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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/11

Paper 11 (Multiple Choice Core), maximum raw mark 30

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2

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Syllabus
Paper
9708
11

Mark Scheme: Teachers version


GCE A/AS LEVEL May/June 2010
Question
Number

Key

Question
Number

Key

1
2

B
C

16
17

A
D

3
4
5

A
C
C

18
19
20

D
D
C

6
7

B
C

21
22

C
B

8
9
10

A
C
C

23
24
25

B
B
C

11
12

A
C

26
27

D
C

13
14
15

A
B
B

28
29
30

D
D
D

UCLES 2010

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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/12

Paper 12 (Multiple Choice Core), maximum raw mark 30

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2

www.maxpapers.com
Syllabus
Paper
9708
12

Mark Scheme: Teachers version


GCE A/AS LEVEL May/June 2010
Question
Number

Key

Question
Number

Key

1
2

C
A

16
17

D
D

3
4
5

C
C
B

18
19
20

D
C
C

6
7

C
A

21
22

B
B

8
9
10

C
C
A

23
24
25

B
C
D

11
12

C
A

26
27

C
D

13
14
15

B
B
A

28
29
30

D
D
B

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/13

Paper 13 (Multiple Choice Core), maximum raw mark 30

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2

www.maxpapers.com
Syllabus
Paper
9708
13

Mark Scheme: Teachers version


GCE A/AS LEVEL May/June 2010
Question
Number

Key

Question
Number

Key

1
2

A
C

16
17

D
D

3
4
5

C
B
C

18
19
20

C
C
B

6
7

A
C

21
22

B
B

8
9
10

C
A
C

23
24
25

C
D
C

11
12

A
B

26
27

D
D

13
14
15

B
A
D

28
29
30

D
B
C

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/21

Paper 21 (Data Response and Essay),


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.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 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 2010

www.maxpapers.com
Syllabus
Paper
9708
21

Section A
1

(a) How far does the data in Fig.1 confirm that the normal demand curve relationship
exists between the price and the quantity demanded of cigarettes?
[3]
Normally price and quantity are inversely related (1), true in majority of years in both
directions (1), clear exceptions 1992/3 and 2002 onward (1)
(b) (i) What do the three elasticity values in Table 1 tell us about the elasticity of demand
for cigarettes?
[3]
Short-run (SR) Price elasticity of demand (PED) very inelastic (1), Long-run (LR) PED
inelastic but less than SR (1), Income elasticity of demand (YED) elastic (1), PED
negative or YED positive with meanings (1) any 3 points
(ii) What might explain these different elasticity values?
[4]
Habit/inadequate substitutes makes PED inelastic (1), SR no time to change behaviour
(1), LR time for some to give up or find alternatives (1), PED negative-normal inverse
relationship (1) Maximum of 3 on PED
YED elastic as cigarettes are a high status/luxury good in Malaysia (1) YED positive
normal good (1)
(c) Explain two possible economic reasons why cigarettes are heavily taxed.
To raise revenue (1) based on inelastic demand for cigarettes (1)
or to cover costs of externalities polluter pays principle (1)
To discourage consumption (1), to reduce negative externalities and demerit goods (1)
or to discourage production (1), as above or to improve resource allocation (1)

[4]

(d) Discuss the possible economic consequences of making cigarette smoking illegal. [6]
Arguments may include:
Benefits from: reduced death rates, less hospital treatment, less sickness absence, healthier
workforce, greater safety (less fires), better environment, reduced Government (G)
expenditure
Costs from: enforcement costs, reduced tax revenue, welfare losses, tobacco job losses,
growth of illegal activities, more G expenditure on longer lives and pensions.
Maximum of 4 marks for one side of discussion

UCLES 2010

Page 3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

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Syllabus
Paper
9708
21

Section B
2

(a) Explain how division of labour can affect labour productivity.


[8]
Productivity is output per worker. Specialisation involves sub-dividing working processes
and concentration on one aspect to raise efficiency. Workers can undertake tasks which
match their natural abilities, can become more adept through practice, waste less time
through reduced movement and make greater use of machinery which itself is more
effective. Lack of division of labour may hold back productivity growth. However, division of
labour may create problems which may reduce productivity or limit its growth e.g. boredom.
For understanding of productivity (1) and division of labour (1)

2 marks

For explanation of the effects on labour productivity

6 marks

(b) Discuss how the operation of a barter economy would be affected by the introduction
of money.
[12]
Barter is the exchange of goods without the use of money and requires a double coincidence
of wants. Money is anything generally acceptable as a means of payment and settlement of
debt. It has four functions: a medium of exchange, a unit of account, a store of value and a
standard of deferred payment. An effective money will have properties such as durability,
divisibility etc. Trade will be easier, quicker and more widespread. Specialisation and
exchange will become common and can extend to the international level. Credit can be
introduced. Economic activity and standards of living will be much higher when money works
effectively. However, it may lead to problems such as inflation and counterfeiting.
For understanding of barter and money

4 marks

For analysis of the effects of the introduction of money

4 marks

For discussion of the differences in operation of an economy

4 marks

UCLES 2010

Page 4
3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
21

(a) A free market price operates as a rationing and allocating mechanism. Explain how it
does this.
[8]
A free market sets price by the operation of demand and supply. The price of a product
determines who has the purchasing power to afford the good. A higher income means
greater ability to purchase so the price system favours the richer in society. It rations the
restricted quantity available between those who might wish to buy. The price also allocates
resources between competing uses. The higher the price the greater the potential reward to
factor owners. This will attract resources to those activities which pay the highest price so
determining the employment of factors.
For understanding of free market price

