Mark Scheme

Question
QuestionNo.
Answer Answer
9(a)
Knowledge, application and analysis (up to 7
Number
marks) A
1
Answer

Mark
Mark
1m

Definition of opportunity cost or implied

understanding
Definition of(the
positive
as best
one that
is
valuestatement
of the next
alternative
foregone) (1 mark).
testable/verifiable (1 mark) reference to statement
9(d)(i)

9(d)(ii)

9(b)

A as
a positive statement
and some justification
for
Development
of inopportunity
e.g. limited
Percentage
change
tuition fees cost
from 2005
this
assertion
(will/can
measure growth) (1 mark)
resources
/ scarcity
(1 mark)
to
Government contribution per student to tuition
2006
is:
Definition
normative
as one thatfor
is
fees
is 4,300 of
per
year; the statement
next best alternative
government
could be: lower taxes / more funds
a - 1,175
3,000
100 = 155.3%
available
for
other
of spending
as primary
value judgement orareas
one which
cannotsuch
be tested
(1
education
or
healthcare
/
possible
decrease
in
-------------------mark)
reference
to
statement
B
as
a
normative
government borrowing. (Up to 3 marks).
statement and some justification for this assertion
1,175
Student contribution to tuition fee alone is up to
(should)
per year;
the(accept
next 155%)
best alternative
for
3,000
Note: correct
answer
(2
students could be: not going into debt / spending the
Answer (B)
marks)
tuition fee money on something else / getting a job
and earning income instead of studying / increased
leisure
Note: time.
correct
workings
but incorrect answer
(Up
to 3marks).
Price
D
S1
(1 mark)
Also award:
Knowledge, analysisS and application (up
P1Diagrammatic analysis or opportunity cost on a
to 4production
marks) possibility frontier (2 marks)
P
Knowledge,
and to
analysis
It has becomeapplication
more expensive
afford (up to 5
Qty
marks)
higher
education
/ at end of three year course
Q
students
Definition ofof
perfectly
inelasticpossibilities
(the quantity (the
Definition
production
will be
in a lot ofdoes
debt (1+1
marks)
demanded
change
at all
as price
maximum
output annot
economy
can
achieve
when all
changes)
resources
are fully
/ efficiently
(1
its
Demand
for higher
education
may fall employed)
(1
mark).
mark)
Thus demand will be perfectly inelastic and when

(2)

(7)

1m

1m

1m
1m

the supply reduce, the supply curve will shift to

Data application: demand fell by 3% from
Understanding
of anwill
increase
in output
education
the left and price
be increase
from/ P-P1
522,155 to 506,304 (up to 2 marks)
is a capital or investment good / leads to higher skills

or productivity
of increase
workforce
the economy
/ Another
significant
in /tuition
fees is could
become more competitive.
predicted in 2010 according to the extract (from
(Up to 3 marks).
Answer (B)
3,000 a year to 6,000 a year - a doubling in
Pric
Diagram
showing outward shift in production
fees)
(1 mark).
e
possibilities (1 mark) plus relevant labelling (1
P
mark).
For example: capital / consumer goods, or,

1m

P1
reference
to education / economy
Q

Q1

Qty

1m

(7)

Definition of demand ( the quantity of good or

1m

service that will bought at any given price

over a period of time
Application of price elasticity of demand (1
As the price of cars rises then, ceteris peribus
mark)
condition, the quantity of cars demanded will

1m

fall (up to 3 marks for one

Evaluation
4

evaluation point
Answer (C)
well developed, or 2+1)
Define minimum wage: A minimum wage is
Figure 1 indicates that only a temporary
the lowest hourly, daily or
drop
in student
applications
foremployers
2006 / themay
monthly
remuneration
that

1m

1m

trend
depicts
growthEquivalently,
from 476,467itin
legally
paymore
to workers.
is the
2003
to
540,108
in
2008
(13.3%)
(1+1
lowest wage at which workers may sell their
marks).
labor.
It suggests that higher education still

