Unit1 Q&A

Unit 1
2 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.
(a) Define opportunity cost. [2]
(b) Explain the economic problem and why it is always likely to exist. [4]
2(a) The (next) best alternative / choice (1) forgone / sacrificed (1).
2(b) 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).
2 Medan is the third largest city in Indonesia by population. It is sometimes known as the city of a
million shop-houses as many people start small firms at the street level of their homes. This has led to
an increase in the market supply of industries such as cafes and clothes shops. Also, due to the growth
in demand for food delivery, the unemployment rate has fallen. However, mobility of labour is limited
both within Medan and within Indonesia.
(b) Explain two influences on the mobility of labour. [4]
2(b) Logical explanation which might include: Good transport links (1) such as public transport /
highways (1) ease of workers moving from one place to another to take up a job (1). Cheap cost of
living / relocation (1) such as good access to affordable homes in different places (1). Similar culture (1)
such as similar languages / work culture (1). Ease of workers moving from one job to another job (1) lots
of re-training opportunities (1) good quality education (1) skills/qualification needed between different
jobs are similar (1).
Also accept answers based on influences for low mobility of labour.
2 Washington State is the state which grows the most apples in the US. In 2019, apple production
increased in Washington State but the market was in disequilibrium. Apple farming is a
labourintensive industry because apples are picked by hand. The market for apples in the US is
competitive.
(a) Define market disequilibrium. [2]
(b) Explain opportunity cost and how it can influence a farmer’s decision to grow apples. [4]
(c) Analyse how labour-intensive production can benefit an economy. [6]
(d) Discuss whether or not consumers benefit from a competitive market. [8]
2(a) A market where demand and supply are not equal / balanced / matched (2). A market where there
is a surplus / excess supply (1) or a shortage / excess demand (1). 2
2(b) Logical explanation which might include: Opportunity cost is the (next) best alternative / choice /
option (1) sacrificed / forgone / given up (1). A farmer could grow another crop (1) size of opportunity
cost / choice made is influenced by revenue / cost / profit / resources available / weather (1).
2(c) Coherent analysis which might include: Labour-intensive production uses a high proportion of labour
(1) it may increase employment (1) lower unemployment (1) raise incomes (1) raise standard of living /
reduce poverty (1). The country may have a large supply of labour (1) the labour force may be relatively
unskilled (1) which is cheap to employ / cheaper than using capital (1) saving money for firms (1) more
flexible than capital in adjusting supply (1) less pollution / more environmentally friendly (1). Labour-
intensive production may provide individually made products / handcrafted / higher quality (1) raise
skills level of workforce (1) may be in high demand internationally (1) increase exports / reduce deficit on
current account balance (1). 6
This is a static analysis so do not reward answers that write about higher government revenue and
expenditure and rise in total demand and economic growth.
2(d) Why they might: • give consumers some power • may lower prices • may raise quality • increase
choice • goods and service may be readily available.
Why they might not: • firms may be too small to take advantage of economies of scale • firms may not
have much profit to invest in research and development • there may be wasteful duplication • there may
be wasteful expenditure on advertising • there may a reduction in quality because of cost-cutting • there
may be too much choice, taking time to make decisions • consumers may benefit more from monopoly
where economies of scale result in lower prices than in a competitive market
3 A reasoned discussion which accurately examines both sides of the economic argument, making use of
economic information and clear and logical analysis to evaluate economic issues and situations. One side
of the argument may have more depth than the other, but overall both sided of the argument are
considered and developed. There is thoughtful evaluation of economic concepts, terminology,
information and/or data appropriate to the question. The discussion may also point out the possible
uncertainties of alternative decisions and outcomes. 6–8
2 A reasoned discussion which makes use of economic information and clear analysis to evaluate
economic issues and situations. The answer may lack some depth and development may be one-sided.
There is relevant use of economic concepts, terminology, information and data appropriate to the
question. 3–5
1 There is a simple attempt at using economic definitions and terminology. Some reference may be made
to economic theory, with occasional understanding. 1–2
0 A mark of zero should be awarded for no creditable content. 0
This is a discussion of a market not of an economic system so public goods and merit goods are not
relevant.

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Unit 1

(a) Define opportunity cost. [2]

2(b) Logical explanation which might include:

(b) Explain two influences on the mobility of labour. [4]

Also accept answers based on influences for low mobility of labour.

(a) Define market disequilibrium. [2]

(c) Analyse how labour-intensive production can benefit an economy. [6]

0 A mark of zero should be awarded for no creditable content. 0

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