2 marks

For explanation of the rationing function

3 marks

For explanation of the allocating function

3 marks

(b) Discuss why certain goods and services are usually supplied directly by the
government rather than through the market.
[12]
Private goods can be supplied by the market system because of excludability and rivalry.
Certain other goods will not be supplied in sufficient quantities or not at all if left to the
market. Public goods, such as defence, are non-excludable and non-rival so it is not
possible to charge for them and free riders can gain benefit without paying. In this case the
government provides the good or service and pays for it out of general taxation. Another
case is merit goods. These provide a greater benefit than is recognised by the consumer
and so will be under-consumed from societys viewpoint. Health and education fall into this
category. The government will provide the goods or services from taxation and offer them at
a subsidised or at no price. In both cases the government is making the judgement that
providing these will raise welfare levels in society. There will be a range of other motives for
supply by the government such as prevent exploitation, natural monopolies and reduce
unemployment.
For understanding the nature and a discussion of public goods

Max 4 marks

For understanding the nature and a discussion of merit goods

Max 4 marks

For understanding the nature and a discussion of other cases

Max 4 marks

UCLES 2010

Page 5
4

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
21

(a) With the aid of a diagram, explain why an economys floating exchange rate may
depreciate.
[8]
Depreciation is a fall in the value of a currency which is fixed by market forces. The fall may
have been the result of a fall in demand or an increase in supply of the currency. Possible
causes include a loss of international competitiveness, loss of foreign confidence and
changes in international investment flows. Reference to both supply and demand needed for
full marks.
For understanding of a depreciating floating exchange rate

2 marks

For diagram illustrating the depreciation

2 marks

For explanation of the factors behind the depreciation

4 marks

(b) Discuss whether a current account deficit is always a serious economic problem for a
country.
[12]
A current account deficit occurs when financial outflows from goods, services, income and
transfers outweigh inflows. This may be a serious problem if it is the result of a fundamental
disequilibrium, if it requires unusual policy measures, if it is long term and if it is not possible
to finance it without excessive borrowing or rundown of reserves. However, it may not be
significant if it alternates with surplus years, there are sufficient reserves to cover it, if it will
enable longer term development (via the importing of capital goods) and if it is a small
percentage of GDP. Other economic problems (inflation or unemployment) may be more
significant depending upon economic conditions.
For understanding of a current account deficit

4 marks

For discussion of circumstances when it is serious

4 marks

For discussion of circumstances when it is not serious

4 marks

UCLES 2010

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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/22

Paper 22 (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.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2
1

(a)

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
22

(i) Why are weights used in constructing a CPI?

[2]

To give an accurate measure of inflation (1), by reflecting the importance of different


products to consumers (1).
(ii) Explain possible reasons why the weights for alcohol and tobacco and transport
changed between 1992 and 2008.
[4]
Alcohol and tobacco prices may have risen, health issues may have reduced
consumption (2), transport costs may have changed or income increases may have
allowed more relative expenditure (2) to max.
(b)

(i) What is meant by inflation?

[2]

A continuous/persistent/sustained rise (1) in the general price level (1). A fall in the
value of money (1).
(ii) Using Fig. 1 compare Paraguays inflation with that of Venezuela.

[2]

Higher until approx. 1987, lower from approx. 1987 onwards, accept other valid
comparisons, 1 mark per comparison.
(iii) To what extent did Paraguay achieve a low and stable rate of inflation between
1950 and 2005?
[4]
Generally unstable over whole period (1), relatively high for most of the period (1),
particularly high and unstable at start of period to 1960(1), 19621970 most successful
in controlling inflation (1), credit other valid comments, evidence required to support
conclusions.
(c) Discuss whether all countries should set annual inflation targets of around 3%.

[6]

Case for includes e.g. stable and low rate desirable, active policy priority, retention of
competitiveness, avoidance of unwanted redistribution, maintenance of confidence and risk
taking.
Case against includes e.g. unrealistic (current high inflation), unnecessary (current low
inflation), more important priorities, ineffective control (lack of institutional framework) and
different circumstances in different economies.
4 marks maximum for one side.

UCLES 2010

Page 3
2

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
22

(a) Explain how a countrys production possibility curve depends upon its factors of
production.
[8]
A production possibility curve (ppc) shows the combination of outputs that a country can
produce when fully employing its resources. Factors include land, labour, capital and
enterprise. Some countries have greater quantities and better quality of factors. Land may
include a favourable climate and valuable minerals, labour may be skilled,, capital may
embody modern technology and, enterprise may be readily available. The way the factors
are combined to work productively will determine the quantities of different outputs produced.
This will be reflected in the absolute and relative levels of output, which may be shown as
diagrams.
Understanding of the ppc and factors of production
Explanation of the different impact of the factors

4 marks
4 marks

(b) Discuss how well comparative advantage explains the pattern of international trade. [12]
A country has a comparative advantage when it can produce a good at a lower opportunity
cost than another country. This would reflect its factor endowment. The result is increased
total output when both specialise where they have comparative advantage and trade with
one another at an exchange rate between their opportunity cost ratios. This works even if a
country possesses no absolute advantage in relation to another country. There are no gains
from trade if they have identical opportunity cost ratios. The theory is able to explain much of
commodity trade which reflects the strength of countries in different resources. The
assumptions of the model restrict its conclusions. These include no transport costs, constant
costs, perfect factor mobility, no trade barriers and perfect knowledge. It also does not take
account of political influences, obligations of trade agreements and trade in nonhomogeneous goods.
Understanding of the operation of comparative advantage
Discussion of its validity as an explanation of trade
Discussion of its weaknesses as an explanation of trade

UCLES 2010

4 marks
4 marks
4 marks

Page 4
3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
22

(a) With the help of a diagram, explain why some goods are produced in quantities
greater than is socially desirable.
[8]
Overproduction is usually associated with production of goods with negative externalities and
demerit goods. Negative externalities, such as pollution, impose a cost on third parties which
is not reflected in the market outcome where the price is too low and quantity too great.
Demerit goods, such as cigarettes, are demanded in quantities which reflect the consumers
lack of information about the effects of consumption or the failure to act upon that
information. As the free market sets an equilibrium that only accounts for the private costs
and not the external and therefore social costs the socially desirable outcome will not be
achieved.
Understanding of externalities and demerit goods
Explanation with diagram showing overproduction

