March Scheme

Form 5 Paper 2

1(a) 12240 (1)

(b) -GDP per head (1)
-HDI (1)
-Accept any other appropriate indicators
(c) Bad weather reduced output of grapes (1) leading to supply being less than demand (1) thus a
shortage (1).
(d) Jobs for well-educated workers: 1 mark for a valid point and 1 mark for a logical explanation
-Less physically demanding (1)
-Requires more experience (1)
-High wages an incentive (1)
-High earnings helps them stay in good health (1)
-Train young workers (1)
-Accept any other logical explanations
(e) A rise in the in a country’s retirement age:
-Reduces government spending on pension (1)
- Save on government spending (1)
- lowers a deficit (1)/increases budget surplus (1)
-Smaller total budget (1)/budget share on welfare support (1)/pensions (1)
(f) - Generally, countries with lower inflation rates have competitive exports (1) hence current account
surplus (1) are likely
-However information presents some inconsistency (1)
-Mongolia has the highest inflation rate (1) and has the largest (1) current account deficit
-Two countries with low inflation below 5% (1) have surplus current accounts (1) thus Iceland and
Slovenia (1)
-Two countries with higher than 5% inflation rates (1) have current account deficits (1) thus Mongolia
and Nepal (1)
-Cyprus and Kenya (1) have less than 5% inflation (1) but have current account deficits (1)
-Cyprus have the lowest inflation rate (1) but has a current account deficit (1)
(g) Cyprus PPC shifts to the right:
-Capital intensive production increases productivity
- Prospects of better weather conditions in future
Shifts to the left: Some relevant points
-emigration of entrepreneurs
-decline in quality of agricultural land
(h) Capital-intensive production benefits include: up to 4 marks
-Quality products
-less mistakes
-more output/less shortages
-lower prices due to improved efficiency
Capital-intensive production costs include: up to 4 marks
-High costs of acquiring capital/maintenance costs presents need for higher prices
-Machine breakdown slows production hence supply delays
- Lack of variety/consumer choice due to standardized products
-Faulty products due to malfunctioning production process
3(a) Privatization means change of ownership from government to private individual (2)

(b) Absolute poverty is when one ca not afford basic needs and relative poverty is when one earns less
than the average of the population. (4)

(c) Specialization is when one focuses on what they do best (1) hence high productivity (1)
-efficiency improves (1) also due to discovery of advanced ways of producing (1) and new products
being made (1)
-allows for mechanization (1) of the firm due to use of specialized equipment hence technical
economies of scale (1)
-good reputation (1) due to quality products (1)
-more output is produced (1) resulting in higher market share (1)/sales revenue(1)/profits(1)
-other relevant benefits

(d) Supply-side policy measures increase aggregate supply

Reduce unemployment through: up to 5 marks
-Education and training makes worker employable/attractive due to higher skills acquired
-Subsidies lowers prices of goods hence high demand for good which requires man power
-Privatization e.g. deregulation leads to many firms operating hence more vacancies
-Reducing power of trade unions lowers wages hence high demand for labor
-Removing minimum wages lowers wage cost and attract MNCs
-Removing maximum prices increases profitability hence more output
-Removing unemployment benefits encourage people to search for jobs
-Lowering income tax leads to expansion of firms
Unemployment may not increase: up to 5 marks
-Lack of funds to support education and training as well as subsidies
-Privatization may lead to private monopolies hence less job openings
-Supply side policies like education and training take time to work
-Government funds can be misused by corrupt politicians
-A government may not be able to lower takes due to limited sources of revenue
-Lowering unemployment benefits lowers AD

5 (a) Reward for labor is wages

Reward for land is rent

(b) A rise in worker’s income e.g. wages may incentivize them to stick with current job/occupation
since their needs are sufficiently met hence reduces change of occupation/occupational mobility.
Also rise in income enables the worker to develop themselves through education and training and
prepares them for their next job thus increase occupational mobility.
More so, with high income a worker tend to look elsewhere for even higher wages thus may afford to
travel and seek opportunities in a different location.
(c)
Diagram:
- one mark for correct label of both axes
- one mark for an arrow showing rightward shift in the demand curve
- one mark for an arrow showing an increase in price
-One mark for an arrow showing increase in output

Explanation:
Greater awareness increases demand (1) thus equilibrium quantity increases (1) and equilibrium price
rises (1).

(d) Benefits of the Market economic system include: up to 5 marks

Lowest prices possible due to competition
Efficiency due to profit motive
Responds to consumer’s needs
Greater variety for the consumer
Innovation due to the need to lower cost
High quality products to satisfy customers

Costs include: up to 5 marks

-Public goods are not produced
-Overproduction of demerit goods and underproduction of merit goods
-high pollution
-monopolies are created
-harmful products can be produced
-income inequality
Labor immobility