Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/42
Paper 4 Data Response and Essays May/June 2016
MARK SCHEME
Maximum Mark: 70

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the May/June 2016 series for most Cambridge IGCSE®,
Cambridge International A and AS Level components and some Cambridge O Level components.

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Section A

1 (a) Lower deposits, low interest rate, relaxing of planning regulations, monetary policy,
export led growth, government scheme, fixed interest rates, increased demand for
housing. (1 + 1) [1]

(b) It was thought to be an improvement because it would increase in demand, increase in

growth, wealth effect, employment and incomes. Simple linkage e.g. demand increases
leads to economic growth (max 3 +2 for further elaboration.) [5]

(c) Not necessarily linked to income growth, average house prices risen to seven times the
average wage, there is an increase in debt which is excessive compared with incomes,
creates inequality in wealth, might easily reverse – as in Spain and Netherlands – causing
financial crisis, not stable in the long term. (5 marks for identifying contradictions +1 for
conclusion.) [6]

(d) 2 marks for identifying aims, 3 marks for linking 2 models to an aim + 2 marks for second aim
/ models link [7]

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Section B

The essay questions carry a maximum mark of 25. Try not to ‘bunch’ marks, but use the whole mark
range. If there is any doubt in your mind, give the benefit of doubt to the candidate.

The difference in grades should be assessed on the ability of the candidate to demonstrate the various
objectives of the examination listed in the syllabus and not purely on the ability to itemise further facts
from the content of the syllabus. Marks should be awarded for the ability to demonstrate that aim b) of
the syllabus has been achieved as well as aim a) – which refers to content knowledge. It is the objective
of the examination, as listed in the syllabus, to assess both these aims.

An overall guide for marks for individual questions is given below; these are from a total of 25. They may
be applied proportionally of course to parts of questions where the total is less than 25:

Mark 1–9 (Linked to level one in individual question notes).

1–5 where the answer is mostly irrelevant and only contains a few valid points made incidentally in
an irrelevant context. There will also be substantial omissions of analysis.

6–9 where the answer shows some knowledge but does not indicate that the meaning of the
question has been properly grasped. Basic errors of theory, or an inadequate development of
analysis may be evident.

Mark 10–13 (Linked to level two in individual question notes).

10–11 where there is evidence of an ability to identify facts or some ability at graphs and/or a fair ability
to apply known laws to new situations.

There should be an accurate although undeveloped explanation of the facts relating to the
question together with an explanation of the theory, and evidence of some ability to discriminate
and form elementary judgements. Do not expect a clear logical presentation. There will not be
much evidence of the ability to recognise unstated assumptions, nor to examine the implications
of a hypothesis, nor of the ability to organize ideas into a new unity.

12–13 where the answer has a more thorough relevance to the question but where the theory is
incompletely explained.

Mark 14–17 (Linked to level 3 in individual question notes).

14–15 where there is a good knowledge of the facts and theory of the question, clear evidence of the
ability to use the facts and theory with accurate reference to the question that may have
presented the candidate with a novel application.

There should also be evidence, where appropriate, of the ability to examine the implications of
the question and an attempt to distinguish between facts and value judgements.

Clear statements, supported by reasoned arguments should be given and there should be
some attempt at a conclusion to the question. There should be a reasoned structure to the
whole answer. Do not expect too many extra Illustrative points which are not explicitly referred
to in the question, do not expect too much critical comment on unstated assumptions

16–17 for an answer showing a well reasoned understanding of the question’s requirements and of the
relevant theory: the analysis should be sound though the illustration and development may not
be very full.

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Mark 18–25 (Linked to level 4 in individual question notes).

18–22 where there is a thorough knowledge of the facts and theory with an excellent ability to describe,
explain or analyse this in a precise, logical, reasoned manner. There should be an ability to
query some of the assumptions in the question and clear evidence of an ability to distinguish
between fact and value judgements and to draw some conclusions on the matter being
discussed. Conclusions should be formed and expressed within a sound structured answer so
that the whole is well presented. New illustrations and apposite examples should be introduced
as further evidence of an ability to recognise the principles of the question and their application
to relevant current situations.

23–25 for an answer which, given the time constraint, could not be improved significantly: it will have
clear analysis, ample illustration and a good attempt at considered evaluation.