4 marks
4 marks

(b) Discuss whether national defence or a public park is the better example of a public
good.
[12]
A public good possesses the properties of non-rivalry and non-excludability. Consumption
by one does not reduce the availability to others and it is not possible to restrict the benefit of
the good to selected groups. Non-rejectability, that is automatically having to consume the
good or service, can also apply. Defence is a classic example of a public good, as increases
in population do not reduce the protection for current consumers and it is not possible to
prevent consumers in some places from getting the benefit as it applies nationally. Everyone
is automatically protected. A public park is non-rival up to the (unlikely) point at which its
popularity causes it to become so crowded that others cannot enjoy it and the admission of
others would reduce the consumption of other users . While public parks are usually free to
enter, so no-one is excluded by price, it is possible to exclude people by admission systems
and the enforcement of charges. No-one is forced to enjoy the existence of the public park
as they are not compelled to use it. While defence always demonstrates the required
qualities, a public park usually does but not always or entirely.
Understanding of the properties of a public good
Discussion of national defence as a public good
Discussion of a public park as a public good

UCLES 2010

4 marks
4 marks
4 marks

Page 5
4

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
22

(a) Explain, using a normal demand curve, how consumer surplus occurs.

[8]

A normal demand curve slopes downward from left to right and shows a negative relationship
between price and quantity demanded. Consumer surplus is the difference between what a
consumer is willing to pay for a good and what he actually pays for it. It arises because of
the downward sloping nature of the demand curve and the fact that the price paid is that for
the last worthwhile purchase. The consumer might be willing to pay $10 for one item of a
product but the market price is $2, this gives consumer surplus of $8, for the second he
might value it at $7 so consumer surplus is $5 and so on until the surplus disappears.
Consumer surplus is zero when the market price matches the buyers valuation. The more
elastic the demand curve, the lower the level of consumer surplus. Price changes will
directly affect the level of consumer surplus.
Understanding of consumer surplus and demand curve
Explanation of varying levels of consumer surplus

4 marks
4 marks

(b) With the help of diagrams, discuss whether consumers will benefit from the
introduction on a product of (i) an indirect tax and (ii) an effective maximum price. [12]
An indirect tax is a tax on consumption. An effective maximum price sets the highest price at
which a good can be sold and is below the market price. An indirect tax shifts the supply
curve to the left and raises the price. This reduces the amount of consumer surplus with less
consumed and surplus per item reduced. The consumer pays a higher price and consumes
less of the product. This does not benefit the consumer although the way the tax is spent
may be to their advantage and a tax on a demerit good may raise their welfare. An effective
maximum price is set below the market price and results in a smaller quantity supplied,
greater quantity demanded and excess demand. Unofficial black markets may develop. The
reduced consumption will reduce the consumer surplus as less is consumed, while the lower
price will increase consumer surplus for those who continue to consume. Some consumers
will benefit while others will lose. Whether the overall effect is an increase or decrease will
depend on the level of the maximum price and the elasticities of demand and supply. The
maximum price has the potential to raise consumer surplus, an indirect tax does not.
Understanding and diagram of an indirect tax and effective maximum price 4 marks
Discussion of tax impact
4 marks
Discussion of maximum price impact
4 marks

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/23

Paper 23 (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.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2
1

(a)

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
23

(i) Summarise the main changes in bicycle production shown in Table 1.

[2]

Chinas production has increased (1), all other production has decreased (1)
(ii) How might the changing pattern of production be explained?

[3]

China has replaced production in the other countries or has achieved comparative
advantage in bicycle production (1), this may be based on cheaper labour,
advantageous exchange rate, economies of scale etc. (2)
Allow approach from other countries angle.
(b) Explain the likely effects for Chinese bicycle manufacturers of the anti-dumping
import duty introduced by the EU.
[3]
Price in EU will rise or now less competitive (1), fewer Chinese bicycles will be sold (1),
employment, revenue or profits will reduce (1)
(c)

(i) Use Fig. 1 to compare the trend in the world production of bicycles with that of
cars.
[2]
Bicycle production has grown by a greater amount (1), tenfold rather than fivefold (1), it
has shown greater volatility (1), unit bicycle production has always been greater than car
production (1). Allow approach from car production angle. Any two points.
(ii) How might the change in Chinese ownership of bicycles and cars between 1995
and 2005 be explained?
[4]
Car ownership has grown while bicycle ownership has fallen (1), this was in a period of
rising incomes and prosperity (1), relative costs of use may have changed (1), cars are
normal goods (explanation) (1), bicycles may be inferior goods (explanation) (1) Any four
points.

(d) Discuss the externalities that might arise from the use of bicycles and cars.

[6]

Externalities are effects on third parties, they can be positive (beneficial) or negative
(harmful) (1), bicycles may have positive externalities e.g. health benefits, safer travel,
reduced congestion (to max 4), cars may have negative externalities e.g. pollution,
congestion, accidents (to max 4), credit different examples or plausible reversal of cases.

UCLES 2010

Page 3
2

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
23

(a) With the help of examples, explain why different economic decision makers face the
problem of scarcity.
[8]
Scarcity results from limited resources and unlimited wants. This means choice is necessary
and an opportunity cost occurs. All economic decision makers including individuals, families,
firms and governments are unable to achieve all of their wants. The nature of the sacrifice
may differ from case to case but the basis is the same. Examples of the decision makers
and their choices must be identified.
Understanding of the basis of scarcity
Explanation of the position of different economic decision makers

4 marks
4 marks

(b) Discuss why the mixed economy is the most common economic system.

