Mark Scheme (Results)

January 2012

International GCSE Economics (4EC0)

Paper 01
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January 2012
Publications Code UG030324
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© Pearson Education Ltd 2012
General Marking Guidance

• All candidates must receive the same treatment. Examiners must

mark the first candidate in exactly the same way as they mark
the last.

• Mark schemes should be applied positively. Candidates must be

rewarded for what they have shown they can do rather than
penalised for omissions.

• Examiners should mark according to the mark scheme not

according to their perception of where the grade boundaries may
lie.

• There is no ceiling on achievement. All marks on the mark

scheme should be used appropriately.

• All the marks on the mark scheme are designed to be awarded.

Examiners should always award full marks if deserved, i.e. if the
answer matches the mark scheme. Examiners should also be
prepared to award zero marks if the candidate’s response is not
worthy of credit according to the mark scheme.

• Where some judgement is required, mark schemes will provide

the principles by which marks will be awarded and
exemplification may be limited.

• When examiners are in doubt regarding the application of the

mark scheme to a candidate’s response, the team leader must be
consulted.

• Crossed out work should be marked UNLESS the candidate has

replaced it with an alternative response.
Question Answer Mark
Number
1(a)(i) $700 or 700 (1)

Question Answer Mark

Number
1(a)(ii) B (Excess supply) (1 mark) (1)

Question Answer Mark

Number
1(a)(iii) Definition: Responsiveness of quantity demanded
to a change in price (2 marks)
Also accept equation (2 marks)
Vague definitions or where definition correct but
candidate also gives incorrect formula or vice
versa, 1 mark.
Vague definitions or imperfect formula, 1 mark. (2)

Question Answer Mark

Number
1(a)(iv) A (elastic) (1 mark) (1)

Question Answer Mark

Number
1(a)(v) 1 mark for statement “increase price decrease
total revenue”.
2 marks for data:
2 marks for correct data:
$800 x 30,000 units = $24,000,000
$900 x 20,000 units = $18,000,000
If candidates use 200 and 300 units then only 1
mark for data.
Or
If e of d is greater than 1 therefore elastic = 1
mark
Calculation: % change in quantity demanded =
33.3% % change in price = 12.5% .
Some attempt to show calculation = 1 mark (3)
E of d = 2.7 (1 mark)

Question Answer Mark

Number
1(a)(vi) A second hand motorbike. (1 mark) (1)

Question Answer Mark

Number
1(b)(i) 1 mark for shift to left of supply curve
1 mark for new price and new quantity (2)
Question Answer Mark
Number
1(b)(ii) Factor identified, 1 mark e.g. falling costs, increasing
incomes
Explanation, 1 mark e.g. reference to
increase/decrease in supply or demand.
Or explanation of factor e.g. wages rise (1 mark) so
costs of production rise so prices rise (1 mark) (2)

Question Answer Mark

Number
1(c)(i) 1 mark for policy/law imposed by government
1 mark for “above market equilibrium wage” or
for reference to wages of the poor being (2)
increased.

Question Answer Mark

Number
1(c)(ii) Each benefit of minimum wage rate 1 mark (max
2)
Development up to 2 marks.
e.g. it will increase standard of living (1 mark) as
people have more money to spend (1 mark).

Each reason why “only small number

benefit”/some people won’t benefit, 1 mark
(max 2)
Development up to 2 marks.
e.g. only the lowest paid workers will benefit (1
mark) as those above minimum wage will not (1
mark).

3 marks for one sided response

3 marks for diagram if accurate and relevant and

shows MWR above market wage and unemployment

4 marks for Diagram + basic explanation

4 marks for both sides of argument

5 marks for good balanced argument.

Award 6th mark for further development e.g. (6)

workers above minimum wage may ask for higher
wages to maintain differentials.
Question Answer Mark
Number
1(d)(i) Definition: division of labour is the breaking down
of a job into smaller tasks (2 marks).
Example 1 mark. (3)

Question Answer Mark

Number
1(d)(ii) Each advantage identified, 1 mark (up to 2)
Development up to 2 marks.
e.g. Division of labour will increase productivity
(also accept production) (1 mark) as workers will
become more efficient (1 mark)
Each disadvantage identified, 1 mark (up to 2).
Development up to 2 marks.
e.g. if workers are bored with doing the same
thing over and over (1 mark) then industrial
action might mean all production stops (1 mark).
Must have both sides of argument for 4 marks.
Award 5th and 6th marks for evaluation/reasoned
judgement e.g. The firm may increase profits as
productivity increases but industrial action may
have long term effects on the firm as they may
lose customers. It should try to keep workers
interested in their job. (6)

Question Answer Mark

Number
2(a)(i) Definition: organises factors of production (1
mark).
1 mark for take risk or receive profits or bear (2)
losses of business.