Be positive in your marking awarding marks for what is there without being too much influenced
by omissions. Marks should not be deleted for inaccuracies.

Corresponding marks for sub-sections.

Level 1 2 3 4

Total Mark 1–4 5–6 7–8 9–12

Total Mark 1–4+ 5–6+ 7–8+ 9–13

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2 The answer should consider the initial proposition and comment on its validity. It should then identify
and describe the necessary conditions for efficient resource allocation and consider whether it can
be achieved by the market alone. [25]

L4 (18–25) For a reasoned and clear discussion with accurate development of theory and good
explicit links to the statement together with reasoned evaluative comments and
conclusions. Max 20 if no conclusion.

L3 (14–17) For a competent comment together with limited elaboration of the analysis or imprecise
links to the statement. There will be some discussion but the evaluation will not be fully
developed or extensive.

L2 (10–13) For a brief explanation but weak or ill-explained links to the statement. The explanation
will be undeveloped with some limited analysis.

L1 (1–9) For an answer which shows some knowledge but does not indicate that the question
has been fully grasped. The answer will have some correct facts but include
irrelevancies. Errors of theory or omissions of analysis will be substantial.

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3 (a) Explanation of consumer equilibrium, using indifference curves and budget lines, as point of
maximum satisfaction with given income and given prices. Derivation of a point on the demand
curve from the equilibrium point. The rest of the demand curve is only obtained by a change in
the equilibrium. [12]

L4 (9–12) For a sound explanation of both budget lines and indifference curves and a clear
link to the demand curve with accurate clear diagrams and a clear understanding
of the principles involved.

L3 (7–8) For an accurate reference to the question but with a more limited explanation,
includes a link to the demand curve, or with minor errors in the analysis or in the
diagrams.

L2 (5–6) For a explanation of the equilibrium position but with no link to the demand curve;
or with inaccurate diagrams and weak explanation.

L1 (1–4) For an answer which has some basic correct facts but includes irrelevancies and
errors of theory.

(b) Taxes on goods would be likely to raise the price. A price rise of one or more goods is reflected
in a change in the budget line (pivot from point on axis of good with no price change) with a
subsequent change in equilibrium. The equilibrium change involves substitution and income
effects. Substitution effect would be in the opposite direction to the price change. The income
effect represented by a parallel shift of the budget line is in the same direction as the
substitution effect for the normal good but in the opposite direction as the substitution effect for
the inferior good. Candidates may analyse the effect of tax changes on the price of two goods.
[13]

L4 (9–13) For a reasoned and clear discussion, logically presented dealing with income,
substitution effects, normal, inferior goods.

L3 (7–8) For a fair but undeveloped discussion probably concentrating on income,

substitution effects without mentioning different types of goods or vv with either a
brief comment about the individual demand curve or no discussion about the
market demand curve.

L2 (5–6) For a limited discussion with a lack of development of both income/substitution

and normal/inferior goods.

L1 (1–4) For an answer which has some basic correct facts but includes irrelevancies and
errors of theory.

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4 (a) Explanation of the theory of wages which deals with both supply and demand factors. In the
short run given a similar demand, (mrp), the wage level would change if supply (and elasticities)
were different in different occupations, similarly the wage level would be different with different
demand (and elasticity) schedules. [12]

L4 (9–12) For a sound explanation of the analysis and a clear understanding of the principles
involved in perfect markets, A link between the firm and market is required. (D/S
only, no mrp, 7–8)

L3 (7–8) For a competent comment in a perfect market but with a limited development of
the analysis. (D/S only, no mrp, 5–6)

L2 (5–6) For a correct explanation of a limited part of the analysis – perhaps concentrating
on either demand or supply. (D/S only, no mrp, 3–4)

L1(1–4) For an answer which has some basic correct facts but includes irrelevancies.
Errors of theory or omissions of analysis will be substantial. (D/S only 1–2)

(b) Analysis of wage theory in imperfectly competitive labour market. The fixing of a higher wage
may lead to unemployment depending on its level compared with the original wage and the
extent of ‘exploitation’ in the fixing of the original wage. [13]

L4 (9–13) For a sound consideration of the analysis and a clear understanding of the
principles involved in imperfect markets. (D/S only, no mrp, 7–8)