1m

Minimum
wage
will for
increase
cost of
represents
good
value
moneythe
/ the
production
producers.
As a fees
result,
government
is for
stillthe
subsidising
tuition
/ the
producer
will
reduce
their labours
and thus
by 4,300
per
year
/ graduates
still earn

created.
wellunemployment
over 100,000may
morebeover
a life time
Graph
than non-graduates (2 marks).
Tuition fees are only part of the total cost of
Answer (D)
higher education for students
Discussion of the expected doubling of
Explanation
of theThis
geographical
/
tuition
fees in 2010.
could havemobility
a
immobility
labour
(e.g.the
similar
effect toof
that
of 2006
butability
not / inability
of labour
to move trend
from one
location to
reduce
the underlying
of growing

1m

1m

1m

anothernumbers.
in taking work)
application
Alternately, perhaps this large increase will
major obstacle
geographical
labour
have a A
significant
impactofon
reducing

1m

mobility
is imperfect
market
knowledge
of
applications
since
it implies a
doubling
of
jobs /asymmetric information OR by
studentavailable
debt (2 marks)

improving marketknowledge of job vacancies,

Different impact on different income group
labour mobility will improve
e.g. low income groups may suffer more
Examples of improving market information (for
than high income groups. It depends on
example,
increase
funding of Job Centers /
additional
grants
available.

1m

more staffing / improve location of Job Centres

6

/ relocation grants)
Answer (C)

Definition of income elasticity of demand

Hawaiian drinks are inferior good

1m
1m
1m

elasticity of demand
Normal goods have a positive income
elasticity of demand

7
9(e)

Answer (C)
Knowledge, Application & Analysis: (up to
6 marks).
Definition of subsidy
It may
do more
good
since: (2+2+2)
(15-7)
X 180
=1440
Labeled diagram to show area of subsidy

Students
Answer (C)
Students might take their education more

1m
1m
1m
1m
1m
1m

seriously and work harder / since they make

Definition of cross elasticity of demand
significant
financial
contribution.
(1+1 are
Game console
and
software games

1m

marks).
complementary goods
Students
learn to manage
(1 cross
Complementary
goods their
have finances
a negative

1m

mark)
elasticity of demand
Improved
quality
education
forwill
students
/
Fall in price
of of
game
console
cause an
for increase
example,inlower
teacher-student
ratio, software
the demand
for computer

more
support services, more IT funding per
games
student (1+1 marks).
Lower student drop-out rate from
university / so less likely that a year is

wasted (1+1 marks)

Students might select courses which will
generate earnings potential in future / for
example, science based courses or

vocational courses (1+1 marks).

According to the research in Extract One,
students still gain more income over their
lifetime with a degree compared to A
Levels (160,000) / so can afford to pay
more in tuition fees / especially as back
loaded so only pay once in employment
(1+1 marks).

Universities

Increase total funds for universities to

1m

(12)

improve quality of education / resources /

staff pay / teacher-student ratio (1+1

marks).
Universities might become more
innovative / for example, more research
projects or use of new technology (1+1

marks).
Universities might increase efficiency since
student customers pay more / universities
directly responsible to their customers /
provide more learning support services

(1+1 marks).
Fall in student numbers / staffing
implications

Note: If only students considered and not

universities, award a maximum of 4 marks in
this section (vice-versa).
Evaluation: (2+2+2 marks)
NB Arguments for and against an increase
in tuition fees can be regarded as
evaluation and so no cap applied here.
Problems (harm) could arise since:

Increase inequality as fewer low income

students enrol for university.

University revenue is influenced by price
elasticity of demand for tuition Increase
student debt levels: significant increases in
student contributions are likely extract
mentions it will have to increase to at least

6000 per year by 2010.

Problem of non-payment of student loans
for tuition fees extract indicates almost at
1 billion.

Time lag between student loan for tuition

fees and repayment in work. Meanwhile
government finances could worsen. Less

funds made available for universities?

Insufficient high skilled jobs available for
graduates compared to less skilled jobs for
non graduates. Unemployment may rise for

graduates.
Government may not achieve target of 50%
of young people in higher education by
2010. Discussion of this target as being

arbitrary.
Government might be tempted to reduce its
own contributions and so no extra funds for

universities.
University income from tuition fees still too
low (7,400) to compete with US higher
education system (11,500). Figure 1
reveals that UK is well behind the US in
terms of academic research (however, it is
in front of other countries).

Question
No.

