Mark Scheme

Section A — Structured Questions

1. (a) (up to 2) Opportunity cost = the next best alternative given up when a choice is made (because resources are scarce, choosing one thing means going without another). [2] (b) (up to 4) Two factors: rise in consumer incomes; higher price of petrol/diesel cars (substitutes) or fuel; government subsidies/incentives; greater environmental awareness/tastes; more charging infrastructure. 1 + 1 development each. [4] (c) (up to 4) A shortage means demand exceeds supply at the current price; this causes the price to rise; the higher price discourages some demand (contraction) and encourages more supply (extension); the market moves back to equilibrium, removing the shortage. [4]

2. (a) (up to 2) Productivity = output per worker (or per unit of input) in a given time; a measure of how efficiently resources are used. [2] (b) (up to 4) Two ways: training to improve skills; better technology/machinery; improved motivation (pay, conditions); better organisation of production. 1 + 1 development each. [4] (c) (up to 4) Two economies of scale: purchasing/bulk-buying (lower cost per unit when buying in bulk); technical (large, efficient machinery); financial (cheaper borrowing); managerial (specialist managers). 2 each (example + why it lowers unit cost). [4]

3. (a) (up to 4) Two reasons using the data ($2,400 vs $380): a surgeon needs many years of training/qualifications and high skill, so the supply of surgeons is low relative to demand; the work carries great responsibility; cleaning requires few qualifications, so the supply of workers is large, keeping pay low. Must reference the pay gap. [4] (b) (up to 4) Effect on low-paid workers: a minimum wage raises their pay/income and living standards (2); drawback for employers: higher wage costs, which could lead them to employ fewer workers or raise prices (2). [4] (c) (up to 4) One way explained: a trade union can negotiate collectively with employers (collective bargaining) for higher pay/better conditions; the strength of many members gives more bargaining power; may threaten industrial action (e.g. a strike) if demands are not met. Method + how it works. [4]

4. (a) (up to 2) Any two: to raise revenue to pay for public services (health, education); to redistribute income (reduce inequality); to discourage harmful consumption (e.g. tax on cigarettes); to manage the economy. [2] (b) (up to 4) A direct tax is charged on income or wealth and paid directly to the government (e.g. income tax); an indirect tax is charged on spending/goods and services and paid via the seller (e.g. VAT/sales tax). Distinction (2) + example each (2). [4] (c) (up to 6) Two ways developed: spending on education and training improves workers' skills and long-term productivity/growth; spending on infrastructure (roads, broadband) helps businesses operate and creates jobs; spending on healthcare keeps the workforce healthy and productive; spending to boost demand in a downturn reduces unemployment. 3 marks each (way + explanation of how it helps the economy). [6]

Section B — Extended Response

5. (16 marks) Levels-marked discussion.

• Problems of high unemployment: lower incomes and living standards for the unemployed; less spending in the economy (knock-on effects); lower tax revenue and higher benefit costs for the government; wasted resources/lower output; social problems.
• Ways to reduce unemployment: demand-side — government spending, lower taxes or lower interest rates to boost demand and create jobs; supply-side — training/education to improve skills, incentives for firms to hire, improving job information; helping specific regions/industries.
• Evaluation: costs of government spending; time lags; some policies suit some types of unemployment better (e.g. training for structural unemployment vs demand policies for cyclical unemployment).
• Level 4 (13–16): developed discussion of problems and a range of policies with evaluation and a justified conclusion; Level 3 (9–12): several points with some development; Level 2 (5–8): limited/one-sided; Level 1 (1–4): basic.

Sample Answers with Examiner Commentary

Question 1(c) — Sample Answers

Grade A response. "A shortage happens when the quantity demanded is greater than the quantity supplied at the current price. Because buyers are competing for the limited goods available, the price will start to rise. As the price rises, two things happen: some buyers are no longer willing or able to buy at the higher price, so the quantity demanded falls (a contraction of demand); and suppliers are encouraged to produce and sell more because it is now more profitable, so the quantity supplied rises (an extension of supply). These two changes continue until the quantity demanded once again equals the quantity supplied — the equilibrium — and the shortage has been removed."

Mark: 4/4. Examiner commentary: A complete, correctly sequenced answer. The candidate explains the whole adjustment process: shortage → price rises → demand contracts and supply extends → new equilibrium with no shortage. Crucially, they use the correct economic language (contraction of demand, extension of supply, equilibrium) and explain why each side responds to the higher price. Describing the price mechanism as a self-correcting process, rather than just saying 'the price goes up', is what earns full marks.

Grade C response. "If there is a shortage the price goes up because lots of people want it. This means the shortage goes away because it is more expensive."

Mark: 2/4. Examiner commentary: The candidate correctly identifies that a shortage causes the price to rise and links this to demand, earning two marks. However, the explanation of how the shortage is actually removed is incomplete. The answer needs to explain that the higher price both reduces the quantity demanded (some buyers drop out) and increases the quantity supplied (producers make more), and that the market moves back to equilibrium. Describing both sides of the price mechanism, using terms like equilibrium, would gain the remaining marks.

Question 5 — Sample Answers

Grade A response (extract). "High unemployment causes serious problems. For the people who are unemployed, incomes fall and living standards drop, which can cause hardship and stress. For the wider economy, unemployed people spend less, so businesses sell less, which can lead to further job losses. The government also suffers: it collects less tax and has to pay out more in unemployment benefits, worsening its finances, and the economy wastes resources by not using available workers, so output is lower than it could be.

There are several ways a government could try to reduce unemployment. Demand-side policies aim to boost total demand — for example, increasing government spending, cutting taxes, or lowering interest rates — so that firms sell more and need to hire more workers. These can work quickly but are expensive and could cause inflation. Supply-side policies aim to make workers more employable — for example, funding training and education so that workers have the skills firms need, or giving firms incentives to take on staff. These take longer to work but tackle the root causes, and are especially useful for structural unemployment where workers' skills no longer match the jobs available.

In conclusion, high unemployment is damaging both to individuals and to the economy and government finances, so action is justified. I would argue that the best approach depends on the cause: demand-side policies are most useful when unemployment is caused by a lack of spending in a downturn, while supply-side policies such as training are better for long-term, structural unemployment. A combination is often needed, but because supply-side measures address the underlying skills problem, they are likely to be the most effective in the long run."

Mark: 15/16. Examiner commentary: A Level 4 answer. It develops the problems of unemployment fully — covering the individual, the wider economy and government finances — and then evaluates a genuine range of policies, correctly distinguishing demand-side from supply-side and noting their trade-offs (speed and cost versus tackling root causes). The conclusion is genuinely evaluative, linking the best policy to the cause of the unemployment (cyclical vs structural), which shows sophisticated understanding. Accurate terminology and a balanced, justified judgement place it firmly in the top band.