paper reference(s) 7120 london examinations€¦leave blank 3 *h36396a03 4* turn over 2. the...
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Examiner’s use only
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Section A 1
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5 Section B 6
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Paper Reference(s)
7120London ExaminationsGCEEconomicsOrdinary LevelTuesday 12 January 2010 – MorningTime: 2 hours 30 minutes
Materials required for examination Items included with question papersNil Nil
Instructions to CandidatesIn the boxes above, write your centre number, candidate number, your surname, initial(s) and signature. The paper reference is shown above. Check that you have the correct question paper.Answer ALL questions in Section A and THREE questions in Section B in the spaces provided in this question paper.In Section B indicate which questions you are answering by marking the box ( ).If you change your mind, put a line through the box ( ) and then indicate your new question with a cross ( ).Do not use pencil. Use only blue or black ink.
Information for CandidatesThe marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).There are 12 questions in this question paper. The total mark for this paper is 100. There are 24 pages in this question paper. Any blank pages are indicated.You will receive credit for use of diagrams and recent examples where relevant and appropriate.
Advice to CandidatesYou should spend the first ten minutes studying the paper.Write your answers neatly and in good English.
Paper Reference
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This publication may be reproduced only in accordance with Edexcel Limited copyright policy. ©2010 Edexcel Limited.
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SECTION AAnswer ALL of the questions in this section.
(You are advised to spend approximately 50 minutes on this section.You are also advised to make use of the data provided in your answers.)
1. (a) Define the term opportunity cost.
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(b) Identify a possible opportunity cost when
(i) a government increases its expenditure on health care,
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(ii) a student decides to go to the cinema instead of revising for an examination.
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(Total 4 marks)
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2. The population pyramids below show the population of India in 2000 and the projected changes by 2050.
MALE India: 2000 FEMALE
100+95–9990–9485–8980–8475–7970–7465–6960–6455–5950–5445–4940–4435–3930–3425–2920–24 15–1910–14 5–90–4
70 60 50 40 30 20 10 0 0 10 20 30 40 50 60 70
Population (in millions)Source: U.S. Census Bureau, International Data Base
MALE India: 2050 FEMALE
100+95–9990–9485–8980–8475–7970–7465–6960–6455–5950–5445–4940–4435–3930–3425–2920–24 15–1910–14 5–90–4
70 60 50 40 30 20 10 0 0 10 20 30 40 50 60 70
Population (in millions)Source: U.S. Census Bureau, International Data Base
Study the population pyramids for 2000 and 2050.
(a) (i) With reference to the population pyramids, briefly describe two major changes in the age distribution between 2000 and 2050.
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(4)
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(ii) Briefly explain one possible cause of a change you have identified in (a)(i).
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(iii) Define the term ‘dependency ratio’.
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(iv) What is likely to happen to the dependency ratio in India from 2000 to 2050? Briefly explain your answer.
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(v) How is the predicted change in the dependency ratio you have identified in (iv) likely to affect the balance of government spending and taxation? Briefly explain your answer.
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(Total 13 marks)
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3. (a) With the aid of examples define
(i) savings
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(ii) investment.
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(b) Place a cross in the correct box to indicate which of the following is an injection or a withdrawal from the circular flow of income.
Injection Withdrawal
(i) Government expenditure
(ii) Imports (2)
(iii) When injections are greater than withdrawals in the circular flow of income what will happen to the level of national income?
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(Total 7 marks)
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4. In Spain many small farmers are members of producer co-operatives.
(a) With the aid of examples, briefly explain two benefits of producer co-operatives to small farmers.
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(b) Identify two ways in which
(i) a small farmer can raise finance
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(ii) a public limited company can raise finance.
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(c) Briefly explain two reasons why a firm may remain small.
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(Total 12 marks)
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5. Briefly explain two functions of the World Trade Organization.
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(Total 4 marks)TOTAL fOr SECTION A: 40 MArkS
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BLANk PAGE
TurN OvEr fOr SECTION B
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SECTION B
You should answer THrEE questions in this section.
Indicate which question you are answering by marking the box ( ). If you change your mind, put a line through the box ( )
and then indicate your new question with a cross ( ).