Answer

Marks

10(a)

KAA = 4 marks
Definition of NMW [the legal minimum hourly
rate of pay employers can set] (1 mark)
Data reference to extract 1 e.g. the actual
increase in minimum wage or the level of
minimum wage or increase in food and fuel
prices (1 mark)
Identification of a reason for government
intervention to impose NMW (1 mark) and its
development (up to 3 marks).
Reasons might include:
Reduce

poverty

inequality

exploitation: the NMW may help poor

people who are in low paid job / create fairer
society / help part-time or female or young
unskilled workers / maintain incentive to
work.
Reduce voluntary unemployment: the
increase in NMW makes it worthwhile for low
paid to remain in their jobs / fill low paid job
vacancies / prevent unemployment trap or
poverty trap / maintain differential between
low paid work and benefits such as Job
Seekers Allowance
Inflation / cost of living: to keep up with
cost of living (higher fuel and food prices) /
so that in real terms the NMW remains the
same / to afford basic necessities.
Earnings growth: to keep up with growth
in average earnings / so in relative terms
the

NMW

keeps

its

value

maintain

incentive for low paid to remain in their jobs

Training & productivity: the increase in

NMW

may

give

greater

incentive

for

employers to train low paid staff / to raise

productivity levels / and so justify the wage
increase.
NB: Accept an overlap in the explanation
of a reason offered.

(4)
Question

Answer

Mark

No.
10(b)

KAA = 6 marks
Definition of government failure (government
intervention which leads to a net welfare loss /
inefficient
marks).

allocation
Also

of

accept

resources)

idea

of

(1+1

government

intervention to correct market failure but it

makes things worse (1 mark).
NB a maximum of 2 marks available for
definition.
Data reference to tax evading activities or
unrecorded cash payments (1 mark)
Identification of tax evading activities being
illegal (1 mark)
Hairdressers not declaring all their income /
less tax revenue to the government (1+ 1
marks).
Employers may pay below NMW rate / use of
example

such

as

immigrants

or

young

unskilled / less tax revenue to the government

(1 + 1 + 1 marks).
Weak government implementation of NMW /
monitoring and enforcement of hairdressers
paying below the minimum wage (1+1 marks).
An increase in the NMW may increase
unemployment in hairdressing / and also reduce
tax revenue or increase in benefits as without
government intervention more staff may be
employed (1+1 marks).
Accept higher order analysis which suggests
the government failure is not significant since:
the NMW increase is small / data reference to
hourly wage increases of 7p per hour / not
worth the risk of fines for breaking law /
especially as severe penalties / difficult to
obtain staff / 87% of employees are paid above
NMW / labour productivity still above wage
cost / so profit made on employees even with
higher wage. (2 marks)
NB if no reference to informal economy or tax
evading activities award up to 2 marks for the
link with unemployment and loss of government
revenue.
(6)
Question

Answer

No.
10(c)

KAA = 6 marks

Mark

Definition or understanding of the division of

labour (production of a good or service is
broken down into different tasks and labour
allocated to each task) (1 mark).

Application

of

division

of

labour

to

hairdressing: male or female cuts / hair stylists /

washing hair / cleaning and serving drinks /

cashier (1 mark)
Explanation of one or more benefits:
Increase

in

productivity

(efficiency)

reducing costs per unit / leading to higher

profits or revenue (1+1+1 marks).
Diagram showing an increase in the supply
curve (1 mark)
Repetition means workers become more
skilled / faster at specific tasks (1 + 1
marks).
Less training costs / less staff turnover (1+
1 marks).
More effective use of capital / seating and
hair machines (1 + 1 marks).
NB if not application to hairdressing award a
maximum of 4 marks for KAA
Evaluation (2+2 marks)
Division

of

labour

is

quite

limited

in

hairdressing salons since often just a one or

two person business.
Specialisation may limit

hairdressers

market e.g. mens (barbers) or womens

hairdressers.
The provision of a personal service also
means less room for specialisation for a
haircut.
Limited

career

opportunities

through

specialisation.
Disadvantages may outweigh advantages,
for example, repetition leads to boredom /
reduced
turnover.
Division

productivity

of

may

labour

increased
make

staff
the

hairdressing business highly dependent on

(10)

just one or two individual members of staff

danger of illness or sudden resignation from
job could expose the business.

Question
No.
10(d)

Answer

Marks
KAA = 8 marks
Data reference of the
actual increase or level of
the minimum wage e.g. 7p,
1.2% or 5.80 an hour /
National

Hairdressers

Federation

believes

significant job losses will

occur in current economic
climate (1 + 1 marks)
The increase in NMW
increases

costs

lower

profits or even losses/ firms

may lay off workers or exit
industry (1+1 + 1 marks).