L3 (7–8) For a competent comment of an imperfect market but with a limited development
of the analysis or a recognition of only one possibility. (D/S only, no mrp, 5–6)

L2 (5–6) For a correct consideration but limited to part of the analysis. (D/S only, no mrp,
3–4)

L1 (1–4) For an answer which has some basic correct facts but includes irrelevancies.
Errors of theory or omissions of analysis will be substantial. (D/S only 1–2)

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5 (a) Explanation of maximum profit rule. Candidates should consider how a firm might move towards
the point of maximum profit but also consider the meaning of normal profit and the possibility of
less than – or more than – normal profit. The ‘maximum’ profit point is the best potential but
does not always result in profits. A mention of alternative market structures would be valid. [12]

L4 (9–12) For a good explanation of the maximum profits rule, a consideration of

super/normal and sub-normal profits; a mention of the situation in different market
structures. (Max 10 if only 1 market structure)

L3 (7–8) For a competent analysis but with a weaker structure to the answer. A clear
indication of the maximum profit position should be given but probably no
mention, or very brief mention of alternative market structures.

L2 (5–6) For a more limited analysis with weak explanations.

L1 (1–4) For an answer which has some basic correct facts but includes irrelevance.
There will be errors of theory or omissions of analysis.

(b) Discussion of the alternative objectives, influence in the market, behavioural theories,
managerial theories, balancing of aims of different parts of the company, pricing according to
other firms in the market rather than according to profit maximisation. [13]

L4 (9–13) For a sound discussion with clear understanding of the principles involved. 2 or
more alternative objectives are explained with analysis of one of them. Different
market structures may be implied by diagrams.

L3 (7–8) For an accurate reference to the question with discussion of 2 alternative

objectives. Different market structures may be implied by diagrams.

L2 (5–6) For a discussion which contains minor errors or an undeveloped comment, not
necessarily logically presented. Examines market structures not aims.

L1 (1–4) For an answer which has some basic correct facts but includes irrelevancies
and errors of theory.

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6 Candidates should explain what they would consider to be important to include – for example,
output, health, housing, education, crime, income distribution. They should comment on the merit of
using the value of GDP as an indicator of quality of life and discuss other possible indicators. [25]

L4 (18–25) For an clear discussion of the merits and drawbacks of using GDP, a comment on
alternative indicator(s) and reasoned evaluation and conclusions. (Max 20 if no
conclusion.)

L3 (14 –17) For a competent explanation which does not fully analyse the drawbacks of using GDP
or does not provide a developed comment on an alternative indicators. There will be
some discussion but the evaluation will not be extensive.

L2 (10–13) For an accurate though undeveloped discussion of the use of GDP with very brief
mention of its limitations – any reference to an alternative indicators would be a
passing remark.

L1 (1–9) For an answer which shows some knowledge but does not indicate that the question
has been fully grasped. The answer will have some correct facts but include
irrelevancies. Errors of theory or omissions of analysis will be substantial.

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7 (a) Explanation of the differences between the birth rates, death rates, migration and between the
proportion in primary, secondary and tertiary sectors in developed and developing countries.
[12]

L4 (9–12) For a sound explanation of the analysis and a clear understanding of the possible
differences between countries.

L3 (7–8) For a competent comment but with limited direct comparison.

L2 (5–6) For either a brief explanation of both the population structure and the employment
composition or a competent comment on either population or employment with
little comparison between different countries.

L1 (1–4) For an answer which has some basic correct facts but includes irrelevancies.
Errors of theory or omissions of analysis will be substantial.

(b) Consideration of the different causes of unemployment with a comment on the significance of
the causes for the different types of development. [13]

L4 (9–13) For a clear consideration with accurate development of at least three causes of
unemployment and a developed comparison for at least 1. A conclusion is drawn
for max marks.

L3 (7–8) For a clear consideration of at least two developed causes of unemployment or

more than two with undeveloped explanation or lack of comparison.

L2 (5–6) For a limited attempt with little development of either causes or significance.

L1 (1–4) For an answer which has some basic correct facts but includes irrelevancies.
Errors of theory or omission of analysis will be substantial.

© Cambridge International Examinations 2016