Question Answer Mark

Number
2(a)(ii) 1. Petrol = Variable cost (1 mark)
2. Car insurance = Fixed cost (1 mark)
3. Shampoo = Variable cost (1 mark) (3)

Question Answer Mark

Number
2(a)(iii) Total costs = $450 (fixed costs) + $150 (variable
costs) = $600
1 mark for correct formula or figures
1 mark for correct answer. (2)

Question Answer Mark

Number
2(a)(iv) 1 mark for total costs = $610
1 mark for formula/figures for profit i.e. $1200 -
$610 (3)
1 mark for correct answer = $590
Question Answer Mark
Number
2(b)(i) Each method identified, 1 mark.
Explanation 1 mark
2 + 2 marks
e.g. cheap loans (1 mark) as individuals don’t
have much finance.(1 mark).
Advice and support (1 mark). Individuals may not
know about rules and regulations about
businesses (1 mark)
Reduced taxes on small firms e.g. profits tax,
business rates, grants. (4)

Question Answer Mark

Number
2(b)(ii) Each advantage identified 1 mark (up to 2)
Development up to 2 marks.
Each disadvantage identified, 1 mark (up to 2).
Development up to 2 marks.
Advantages: e.g. Increases competition in the
economy (1 mark). This can lead to a fall in prices (1
mark) and more variety for consumers (1 mark).
Disadvantages: e.g. opportunity cost argument, 1
mark– money could be spent elsewhere in economy
e.g. education 1 mark.
Incentives to existing firms to grow larger may be
more advantageous as they may become more
efficient and take advantages of economies of scale.

Must have both sides of argument for 4 marks.

Award 5th and 6th marks for evaluation/reasoned
judgement.
E.g. All private firms start off small. When they grow
they will provide more jobs and exports for the
country as well as adding to economic growth.
Therefore they are always an advantage to an (6)
economy.

Question Answer Mark

Number
2(c)(i) Definition: transfer of public sector firms to the
private sector (2 marks).
Vague definitions, 1 mark e.g. selling off state (2)
firms.

Question Answer Mark

Number
2(c)(ii) Reason identified, 1 mark. Development, 1 mark.
e.g. profit seeking so may increase prices.
Monopoly power so may increase prices. Reduce
non profit making services so consumers suffer. (2)
Question Answer Mark
Number
2(c)(iii) Each cost identified, 1 mark (up to 2)
Development up to 2 marks.
Each benefit identified, 1 mark (up to 2).
Development up to 2 marks.
Benefits e.g. When the government privatises a firm it
gains a great deal of revenue (1 mark) which it can
use to improve the country/economy (1 mark).
e.g. An increase in competition (1 mark) may increase
efficiency and productivity (1 mark) leading to
economic growth (1 mark).
Privatised firms may be bought by foreigners (1 mark)
so profits are sent abroad (1 mark).
Must have both sides of argument for 4 marks.
Award 5th and 6th marks for evaluation/reasoned
judgement.
e.g. Firms usually become more efficient when
privatised. If this leads to economic growth then the
benefits will undoubtedly outweigh the costs for the
government and the country. (6)

Question Answer Mark

Number
3(a)(i) Prices rise (1 mark)
2nd mark for general level of prices or over a period
of time, or sustained increase. (2)
Value of money falling (2 marks).

Question Answer Mark

Number
3(a)(ii) Prices rose, 1 mark.
Reference to data or inflation rate 1 mark e.g.
The price rise in 2008 (about 23%) was higher (2)
than in 2009 (6.5%), 1 mark.

Question Answer Mark

Number
3(a)(iii) “an increase” 1 mark (1)

Question Answer Mark

Number
3(a)(iv) “cost-push” 1 mark (1)

Question Answer Mark

Number
3(a)(v) Function identified, 1 mark.
Do not accept characteristics of money. (1)
Question Answer Mark
Number
3(a)(vi) Effect identified, 1 mark. Development, 1 mark.
e.g. Function in (a)(v) = means of exchange.
Money would lose its value so people wouldn’t
accept it in payment for goods and services (1
mark) so they would revert to barter (1 mark). (2)

Question Answer Mark

Number
3(b)(i) Balance of payments worsened/deficit grew, 1
mark.
Reference to data, 1 mark e.g. in 2007 it was -
7bn, in 2008 it was -10.5bn. (2)
Accept approximate figures.

