Mark scheme Annual Examination 2023

Date Teacher name Grade Subject & Duration Maximum

Code Marks

Ms. Shantala, Economics 2 h 15 m 90

01/06/2023 9
Ms. Riddhi 0455/22

Topic(s) Ch 1 to 25

Section A

1 Banking and unemployment in Morocco

Morocco’s banking industry has been described as one of the best in Africa. It has
some of Africa’s largest commercial banks, but three out of nineteen control more
than two-thirds of the market. These three have grown mostly through mergers and it
is expected more mergers will occur between Moroccan banks in the future.

The banks make use of brand names, set their own interest rates on loans and
provide some different services. The larger banks tend to lend to large firms. Small
and medium sized firms find it more difficult to get loans.

More than 60% of the population now make use of the services of commercial
banks. The proportion of families opening savings accounts at commercial banks is
increasing.

Moroccan banks now have branches in 22 African countries as well as a number of

European countries. They are also expanding in Morocco, creating more jobs.
Morocco has a relatively high unemployment rate. Fig. 1 shows the unemployment
rate in 2015 in a range of African countries including Benin, a relatively poor country.
Benin has a large labour-intensive, subsistence farming sector. Fig. 1 also shows
youth unemployment and population growth. Unemployment rates vary between
different groups. Youth unemployment is often twice the rate of the overall
unemployment rate.
Fig. 1 The unemployment rate, youth unemployment rate and population
growth rate in selected African countries in 2015

In Morocco, the population is increasing at a faster rate than new jobs are being
created. The rising unemployment rate is affecting wage rates in the country. As with
unemployment, wage rates vary between different groups. Older workers, for
example, tend to be paid more than younger workers.

1(a) Identify, using information from the extract, TWO functions of a commercial
bank. [2]
Providing savings accounts (1) lending (1) setting interest rates on loans (1).

1(b) Explain two differences between commercial banks and central banks. [4]
Identifying and explaining differences could include definition, function, motive, ownership or
any other relevant point.

1(c) Analyse why a commercial bank may prefer to sell its services in foreign
countries rather than its home country. [5]
It may make more profit (1) demand for banking services may be higher (1) demand may be
falling in home country but rising abroad (1) due to e.g. higher incomes/larger population (1)
less competition (1).
Costs of production may be lower abroad/efficiency higher (1) due to e.g. lower rents/lower
wages (1).
There may be a greater availability of skilled labour abroad (1) due to better education (1).
Foreign governments may provide subsidies (1) have lower rates of tax (1).
Unfavourable domestic policies (1) e.g. restrictions on the money supply (1) limits the bank’s
ability to make profits domestically (1).
Selling services abroad may help to reduce risks (1).

1(d) State two negative consequences of unemployment. [2]

Less tax revenue, unemployment benefits, any relevant answer.

1(e) Analyse whether the information in Fig.1 supports the view that: the youth
unemployment rate is usually twice that of the overall unemployment rate.[2]
Generally yes (1) Supporting example (1) Egypt is the exception (youth unemployment rate
almost four times as high) (1).
Morocco is exactly twice (1) no other country is exactly twice (1).
1(f) Discuss whether or not older workers are always paid more than younger
workers. [5]
Up to 3 marks for why older workers may be paid more:
Older workers may have been with a firm for a long time (1) may have gained promotion (1)
developed skills (1) gained experience (1) may have undertaken training (1) may be in
managerial jobs (1) may be more productive (1).
Up to 3 marks for why older workers may not be paid more:
May be less productive (1) less fit for physical work (1) may be out of date with new
technology
(1) lack new ideas (1) may have had less education in the past (1).
May be less occupationally mobile (1) less willing/able switch jobs (1).
May be less geographically mobile (1) less willing/able to move in search of higher paid
employment (1).
Note: Accept skills or efficiency on either side. One mark if given on both sides. More
marks can only be awarded if a reason for better skills is given.

1(g) Explain, using information from the extract, ONE reason why a relatively poor
country may have a low unemployment rate. [4]
A large proportion of its population is employed in agriculture (1) in subsistence farming (will
employ family members) (1) labour-intensive (1) would employ a high proportion of labour
(1) relative to capital (1) Lack finance to invest in new (labour-saving) technology (1).
No specific skills required for (subsistence) agriculture / low entry requirements for unskilled
(1).