[12]

A mixed economy draws features from the market and planned system. This includes
private ownership, profit and incentive as well as government ownership, public goods and
planning. This is meant to gain the advantages of both systems while avoiding their
drawbacks. As a result there should be efficiency, choice, flexibility and progress, allied to
equality, avoidance of waste, security and social welfare.
Knowledge of features of a mixed economy
Discussion of advantages of market/disadvantages of planned
Discussion of advantages of planned/disadvantages of market
3

4 marks
4 marks
4 marks

(a) Explain why unanticipated inflation is considered more of a problem than anticipated
inflation.
[8]
Inflation is a persistent rise in the general price level. If it is at the level that economic agents
expect it is anticipated, if it differs from this it is unanticipated. When inflation is anticipated
appropriate action can be taken to offset its effects. Indexation can be used so that incomes
and taxes retain their real value. If it is unanticipated the assumption on which planning by
households, firms and governments is made will be wrong, so plans may fail. There will also
be arbitrary effects on the distribution of income with some gainers and some losers. This
may be thought unjust.
Understanding of anticipated and unanticipated inflation
Explanation of the effects of the two types of inflation

UCLES 2010

4 marks
4 marks

Page 4

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GCE AS/A LEVEL May/June 2010

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Syllabus
Paper
9708
23

(b) Discuss whether inflation is more likely to be caused by domestic or international


influences.
[12]
Causes of inflation are classified as monetary, cost-push and demand-pull. These can each
be affected by domestic and international influences and their importance will depend upon
the nature of the individual economy. Monetary will usually be from government creation of
money and easy credit although money supply is also affected by international flows of
finance. Cost-push may be from domestic wage rates and imported raw materials. Demandpull may be from domestic demand from consumer and government spending or from
demand for exports. An open economy with strong trade links is likely to be more affected by
international pressures than a closed economy, as may economies lacking resources and
facing a falling exchange rate.
Understanding of the types of inflation
Discussion of domestic influences
Discussion of international influences
4

4 marks
4 marks
4 marks

(a) Explain the relevance of the Marshall-Lerner condition and the J-curve effect to the
success of a currency devaluation.
[8]
Devaluation is government lowering the value of a currency from one fixed level to another.
The J- curve effect shows that there is a time lag between introducing the policy and it having
the desired effect. This may be the result of short-term elasticities and contractual
obligations. The Marshall-Lerner condition requires a combined elasticity of demand for
imports and exports greater than one. If this is not the case devaluation will not necessarily
correct a deficit and may worsen the position.
Understanding of devaluation
Explanation of J-curve effect
Explanation of Marshall-Lerner condition

2 marks
3 marks
3marks

(a) There are various influences on the international value of a currency in a floating
exchange rate system.
Discuss their relative importance in different economies.
[12]
Market forces fix a floating rate of exchange, this can be shown by a demand and supply
diagram. With a floating rate changes may depend upon trade flows, investment flows,
speculative flows and hot money flows. In turn these reflect competitiveness, confidence,
investment opportunities and interest rates and vary between economies. Government may
intervene in the market if dirty floating is the system. The relative importance will depend
upon the nature and position of the economy. The size of the economy, the importance of
trade, the potential for inward and outward investment, the success of the economy,
government intervention etc., differ between economies.
Understanding of floating exchange rate movements
Discussion of importance of factors influencing floating rate
Discussion of varied circumstances in different economies

UCLES 2010

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 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/31

Paper 31 (Multiple Choice Supplement), maximum raw mark 30

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2

www.maxpapers.com
Syllabus
Paper
9708
31

Mark Scheme: Teachers version


GCE A/AS LEVEL May/June 2010
Question
Number

Key

Question
Number

Key

1
2

B
C

16
17

D
C

3
4
5

A
B
D

18
19
20

D
A
B

6
7

B
B

21
22

C
A

8
9
10

D
D
A

23
24
25

D
D
C

11
12

D
C

26
27

A
D

13
14
15

D
B
B

28
29
30

C
A
D

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/32

Paper 32 (Multiple Choice Supplement), maximum raw mark 30

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2

www.maxpapers.com
Syllabus
Paper
9708
32

Mark Scheme: Teachers version


GCE A/AS LEVEL May/June 2010
Question
Number

Key

Question
Number

Key

1
2

C
A

16
17

C
D

3
4
5

B
D
B

18
19
20

A
B
C

6
7

B
D

21
22

A
D

8
9
10

D
A
D

23
24
25

D
C
A

11
12

C
D

26
27

D
C

13
14
15

B
B
D

28
29
30

A
D
B

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/33

Paper 33 (Multiple Choice Supplement), maximum raw mark 30

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2

www.maxpapers.com
Syllabus
Paper
9708
33

Mark Scheme: Teachers version


GCE A/AS LEVEL May/June 2010
Question
Number

Key

Question
Number

Key

1
2

C
A

16
17

C
D

3
4
5

B
D
B

18
19
20

A
B
C

6
7

B
D

21
22

A
D

8
9
10

D
A
D

23
24
25

D
C
A

11
12

C
D

26
27

D
C

13
14
15

B
B
D

28
29
30

A
D
B

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/41

Paper 41 (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.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 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 2010

www.maxpapers.com
Syllabus
Paper
9708
41

Section A.
1

(a) government spending/investment, private investment,

[2]

(b) The information says 4% per year, rise in 3 months, therefore, is 1% (The question does not
required an explanation but award 1 mark if there is an attempted explanation of annual
equivalent rate, but an incorrect answer).
[2]
(c) Shows $ against euro. More $ per euro, so dollar is worth less.

[2]

(d) Fall in interest rates makes borrowing easier, demand for houses increases, average price of
houses rises, construction industry is more likely to make profits and be willing to increase
supply of houses presuming that banks are willing to lend to consumers up to 4 if no
evaluation.
[6]
(e) Housing market slump could lead to increased unemployment beginning in the construction
industry but spreading to industries which supply contents for houses and materials for
house building. The slump could be helped by lower interest rates. However, lower interest
rates and the increase in oil prices might increase inflation. Falling interest rates could also
increase spending and put further pressure on inflation. Value of dollar is declining and this
causes further pressures on the balance of payments and exports.
[8]

UCLES 2010

Page 3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
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 19 (Linked to level one in individual question notes).
15

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.

