates should analyse how lowering interest rates might help increase national income
through increased investment or increased spending and then discuss whether lowering
interest rates is the only policy available.
[13]
L4 For a sound discussion with good explanation of the analysis of interest rate changes and a
consideration of alternative fiscal measures with a conclusion
[9–13]
L3 For a competent comment but with limited development of the analysis or undeveloped
alternative policies and a weaker conclusion.
[7–8]
L
For a brief explanation and with a weak discussion of interest rates or weak alternative
policy measures with no conclusion.
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial
[1–4]
© University of Cambridge International Examinations 2011
Page 8
7
Mark Scheme: Teachers’ version
GCE AS/A LEVEL – May/June 2011
www.maxpapers.com
Syllabus
9708
Paper
43
(a) The usual division of production is into primary, secondary and tertiary sectors. Developing
economies move from a dependence on the agricultural sector through industrialisation.
Along with this there is a growth in the service sector – industries relying on IT, call centres,
tourism. The changes reflect changes in demand, income, urbanisation, government policy,
comparative advantage and competitiveness.
[12]
L4 For a clear explanation of why the relative importance of the productive sectors of the
economy might change with good illustration or examples
[9–12]
L3 For a less developed explanation with fewer examples
[7–8]
L2 For a more general descriptive account with lack of comment on the causes of the
change and with few examples
[5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[1–4]
(b) Economic growth involves greater production measured by changes in GDP/GNP. This could
cause an increase in the standard of living, improved health, education and employment
opportunities. There may be disadvantages. Poor working conditions, the growth of
externalities, the careless depletion of resources. There may also still be questions of
inequality in the distribution of income or whether the increased GDP is spent on things
which might not give direct benefit e.g. military research.
[13]
L4 For a discussion of the overall effect of growth on development presenting both positive
and negative aspects with a conclusion.
[9–13]
L3 For an analysis of the contribution of growth to development but with a concentration on
either the positive or the negative aspects with a conclusion.
[7–8]
L2 For a more descriptive account without much evaluation and without a conclusion. [5–6]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial
[1–4]
© University of Cambridge International Examinations 2011