1(h) Discuss whether or not commercial banks in Morocco would benefit from further
mergers. [6]
Up to 4 marks for why they might:
The merger would give the banks / firms more market power (1) a relatively quick way to
grow
(1) may be able to raise price (1) without losing too many customers (1).
It could be a horizontal merger (1) which may enable greater advantage to be taken of
economies of scale (1) example (1) lower (average) costs (1) lower prices / increased
demand (1) higher profit (1).
Up to 4 marks for why it might not:
The reduction in competition may make the banks / firms complacent (1) may not try to keep
costs down (1).
The firms may experience diseconomies of scale (1) example (1) higher (average) costs (1)
higher prices / reduced demand (1) lower profit (1).
Costs of integrating firms such as redundancies/loss of morale (1).
Large firms may lose customers due to lack of personal touch (1).
Note: Accept profits and/or costs on either side. One mark if given on both sides. More
marks can only be awarded if a reason for change in profits is given.

2. The population of Hungary is the most obese in Europe. Hungarians eat fewer vegetables
than most Europeans and more food types that may be considered to be demerit goods. In
2017, the Hungarian government introduced a tax on unhealthy food, known as the chips
tax. The tax has had some success in moving demand to healthier foods. Some economists
suggest that governments should use price controls as well as to influence the food market.

2 (a) Define demerit good. [2]

A product which is more harmful to consumers than they realise / the government considers
is more harmful (2).
It is over-consumed / overproduced (1) it creates external costs (1).
A product that is harmful (1).

2 (b)Explain the difference between an extension in demand and an increase in

demand. [4]
Logical explanation which might include:
An extension in demand is caused by a change in the price of the product (1) rise in quantity
demanded (1) it is shown by a movement along the demand curve (1).
An increase in demand is caused by a change in an influence on demand other than a
change in the price of the product / means more is demanded at each and every
price (1) example of a cause of an increase in demand e.g. rise in incomes (1) it is shown by
a shift in the demand curve (1).

2 (c) Analyse how tax can reduce market failure caused by demerit goods. [6]
 Increased price
 Encouraging alternatives
 Revenue generation
 Behavioural change
Any other relevant point with explanation

2 (d) Discuss whether or not a government should impose a maximum price

on food. [8]
In assessing each answer, use the table opposite.
Why it should:
 may influence price and quantity purchased
 if set below the equilibrium level, will reduce price
 some people will be able to purchase food at a lower price
 may reduce poverty – food is a basic necessity
 may stop monopoly food producers setting high prices.
Why it should not:
 if set above the equilibrium, it will have no effect
 it set below the equilibrium, will result in shortages
 some additional measure will have to be introduced to ration out food
 some foods may be harmful to health and their consumption should be discouraged
 may result in firms making losses and so reducing quality of food or employment of
workers
 free market forces may result in a more efficient allocation of resources.

3 Nollywood, the Nigerian film (movie) industry, is growing in size. More actors are being
employed but their wages are currently still low. Wages and other costs of production may
alter as the firms in the industry increase further in size. Consumers may also be affected by
the growth in the size of the firms.

3 (a) Describe how fixed costs and variable costs are influenced by a rise in
output. [2]
Fixed costs will not change [1] in the short run [1].
Variable costs will rise [1].
Note: a maximum of 2 marks overall.

3 (b) Explain two ways a bank can help a firm increase in size. [4]
1 mark for each of two ways identified:
• lending money
• advice
• help with mergers
• low interest rate.
1 mark for each of two analytical points:
• providing finance to, e.g. buy new capital equipment/may be in the form of overdrafts or
loans
• advice may be given on, e.g. how to cut costs/raise revenue
• a bank may help a firm to sell shares to raise the finance to buy another firm/may draw
up documents on a merger
• providing low interest keeps cost of expansion down.
Note: a maximum of 4 marks overall.

3 (c) Analyse three reasons why someone may be prepared to work for low wage. [6]
1 mark for each of two reasons identified:
• hope of promotion
• good working conditions
• fringe benefits
• lack of skills/qualifications
• job security
• job satisfaction
• unemployment in the economy/lack of demand for labour.
1 mark for each of two explanations, e.g.:
• a worker may be prepared to work for low wages if s/he expects higher pay in the future
• a worker may prefer good working conditions to high wages
• fringe benefits (e.g. company car) may compensate for low wages
• lack of skills/qualifications may mean workers have no option but to work for low wages
• job security may be a key objective during a time of high unemployment
• a number of people accept low wages if they find a job rewarding/have a vocation
• few jobs available means supply of labour exceeds demand, forcing wages down.