69

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 1013 (Linked to level two in individual question notes).


1011

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.

1213

where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.

Mark 1417 (Linked to level 3 in individual question notes).


1415

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.

1617

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.
UCLES 2010

Page 4

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
41

Mark 1825 (Linked to level 4 in individual question notes).


1820

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.

2125

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

Total mark 10

13

45

67

810

Total mark 12

14

56

78

912

Total mark 13

14+

56+

78+

913

Total mark 15

15

68

911

1215

UCLES 2010

Page 5
2

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
41

(a) Explanation of equilibrium in terms of productive efficiency and allocative efficiency.


L4 For a clear explanation of both types of efficiency and a comment on the possibility of
achieving efficiency in different market structures.
[912]
L3 For a more limited explanation of both types of efficiency but with little comment.

[78]

L2 For a limited attempt probably with an explanation of only productive efficiency or a more
general explanation using demand and supply curves only.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]
(b) Discussion of areas of market failure through lack of knowledge, imperfections, monopolies
and externalities.
L4 For a sound discussion with good explanation of the several market failures with a
discussion of the resulting misallocation of resources.
[913]
L3 For a full comment of one market failure, probably monopoly or externalities and a
briefer discussion of the effect on the allocation of resources.
[78]
L2 For a correct but very limited explanation of market failure, either with a brief examples
or in general terms.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]

UCLES 2010

Page 6
3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
41

(a) Explanation of price discrimination requiring separate markets for the same product and
different elasticities for it to be profitable. Difference in the time of day.
Could be argued to be a separate product. Different fares for different people who may
have different elasiticities of demand on the same service does separate the market for the
same product. Those who cannot buy fares in advance also face price discrimination.
L4 For a clear explanation of price discrimination with mention of both separate markets and
different elasiticities. Good discussion and application to the examples given.
[912]
L3 For a more limited explanation of price discrimination, possibly not mentioning elasiticity
and a more limited consideration of the examples given.
[78]
L2 For a very general comment on price discrimination with limited analysis and only brief
comment on the examples given.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]
(b) Discussion of output and pricing policy in different market structures. Market price and
output in perfect competition against attempts to control the price and output in imperfect
competition. Candidates could mention maximum profits, price leadership, collusion,
interdependence and oligopoly, non-price competition, establishing barriers to entry.
L4 For a reasoned and full discussion and clearly structured answer on which covers three
market structures, probably perfect competition, monopoly and one other.
[913]
L3 For a competent but less developed discussion of three market structures or a fuller
discussion of two market structures.
[78]
L2 For a limited but attempt at two market structures or a full account or one market
structure.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]

UCLES 2010

Page 7
4

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
41

Discussion of the theory of wages i.e. marginal revenue productivity theory (MRP). Labour
markets may be imperfect but the theory does explain imperfect markets. It does not give a
definitive answer to the level of wages where negotiations exist, or where there are trade unions,
or government intervention. It gives the limits between which the wage will be fixed.
L4 For a thorough explanation of the analysis of wage determination with a clear link to the
explanation of wages with discussion of institutional factors and government policy. [1825]
(1417 for demand and supply only without institutional factors and government policy)
L3 For a competent explanation but with limited discussion and application and imprecise
conclusion.
[1417]
(1013 for demand and supply only)
L2 For a correct but undeveloped explanation with only brief application and no real conclusion.
(69 for demand and supply only)
[1013]
L1 For an answer which contains inaccuracies and only a few correct points.
(15 for demand and supply only)

[19]

(a) Explanation of the characteristic differences between a developing country and a developed
country.
L4 For a sound explanation and explicit comparison of the characteristics giving a good
range of indicators both economic and social.
[912]
L3 For a competent explanation but with a limited development, or a fuller development of
only a few characteristics but still with an explicit comparison.
[78]
L2 For a correct but weak explanation of the characteristics and little development. No
explicit comparison given and reader is left to draw conclusions.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
(b) Discussion using information given. Fair Trade might promote specialisation and, therefore,
a better use of resources which overall, might lead to some conservation. The use of home
products could well cost more to produce especially if they require use of extra heat or
fertilisers. The weather may not be as suitable for them and the saving in transport cost could
be outweighed by extra production costs.
L4 For a reasoned and well argued discussion with accurate development of the discussion
and a reasoned conclusion.
[913]
L3 For a clear but undeveloped discussion but one which still tries to make a conclusion.
[78]
L2 For a limited attempt to consider the information but with no conclusion.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis are substantial.
[14]

UCLES 2010

Page 8
6

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
41

(a) Analysis and explanation of the working of the multiplier showing the link between investment
and national income, recognising that there would be no leakages to taxes and imports in the
pure market economy.
L4 For a sound explanation with clear understanding of the principle involved.

[912]

L3 For a competent explanation but with limited development.

[78]

L2 For a general explanation probably in descriptive form.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
(b) The government might wish to influence the investment by using fiscal or monetary policy. It
might also influence the investment of the private sector by regulation. It can use taxes or
subsidies, interest rates, regulations or controls.
L4 For a reasoned discussion and clearly structured answer with several alternative
policies.
[913]
L3 For a competent discussion but with a more limited range of policies.

