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ECONOMICS - 2281/22 March- 2023
Paper 2 Structured Questions 2 hours 15 minutes
You must answer on the enclosed answer booklet.
INSTRUCTIONS
• Answer four questions in total:
• Section A: answer Question 1. Section B: answer three questions.
• Follow the instructions on the front cover of the answer booklet. If you need
additional answer paper, ask the invigilator for a continuation booklet.
• You may use a calculator.
INFORMATION
• The total mark for this paper is 90.
• The number of marks for each question or part question is shown in brackets [ ].
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Section A
Read the source material carefully before answering Question 1.
Source material: Air pollution in India.
As India increases its output, it creates more pollution. Its government encourages economic growth
by promoting investment and free trade. It is considering cutting taxes, spending more on education,
lowering import tariffs and removing some import quotas. The Indian government intervenes in its
economy for a number of reasons, including to reduce pollution. The causes of pollution include
vehicles and private and public sector factories which emit harmful gases. With reductions in the
cost of producing cars and rising incomes, more cars are being produced and purchased in India.
Producers and car drivers base their decisions on just their private costs and benefits. Some farmers
burn their fields after harvesting to increase the growth of their next crop, even though their action
causes pollution. Also, some owners of mines do not take sufficient care to ensure that minerals and
metals do not leak into local water supplies. As well as affecting pollution, the relative size of the
primary sector can influence average income as shown in Table 1.
Table 1 - Primary sector output as a percentage of GDP and GDP per head in selected countries in
2017
To reduce pollution, the Indian government subsidises bus travel. It also requires buses to run on
natural gas rather than on more polluting diesel and petrol. Reduced pollution can attract more
foreign tourists. Foreign tourism and changes in the foreign exchange rate affect the current account
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of a country’s balance of payments. It has been predicted that India’s foreign exchange rate is likely
to rise in the future.
Answer all parts to Question 1. Refer to the source material in your answers. 1
(a) Calculate India’s economic growth rate in 2017. [1]
(b) Identify two methods of protection. [2]
€ State why India is a mixed economy. [2]
(d) Explain why external costs cause market failure. [4]
€ Draw a demand and supply diagram to show the effects of a decrease in the costs of production
on the market for cars. [4]
(f) Analyse the relationship between the size of countries’ primary sector output and GDP per
head. [5]
(g) Discuss whether or not increasing subsidies given to bus travel would reduce pollution in India.
[6]
(h) Discuss whether or not India is likely to experience a deficit on the current account of its balance
of payments in the future. [6]
(Total=30 marks)
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Section B
Answer any three questions in this section
1.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.
(a) Identify two determinants of price elasticity of demand. [2]
(b) Explain two advantages to a firm of a horizontal merger. [4]
(c) Analyse, using a demand and supply diagram, how the market for toothpaste would be
affected by an increase in population. [6]
(d) Discuss whether or not an increase in the wages of dentists will increase the number of
dentists employed. [8]
2.Cyclical unemployment is below the national average in some big cities in Canada such as
Toronto, Vancouver, and Montreal. This could be a result of higher government spending and tax
cuts in big cities. However, productivity is low. There are also concerns that structural
unemployment may increase as some industries cannot compete with more efficient foreign firms.
(a) Define structural unemployment. [2]
(b) Explain two causes of low productivity. [4]
(c) Analyse how higher government spending and tax cuts can lead to a fall in cyclical
unemployment. [6]
(d) Discuss whether or not competition between firms in the same industry is always a
disadvantage to workers. [8]
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3.Ireland has one of the lowest rates of corporation tax in Europe. This has encouraged many
multinational companies (MNCs) to produce in Ireland. Other reasons why firms want to produce in
Ireland include access to freer trade with other European countries, higher labour productivity and
government grants.
(a) State two benefits of free trade. [2]
(b) Explain two reasons why governments levy taxes. [4]
(c) Analyse, using a production possibility curve (PPC) diagram, the impact of higher labour
productivity on an economy. [6]
(d) Discuss whether or not MNCs always benefit their host countries. [8]
4.The effects of a depreciation of a currency are influenced by the price elasticity of demand of
exports and imports. Worldwide there has been a reduction in trade barriers including tariffs. There
has also been an increase in the movement of goods and services between countries and, to a lesser
extent, the movement of people. Some countries experience net emigration with more people
leaving the country than entering it.
(a) Define depreciation of a currency. [2]
(b) Explain two reasons why demand for a country’s exports may be price-inelastic. [4]
(c) Analyse how a reduction of its import tariffs could increase a country’s output. [6]
(d) Discuss whether or not net emigration will reduce poverty in a country. [8]
(Total 60 marks)