3 (d) Discuss whether consumers will benefit from small firms. [8]
Points for:
 personalised service
 flexibility
 local focus
 innovation
Points against:
 Limited resources
 Limited product range
 Reliability
 Price
Any other relevant points with explanation

4. The economic problem results in choices and opportunity cost. People have to decide
what job to do and where to live. In recent years Australia has recruited teachers from a
number of countries including Canada, the UK and the US. Most of these teachers
specialise in a single subject.

4 (a) Define opportunity cost. [2]

The (next) best alternative / choice (1) forgone / sacrificed (1).

4 (b) Explain the economic problem and why it is always likely to exist. [4]
Logical explanation which might include:
The economic problem is finite / limited resources (1) and infinite / unlimited wants / wants
exceed resources (1) scarcity (1).
It is always likely to exist as wants grow faster than resources / wants are increasing (1)
there will never be enough resources to produce all the products people would like to have
(1). People are living longer / population is increasing (1) more resources are needed / some
resources are being depleted (1).

4 (c) Analyse why the wages of all teachers may increase. [6]
Coherent analysis which might include:
The wages of teachers may increase if demand for teachers rises (1) derived (1) this may be
because there are more children to educate / rise in population size (1) smaller class
sizes / children staying in education longer (1) teachers being more productive / skilful (1).
A decrease in supply will increase wages (1) this may be due to a rise in qualifications
needed (1) long period of training (1) rise in wages in other occupations / need to
compete with other occupations (1) need to compete with wages paid to teachers in other
countries / recruit from higher paying countries (1).
Bargaining power of teachers may increase (1) more teachers may belong to trade unions
(1) may be more prepared to take strike action (1) wages may be raised to
keep up with inflation / maintain real wages (1).
Government policy may favour teachers (1) e.g. there may be an increase in school leaving
age / increase provision of education (1).
Increase in minimum wage (1).

4 (d) Discuss whether or not a teacher would benefit from specialisation. [8]
In assessing each answer, use the table opposite.
Why it might:
• may be trained more quickly
• become more skilled / productive
• may be in higher demand
• may be better paid
• may increase chance of promotion
Why it might not:
• subject may become less popular
• may become bored teaching the same subject
• if lose job, may find it difficult to get another job
• may spend a long time developing the specialisation
• may not get the opportunity to move into another subject.

5. Poland is the world’s top exporter of toothpaste, a product that is in inelastic demand. In
2019, some Polish firms producing toothpaste considered a horizontal merger. Also, in 2019,
the wages of dentists increased globally. This increase was particularly high in the UK where
dentists received on average, a 25% wage rise.

5 (a) Define perfectly inelastic demand. [2]

When a change in price has no effect on the quantity demanded.

5 (b) Explain two determinants of price elasticity of demand. [4]

 Availability of substitutes
 Necessity
 Time
 Income
 Brand loyalty
Any other relevant point with explanation

5 (c) Analyse, using a demand and supply diagram, how the market for toothpaste
would be affected by an increase in population. [6]
Coherent analysis which might include
Up to 4 marks for the D&S diagram:
Axes correctly labelled – price and quantity or p and q (1).
Original demand and supply curves correctly labelled (1).
New demand curve shifted to the right (1).
Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or
equilibrium points E1 and E2 (1).
Up to 2 marks for written analysis which might include:
An increase in population will mean there are more people
to buy / demand toothpaste (1).
Price will rise / quantity traded will increase (1).

5 (d) Discuss whether or not an increase in the wages of dentists will increase the
number of dentists employed. [8]
In assessing each answer, use the table opposite.
Why it might:
• increase in demand may cause supply to extend
• may encourage more people to train to be dentists
• higher pay may increase the standard of living of dentists
• may persuade current dentists not to leave the occupation / delay retirement.
• may cause increased inward migration of qualified dentists
Why it might not:
• decrease in supply may cause demand to contract long period of training may discourage
people
• people may lack qualifications / skills
• people may not find the job enjoyable
• people may think the job will be too physically demanding e.g. backache
• wages may rise more in other occupations
• may increase costs for dental firms employing dentists / consumers reducing demand for
dentists