[78]

L2 For a weaker attempt which may concentrate on only one type of policy, not present any
drawbacks of that policy or not develop any wider analysis.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
7

There are three different parts to the argument. Candidates should explain utility theory and
consumer equilibrium. They should then consider whether the theory allows for account to be
taken of a change in income and whether the existence of advertising, which could provide more
information and increases rational choice, might be included in the theory. Even if the advertising
is purely persuasive the belief that it is correct might also be considered to be the basis for a
rational choice. They should then consider whether the overall conclusion of the argument is
correct.
L4 For a thorough explanation of the theory and a reasoned discussion of the results of an
change in income and of the influence of advertising.
[1825]
L3 For a competent explanation of the theory but a more limited discussion of the other
elements in the assertion. Probably the income aspect will be better dealt with than the
advertising.
[1417]
L2 For a correct but undeveloped explanation of the theory and only a brief discussion of the
other elements to the assertion.
[1013]
L4 For an answer which shows some knowledge but does not indicate that the question has
been fully grasped, or where the answer is mostly irrelevant.
[19]

UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/42

Paper 42 (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.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 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 2010

www.maxpapers.com
Syllabus
Paper
9708
42

Section A.
1

(a) Spending increased in Jan and Feb which would indicate an improvement; this might be
linked to the fact that price changes were no longer negative; income was also up in Jan, but
fell in Feb; So some improvement.
[3]
(b) There is no apparent consistency between income and spending either in direction or
amount. Even if spending is considered in the subsequent month to the income change
there is no consistency. There is more consistency between the overall price change and
spending in the direction of the change in the same month, but not in the extent of the
change. Up to 3 for either comparison.
[5]
(c) A fall in spending will cause a fall in demand, expected revenue/profits to business will
decline. If the decline is significant or if it is protracted and it is thought that the trend will
continue then there will be less revenue with which to invest and no incentive to invest.
[4]
(d) A rise in saving could mean more funds available to lend which will stimulate the economy.
However, if everyone saves more we know from the multiplier that this means reduced
injections into the economy as people spend less. We are told that spending accounts for
two-thirds of GNP. Increased saving and low spending affects businesses, it could cause
more unemployment. It also affects the government which would probably have to spend
more supporting the unemployed and also receive less in tax revenue. The data says that
US government is proposing to reduce taxes but this will come at a cost later either in a
switch of government expenditure so some anticipated projects will not be funded or in
subsequently raised taxes which will not be welcome.
Up to 6 for comment on positive side, up to 6 for comment on negative side max 8 but
multiplier should be mentioned on one side of the argument. If no mention of multiplier
max 6.
[8]

UCLES 2010

Page 3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
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 19 (Linked to level one in individual question notes).
15

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.

69

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 1013 (Linked to level two in individual question notes).


1011

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.

1213

where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.

Mark 1417 (Linked to level 3 in individual question notes).


1415

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.

UCLES 2010

Page 4
1617

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
42

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 1825 (Linked to level 4 in individual question notes).


1820

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.

2125

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

Total mark 10

13

45

67

810

Total mark 12

14

56

78

912

Total mark 13

14+

56+

78+

913

Total mark 15

15

68

911

1215

UCLES 2010

Page 5
2

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
42

(a) Market clearing where demand equals supply with the best results for everyone is based on
perfect information and perfect markets. With imperfect markets and imperfect information
market failure occurs. This could be because of monopoly influences with resulting higher
profits for producers but higher prices for consumers and with possibly less choice. It could
be because of externalities which may affect consumers but would not necessarily have to
be accounted for by producers. It could be from a lack of information it is likely that
producers will have more information about the effects of a product than consumers.
L4 For a good analysis and clear explanation of both winners and losers.

[912]

L3 For a competent analysis of both sides but with less development or a concentration on
one or two aspects of market failure.
[78]
L2 For a limited general explanation of market failure with only a brief evaluation or a
comment concentrating on one market failure probably monopoly.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]
(b) Discussion of the possibility of government intervention through regulation, through taxation
or through control.
L4 For a good analysis of both fiscal and regulative measures with a clear explanation of
how they can help overcome the failure.
[913]
L3 For a competent but less developed explanation, maybe concentrating on fiscal
measures.
[78]
L2 For a limited general explanation of the measures.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]

UCLES 2010

Page 6
3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
42

(a) Explanation of imperfect market, probably oligopoly. Award up to L2 for an explanation of


theoretical monopoly or monopolistic competition. Use full mark range if candidates use the
legal definition of a monopoly rather than the theoretical definition as this allows for more
than one form of monopoly.
L4 For a good analysis of the characteristics with a description of the pricing policy which
reflects interdependence or collusion.
[912]
L3 For a competent analysis of the characteristics and a weaker description of the possible
pricing structure.
[78]
L2 For a limited general explanation of characteristics and with little on pricing policy. [56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]
(b) Microeconomic theory usually suggests some advantages of large organisations because of
increased efficiency, economies of scale and research and development. However, it also
comments on their disadvantages increased market power which can lead to higher prices,
diseconomies which could lead to higher costs, higher profits which might be caused by
restricting choice, discrimination or lower output. However, macroeconomic theory might
support the idea of increasing subsidies to encourage industry, to support regions and to
stimulate growth. The theory does not suggest that all large organisations should be
encouraged.
L4 For a good analysis of both micro and macro aspects with a conclusion about whether all
large organisations should be encouraged.
[913]
L3 For an explanation which concentrates on either macro or micro or which deals with both
aspects in a less developed manner. There should still be a conclusion.
[78]
L2 For a limited general explanation probably of micro analysis with no supporting
conclusion.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]

UCLES 2010

Page 7
4

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
42

(a) Normally increase in wages leads to increase in number of hours. Exception: backward
supply curve where higher wages causes substitution effect more work taken instead of
leisure but this is outweighed by income effect less need to work the hours and overall
fewer hours are worked.
L4 For a sound explanation with clear understanding of the analysis and a clear conclusion.
[810]
L3 For a competent explanation but with limited development of the income and substitution
effect. There should still be a conclusion.
[67]
L2 For a general explanation with little detail and no conclusion.