Question Answer Mark

Number
3(b)(ii) 1 mark for example of visible e.g. car, coffee. (1)

Question Answer Mark

Number
3(b)(iii) 1 mark for example of invisible e.g. banking,
transport. (1)

Question Answer Mark

Number
3(b)(iv) Explanation of effect of inflation on exports up to 2
marks.
Explanation of effect of inflation on imports up to 2
marks.
e.g. As prices rise due to inflation domestic goods and
services become more expensive (1 mark) so other
countries won’t buy them. Exports fall (1 mark).
Imports on the other hand appear cheaper (1 mark)
than domestic goods so imports rise (1 mark).
Up to 2 marks for reasons why inflation may not
worsen balance of payments. E.g. elasticity of
imports and exports, rate of inflation in other (6)
countries.

Question Answer Mark

Number
3(c)(i) B Monetary Policy (1)

Question Answer Mark

Number
3(c)(ii) Each reason identified, 1 mark. Development, 1
mark. 2 x 2 marks
e.g. Savings might increase (1 mark) so consumer
demand will fall (1 mark). Loans are more
expensive (1 mark) so people will not borrow
money so demand will fall (1 mark) (4)
Question Answer Mark
Number
3(c)(iii) Definition or examples of supply side policy up to
2 marks. E.g. Supply side policies aim to improve
the working of the markets so that supply
increases (2 marks) or supply side policies include
education and training and privatisation (2 marks)

Explanation of how it/they work up to 2 marks.

Through improving occupational mobility of
labour (education and training) unemployed
workers can find new jobs (2 marks).
Limitations of supply side policy up to 2 marks
e.g. some supply side policies e.g. privatisation
may lead to more unemployment as private firms
invest in more machinery (2 marks). Education
and training take time so there may be no change
in the short run (2 marks).
Also accept “no evidence to suggest supply side
policies work”. (6)

Question Answer Mark

Number
4(a)(i) A Globalisation (1 mark) (1)

Question Answer Mark

Number
4(a)(ii) Each advantage identified, 1 mark. e.g.
increased size of market (1 mark), cheaper
imports, more variety. (2)

Question Answer Mark

Number
4(a)(iii) Each disadvantage identified, 1 mark.
Explanation 1 mark.
e.g. cheap imports might lead to domestic firms
closing down (1 mark) and this would lead to
unemployment (1 mark). If imports increase (1
mark) then it might worsen the balance of
payments (1 mark) (4)

Question Answer Mark

Number
4(a)(iv) A Foreign Direct Investment (1 mark) (1)
Question Answer Mark
Number
4(a)(v) Each reason identified, 1 mark. Explanation 1
mark.
2 x 2 marks
e.g. the market for cars in China is growing so
Ford can make more profits. China is now a
member of a free trade area so Fords can export (4)
from China to other member countries without
tariff barriers.

Question Answer Mark

Number
4(a)(vi) Each reason supporting statement that a
multinational improves standard of living 1 mark
(up to 2).
Development up to 2 marks
Each reason against statement that a
multinational improves standard of living 1 mark
(up to 2).
Development up to 2 marks
If multinationals provide employment (1 mark) for
previously unemployed workers then they will
have more to spend(1 mark). The multinational
may employ the workers in poor conditions (1
mark) or for long hours so their health may suffer
(1 mark).
Must have both sides of argument for 4 marks.
Award 5th and 6th marks for evaluation/reasoned
judgement.
Employment by multinationals will increase
people’s incomes but in some cases the
government should ensure that the multinational (6)
obeys employment laws so that the workers’
overall standards of living can be increased.

Question Answer Mark

Number
4(b)(i) Subsidies: money given to firms by government (1
mark) which reduces their costs of production (1 (2)
mark).

Question Answer Mark

Number
4(b)(ii) Dumping: A firm exports goods below their cost of
production (2 marks). Vague definitions 1 mark e.g.
exports at a low price, cheap, below market price. (2)
Question Answer Mark
Number
4(b)(iii) Each benefit identified 1 mark (up to 2).
Development up to 2 marks
Each disadvantage identified 1 mark (up to 2).
Development up to 2 marks
e.g. tariffs will reduce the demand for
imports (1 mark) and this will increase the
demand for domestic goods (1 mark). A
developed country imports raw materials (1
mark) so firms in the developed country will
face increased costs (1 mark).
Must have both sides of argument for 4
marks.
Award 5th and 6th marks for
evaluation/reasoned judgement.
e.g. If tariffs lead to inflation rather than
increased sales for domestic industries then they
will be a great disadvantage to the developed
country. (6)
e.g. accept winners (protected industries ) and
losers (consumers) judgement for up to 2 marks.

Question Answer Mark

Number
4(b)(iv) Method identified 1 mark. Explanation 1 mark.
Quotas limit the amount of imports into the
country.
Exchange control limits the amount of foreign (2)
currency so that people can’t import goods.
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January 2012

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