Question 6
By 2006, supermarkets in the UK had 72% market share of total grocery sales. Supermarkets are large stores selling high volumes of a wide range of groceries. The Competition Commission reported that between 2000 and 2006, during a period of supermarket expansion, real prices of groceries fell by 7.3%.
(a) (i) What is meant by ‘real prices’?
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(ii) Briefly explain one reason why the growth of supermarkets may have contributed to the fall in the real prices of groceries between 2000 and 2006.
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(iii) Identify and briefly explain two other possible causes of the fall in the real prices of groceries between 2000 and 2006.
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(b) Discuss whether the advantages of supermarket expansion outweigh the disadvantages for
(i) consumers
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(ii) grocery producers such as farmers.
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(Total 20 marks)
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Question 7
In 2008 Tata motors of India, a large multinational, bought Ford’s UK-based luxury car companies, Jaguar and Land-Rover.
(a) (i) The UK is part of the European Union. Identify and explain two advantages to Tata of having a base in the UK.
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(ii) Examine two disadvantages to the economy of a multinational company operating in a country of your choice.
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(b) In January 2008, Tata launched the world’s cheapest car, the Nano, priced at £1,250. By contrast, the starting price for Jaguar’s latest sports car, the Jaguar XF, is more than £32,000.
(i) What is meant by income elasticity of demand?
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(ii) With reference to income elasticity of demand, explain what is likely to happen to the demand for the Nano car and the Jaguar XF as incomes in an economy rise.
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(Total 20 marks)
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Question 8
In 2008, European Union candle manufacturers accused China of selling candles in the European Union below cost price. The European manufacturers want tariffs on Chinese candles to be increased.
(a) (i) What is the economic term for selling a product in a foreign country below cost price?
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(ii) The European Union is a trading bloc. Define the term “trading bloc”.
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(b) On Figure 3 below
(i) Label the demand and supply curves for candles and the equilibrium price and quantity.
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(ii) Show the effect on price and quantity of the imposition of tariffs on imported candles.
figure 3
Price
Quantity(3)
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(iii) Briefly explain two other methods the European Union could use to protect its domestic candle manufacturers from Chinese competition.
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(c) Examine the possible effects of protecting a major industry on a country of your choice.
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(Total 20 marks)
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Question 9
In 2008, several economic indicators showed that the USA, the world’s largest economy, could be heading towards a recession.
(a) (i) What is meant by the term ‘recession’?
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(ii) Identify two characteristics of a recession.
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(b) Discuss how the following policies can be used to overcome a recession:
(i) monetary policy
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(ii) fiscal policy.
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(c) Briefly explain two effects a recession in the USA might have on other countries.
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(Total 20 marks)
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Question 10
(a) Give an example of an occupation in each of the following sectors:
(i) primary
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(ii) secondary
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(iii) tertiary.
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(b) (i) In a developing country with a free market economy, why are wages in the primary sector likely to be lower than wages in the tertiary sector?
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(ii) With the aid of a diagram, examine how the introduction of a minimum wage rate may increase the wages of primary sector workers, while at the same time making some workers unemployed.
Wage rate
Number employed
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(iii) Identify and briefly explain two other ways a government could improve the standard of living of primary sector workers.
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(Total 20 marks)
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Question 11
(a) (i) How is economic growth measured?
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(ii) Identify and briefly explain one reason why economic growth is a major objective of government policy.
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(b) Examine the advantages and disadvantages of economic growth resulting from
(i) the development of tourism in the country
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(ii) a policy of privatisation
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(iii) investing in new technology.
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(Total 20 marks)
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Question 12
(a) What is meant by the rate of inflation?
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(b) Explain how each of the following may affect the rate of inflation in a country:
(i) an increase in wages with no change in productivity
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(ii) lower levels of income tax.
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(c) Examine the likely effects of a high rate of inflation on
(i) the balance of payments
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(ii) borrowers and lenders
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(iii) people on fixed incomes.
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(Total 20 marks)
TOTAL fOr SECTION B: 60 MArkS
TOTAL fOr PAPEr: 100 MArkS
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