[45]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[13]
(b) In perfect competition, market forces dominate. In imperfect competition, institutional factors
such as government, trade unions will influence the final level of wages. The government is
able to control public sector pay but not private sector pay.
L4 For a reasoned discussion and clearly structured answer with sound knowledge of the
analysis of both perfect and imperfect markets with a conclusion.
[1215]
L3 For a competent discussion, but without such a full development. There should still be a
conclusion.
[911]
L2 For a limited but acceptable attempt to describe the theory but without any real
development and without a conclusion.
[68]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[15]
5

Candidates should explain the nature of the equilibrium in terms of marginal utility theory for the
consumer. They should comment on how the equilibrium is reached and then comment on the
relevance of the theory. For the consumer there is the difficulty of measuring utility, comparing
utility between goods, and persuasion to buy through advertising and not through consumers
calculation of utility.
L4 For a clear discussion of the analysis using the equi-marginal principle and a good comment
on the usefulness and practicality of giving a value to the equilibrium position. A conclusion
should be given.
[1825]
L3 For a competent discussion the analysis but a weaker evaluation of its practical usefulness.
Some attempt at a conclusion will be presented.
[1417]
L2 For a brief comment on the analysis with very limited evaluation, or a fuller comment on the
analysis but with no evaluation and no conclusion.
[1013]
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.
[19]

UCLES 2010

Page 8
6

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
42

(a) explanation of the different causes of unemployment.


L4 For a clear explanation with accurate development of at least four causes of
unemployment, cyclical, structural, frictional, seasonal, voluntary.
[912]
L3 For a clear explanation of at least three causes or more than three with undeveloped
explanation.
[78]
L2 For a limited attempt with little development.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
(b) Demand for money/liquidity preference based on transactions plus precautionary demand
the demand for active balances. It is determined by income; frequency with which people are
paid; time of year; method of payment use of credit cards reduces active balance demand;
some influence on precautionary demand from the rate of interest although this is likely to
be more relevant to firms active balances than individuals. An increase in unemployment
would affect income, but there may be compensating changes in the use of credit cards.
Possible reductions in consumer spending would affect firms receipts and their liquidity
preference. Some unemployment, e.g. seasonal, could be already accounted for in the
determinants of liquidity preference
L4 For a good analysis of liquidity preference and a clear attempt to link changes in
unemployment to that demand for money.
[913]
L3 For a less developed explanation with weaker links to the changes in unemployment.
[78]
L2 For a limited general explanation.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
7

Candidates should comment on the meaning of standard of living and general influences on the
standard of living with a brief comment on the value of different indicators, for example, GDP,
GDP per capita, HDI. They should then consider how the use of natural resources might
increase the standard of living short term and long term and if so whether it is a good policy to
allow multinational companies to use the resources and if so to what extent they should be used.
They should then consider alterative policies which might improve living standards particularly the
value of government spending on education and health and the link between this expenditure and
likely changes in the standard of living.
L4 For a discussion of the factors which are involved in the analysis of each the stages of the
argument together with a conclusion.
[1825]
L3 For a competent discussion of part of the argument probably that related to the explanation
of living standards and government policy with briefer comment on resource exploitation.
Some attempt at a conclusion will be presented.
[1417]
L2 For a brief comment on part of the argument, with a weak explanation of the analysis and
with no conclusion.
[1013]
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.
[19]
UCLES 2010

www.maxpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2010 question paper


for the guidance of teachers

9708 ECONOMICS
9708/43

Paper 43 (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.

CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 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 2010

www.maxpapers.com
Syllabus
Paper
9708
43

Section A.
1

(a) Spending increased in Jan and Feb which would indicate an improvement; this might be
linked to the fact that price changes were no longer negative; income was also up in Jan, but
fell in Feb; So some improvement.
[3]
(b) There is no apparent consistency between income and spending either in direction or
amount. Even if spending is considered in the subsequent month to the income change
there is no consistency. There is more consistency between the overall price change and
spending in the direction of the change in the same month, but not in the extent of the
change. Up to 3 for either comparison.
[5]
(c) A fall in spending will cause a fall in demand, expected revenue/profits to business will
decline. If the decline is significant or if it is protracted and it is thought that the trend will
continue then there will be less revenue with which to invest and no incentive to invest.
[4]
(d) A rise in saving could mean more funds available to lend which will stimulate the economy.
However, if everyone saves more we know from the multiplier that this means reduced
injections into the economy as people spend less. We are told that spending accounts for
two-thirds of GNP. Increased saving and low spending affects businesses, it could cause
more unemployment. It also affects the government which would probably have to spend
more supporting the unemployed and also receive less in tax revenue. The data says that
US government is proposing to reduce taxes but this will come at a cost later either in a
switch of government expenditure so some anticipated projects will not be funded or in
subsequently raised taxes which will not be welcome.
Up to 6 for comment on positive side, up to 6 for comment on negative side max 8 but
multiplier should be mentioned on one side of the argument. If no mention of multiplier
max 6.
[8]

UCLES 2010

Page 3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
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 19 (Linked to level one in individual question notes).
15

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.

69

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 1013 (Linked to level two in individual question notes).


1011

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.

1213

where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.

Mark 1417 (Linked to level 3 in individual question notes).


1415

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.

UCLES 2010

Page 4
1617

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
43

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 1825 (Linked to level 4 in individual question notes).


1820

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.

2125

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

Total mark 10

13

45

67

810

Total mark 12

14

56

78

912

Total mark 13

14+

56+

78+

913

Total mark 15

15

68

911

1215

UCLES 2010

Page 5
2

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
43

(a) Market clearing where demand equals supply with the best results for everyone is based on
perfect information and perfect markets. With imperfect markets and imperfect information
market failure occurs. This could be because of monopoly influences with resulting higher
profits for producers but higher prices for consumers and with possibly less choice. It could
be because of externalities which may affect consumers but would not necessarily have to
be accounted for by producers. It could be from a lack of information it is likely that
producers will have more information about the effects of a product than consumers.
L4 For a good analysis and clear explanation of both winners and losers.