Diagram

of

labour

market which shows (up to

5 marks):
Initial diagram of labour
market (both demand &
supply curves) (1)
Original
NMW

line

(anywhere on diagram)
(1)
New and higher NMW
line

(anywhere

on

diagram) (1)
Demand

for

hairdressers

contract

(fall from N1 to N3) or

original excess supply
(N1/ N2) (1).
Supply for hairdressing
work extends (from N2
to N4) or new excess
supply (N3 N4) (1)

NB: Candidate may show

NMW below or at free
market

wage

equilibrium but likely to

gain a maximum of 3
marks for the diagram.
NB: if no labour market
diagram

award

maximum of 5 marks in
this section.

Evaluation

(2+2+2

or

3+3 marks)

Impact

on

job

losses

of

NMW

depend upon:
Magnitude
increase:

the

extract

indicates this is very

low at just 7p per hour
(6p and 4p respectively
for 18-21 year olds and
16-17 year olds) / so
not much impact on job
losses.
Wage or price elasticity
of demand for labour: if
inelastic then few jobs
lost / if elastic than
more

jobs

lost

reference can be made

to diagram.
It depends

on

wage

costs as a proportion of
total costs: if low then
easy

to

absorb

the

higher wages costs / if

high

then

harder

to

absorb the wage rise /

hairdressing
labour

is

quite

intensive

126,000

with

employed

in

2008.
Most hairdressers are
paid

above

NMW

so

(14)

little

impact

of

the

increase in NMW / data

reference to just 27%
being paid at the NMW
or

73%

paid

above

NMW / implies support

for argument made by
Brendan

Barber,

TUC

general secretary (this

could

be

shown

by

NMW being drawn so it

remains below the free
market wage).
Trainee hairdressers are
not subject to national
minimum
despite

wage

extract

implying trainee places

may be cut.
Employment

in

hairdressing

actually

increased by 5000 in
2008 / despite previous
increases in the NMW.
Economic
recovery
now

underway

so

easier for firms to pass

on extra wage costs to
customers.
Firms may decide to
employ people illegally
below the NMW / so
limited impact on job
losses

if

employees

accept situation.
Discussion of short run
and

long

run

implications.
Question No.
10(e)

Answer

Marks

KAA = 8 marks
Factors

influencing

the

supply

of

labour

to

any

one

occupation (2+2+2+2 marks or 3+3+2 marks).

The wage rate or earnings / as the wage rate increases
then so too will the supply of labour rise due to incentive
of higher pay.
Net advantages to an occupation / these include tips,
hours

of

work,

cleanliness

of

environment,

career

progression, job satisfaction, private pension scheme,

sick pay and paid holidays.
The level of qualifications, training or work experience
required for a particular occupation / the higher the
qualifications, training and work experience required, the
lower the supply of labour.
Income tax or national insurance contributions / the
higher the rates of tax the lower the potential supply of
labour.
Government social security benefits such as Job Seekers
Allowance and Housing benefit / the higher the benefits,
the lower the supply of labour to low paid occupations.
Higher university tuition fees or scrapping Education
Maintenance Grants / may lead to increase in supply of
school leavers to labour market.
Raising of school leaving or retirement age / lead to an
increase in supply of labour.
Net migration flows into UK / the single European market
has increased net migration flows into the UK.
Trade Unions affecting rates of pay and other work
conditions / so increasing supply of labour.
Accept factors influencing the geographical supply of

labour such as house prices.

NB Do not accept the NMW.
Evaluation (2+2+2 or 3+3 marks)
Magnitude of factors affecting supply, for example, tips
are substantial in hair dressing or, dangers involved in
certain occupations (armed forces) are so great as to
discourage supply.
Prioritise between factors: for example, job satisfaction
or career progression may be more important than pay, or
flexibility in hours of work could be more important than
pay.
Time factor: For some occupations where significant
training / qualifications are involved, supply might be
limited in the short run but increase in the long run.
Discussion of elasticity of supply is acceptable here.
State of economy: many people may be discouraged
from seeking work in a recession but encouraged to seek
work in an economic recovery.
Accept discussion of income and substitution effects /
backward sloping supply curve.

(14)