[912]

L3 For a competent analysis of both sides but with less development or a concentration on
one or two aspects of market failure.
[78]
L2 For a limited general explanation of market failure with only a brief evaluation or a
comment concentrating on one market failure probably monopoly.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]
(b) Discussion of the possibility of government intervention through regulation, through taxation
or through control.
L4 For a good analysis of both fiscal and regulative measures with a clear explanation of
how they can help overcome the failure.
[913]
L3 For a competent but less developed explanation, maybe concentrating on fiscal
measures.
[78]
L2 For a limited general explanation of the measures.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]

UCLES 2010

Page 6
3

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
43

(a) Explanation of imperfect market, probably oligopoly. Award up to L2 for an explanation of


theoretical monopoly or monopolistic competition. Use full mark range if candidates use the
legal definition of a monopoly rather than the theoretical definition as this allows for more
than one form of monopoly.
L4 For a good analysis of the characteristics with a description of the pricing policy which
reflects interdependence or collusion.
[912]
L3 For a competent analysis of the characteristics and a weaker description of the possible
pricing structure.
[78]
L2 For a limited general explanation of characteristics and with little on pricing policy. [56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]
(b) Microeconomic theory usually suggests some advantages of large organisations because of
increased efficiency, economies of scale and research and development. However, it also
comments on their disadvantages increased market power which can lead to higher prices,
diseconomies which could lead to higher costs, higher profits which might be caused by
restricting choice, discrimination or lower output. However, macroeconomic theory might
support the idea of increasing subsidies to encourage industry, to support regions and to
stimulate growth. The theory does not suggest that all large organisations should be
encouraged.
L4 For a good analysis of both micro and macro aspects with a conclusion about whether all
large organisations should be encouraged.
[913]
L3 For an explanation which concentrates on either macro or micro or which deals with both
aspects in a less developed manner. There should still be a conclusion.
[78]
L2 For a limited general explanation probably of micro analysis with no supporting
conclusion.
[56]
L1 For an answer which has some basic correct facts but includes irrelevancies. There will
be errors of theory or omissions of analysis.
[14]

UCLES 2010

Page 7
4

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
43

(a) Normally increase in wages leads to increase in number of hours. Exception: backward
supply curve where higher wages causes substitution effect more work taken instead of
leisure but this is outweighed by income effect less need to work the hours and overall
fewer hours are worked.
L4 For a sound explanation with clear understanding of the analysis and a clear conclusion.
[810]
L3 For a competent explanation but with limited development of the income and substitution
effect. There should still be a conclusion.
[67]
L2 For a general explanation with little detail and no conclusion.

[45]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[13]
(b) In perfect competition, market forces dominate. In imperfect competition, institutional factors
such as government, trade unions will influence the final level of wages. The government is
able to control public sector pay but not private sector pay.
L4 For a reasoned discussion and clearly structured answer with sound knowledge of the
analysis of both perfect and imperfect markets with a conclusion.
[1215]
L3 For a competent discussion, but without such a full development. There should still be a
conclusion.
[911]
L2 For a limited but acceptable attempt to describe the theory but without any real
development and without a conclusion.
[68]
L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[15]
5

Candidates should explain the nature of the equilibrium in terms of marginal utility theory for the
consumer. They should comment on how the equilibrium is reached and then comment on the
relevance of the theory. For the consumer there is the difficulty of measuring utility, comparing
utility between goods, and persuasion to buy through advertising and not through consumers
calculation of utility.
L4 For a clear discussion of the analysis using the equi-marginal principle and a good comment
on the usefulness and practicality of giving a value to the equilibrium position. A conclusion
should be given.
[1825]
L3 For a competent discussion the analysis but a weaker evaluation of its practical usefulness.
Some attempt at a conclusion will be presented.
[1417]
L2 For a brief comment on the analysis with very limited evaluation, or a fuller comment on the
analysis but with no evaluation and no conclusion.
[1013]
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.
[19]

UCLES 2010

Page 8
6

Mark Scheme: Teachers version


GCE AS/A LEVEL May/June 2010

www.maxpapers.com
Syllabus
Paper
9708
43

(a) explanation of the different causes of unemployment.


L4 For a clear explanation with accurate development of at least four causes of
unemployment, cyclical, structural, frictional, seasonal, voluntary.
[912]
L3 For a clear explanation of at least three causes or more than three with undeveloped
explanation.
[78]
L2 For a limited attempt with little development.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
(b) Demand for money/liquidity preference based on transactions plus precautionary demand
the demand for active balances. It is determined by income; frequency with which people are
paid; time of year; method of payment use of credit cards reduces active balance demand;
some influence on precautionary demand from the rate of interest although this is likely to
be more relevant to firms active balances than individuals. An increase in unemployment
would affect income, but there may be compensating changes in the use of credit cards.
Possible reductions in consumer spending would affect firms receipts and their liquidity
preference. Some unemployment, e.g. seasonal, could be already accounted for in the
determinants of liquidity preference
L4 For a good analysis of liquidity preference and a clear attempt to link changes in
unemployment to that demand for money.
[913]
L3 For a less developed explanation with weaker links to the changes in unemployment.
[78]
L2 For a limited general explanation.

[56]

L1 For an answer which has some basic correct facts but includes irrelevancies. Errors of
theory or omissions of analysis will be substantial.
[14]
7

Candidates should comment on the meaning of standard of living and general influences on the
standard of living with a brief comment on the value of different indicators, for example, GDP,
GDP per capita, HDI. They should then consider how the use of natural resources might
increase the standard of living short term and long term and if so whether it is a good policy to
allow multinational companies to use the resources and if so to what extent they should be used.
They should then consider alterative policies which might improve living standards particularly the
value of government spending on education and health and the link between this expenditure and
likely changes in the standard of living.
L4 For a discussion of the factors which are involved in the analysis of each the stages of the
argument together with a conclusion.
[1825]
L3 For a competent discussion of part of the argument probably that related to the explanation
of living standards and government policy with briefer comment on resource exploitation.
Some attempt at a conclusion will be presented.
[1417]
L2 For a brief comment on part of the argument, with a weak explanation of the analysis and
with no conclusion.
[1013]
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.
[19]
UCLES 2010

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