PODAR INTERNATIONAL SCHOOL

Grade 8 First Term Revision Paper

Grade 8 First Term Revision Paper

Chapter 1 The nature of the economic problem

1. Define scarcity (2)

Ans:- Scarcity is a situation where there are not enough resources to satisfy everybody’s wants.
2. Define the basic economic problem. (2)
Ans:- It is when unlimited wants exceed limited resources. The economic growth arises from when
there are unlimited wants but limited resources. When the resources are limited and the wants are
unlimited then a choice needs to be made

3. Define finite resources. (2)

Ans A resource is an aid to production that is limited in supply it cannot be replaced over time / fast
enough / will run out to keep pace with consumption.

4. Explain why the economic problem can never be solved. (4 marks) 0455/21/M/J/15
Ans - The economic problem is scarcity, where there are infinite wants, but finite resources.
Wants to exceed resources, as wants are growing faster than resources, yet the growth of
resources will not exceed the growth of wants.

5. What are the 3 basic economic problems of every society? [3]

Ans i) What to produce?, How to produce?, For whom to produce?

6. Differentiate between the following goods with examples. (2 marks each)

a. Needs & wants,
Ans:- Needs: Needs are something that is required for the survival of the human being.
• Example: Food, clothing, shelter, water
• Wants: Wants are something that is not required for survival but they add comfort to ones life.
• Example: Luxury car, branded T-shirts.
b. economic goods & free goods
Ans- Economic Goods: A product that requires resources to produce it and therefore has an
opportunity cost. Example: Education, Bottled Water
Free Goods: A product that does not require any resources to make it and does not have an
opportunity cost. Example: Air, Wind.
 c. consumer goods & capital goods
Ans:- Capital Goods: Capital goods are those goods which are required to produce other goods.
o Used by: Producers
o Purpose: Business
o Example: Pizza Ingredients, Taxi

• Consumer Goods: Consumer goods are those goods which are directly used for final consumption.
o Used by: Consumers
o Purpose: Consumption
o Example: Pizza, Car

d. durable goods & perishable goods

Ans:- Durable Goods: Durable goods are goods which last for a longer period of time. It can be used
many times. o Example: Refrigerator, Washing Machine, Machinery.
• Perishable Goods: It cannot be stored and preserved for a longer period of time. It can be used only
once. o Example: Fruits, Vegetables, Bread.
e. merit goods & demerit goods
Ans:- Merit Goods: People underestimate the benefits of these goods. Merit goods have positive
externalities. o Example: Education, Vaccination, Healthcare
• Demerit Goods: People underestimate the costs of these goods. Demerit goods have negative
externalities. o Example: Tobacco Products, Alcohol, Violent Games and Movies

7. Explain how economic problems result in consumers to make choices. (4)

8. Explain why a car is an economic good. (4)

Ans:- A car is an economic good as it takes resources to produce it. Among the resources that
are used to produce cars are, for example, machines and workers. The amount of cars produced
depends on the quantity and quality of resources that are used. These resources could be used
to produce other goods and services.

Chapter 2:- Factor of Productions

1. State the two non-human factors of production (2)
Ans:- Land – natural resources
Capital – Man made resources
2. Explain, giving examples, two factors of production used in the tourism industry. (4)

Ans:- Ans Labour which is a human effort (1) e.g. tourist guides (1).

o Land which is natural resources (1) e.g. beaches (1).

o Capital which is human-made goods and services used in production (1) e.g. hotels (1).

o Enterprise which is risk bearing and decision making (1) e.g. may be undertaken by the
owner of a hotel (1)
3. What is the difference between labor and capital? (4)
Ans:- Ans Labour has more human resources. It comprises the physical and mental efforts put
for the production of goods and services with the intention of earning a reward. Reward for labour
is wages or salary. Example: nurses, teachers, doctors, etc.

Capital: It is a man-made resource. It includes anything which is required for further

production of goods and services. Reward for capital is interest. - Example: machinery,
raw materials, tools, etc.

4. What is the difference between Entrepreneur and Land? (4)

Ans Entrepreneur is a human resource. It includes the risk taking ability and decision making
skills. This combines all the other 3 factors of production. Reward for enterprise is profits.
Example: owner, sole proprietor, entrepreneur, etc. Enterprise tends to be more geographically or
occupationally mobile than labour.

It is a natural resource. It is a free gift of nature. It includes everything which is available

on, above and under the surface of the earth. Reward for land is rent. Example: farms,
rivers, sunlight, etc. Land is geographically immobile

5. Explain whether land is mobile. (4)

Ans- Most land is geographically immobile. It is fixed at one place and it cannot move from one
place to another place. Some land eg:- wildlife can move from one place to another. Land is
occupationally mobile. Land is occupationally mobile, as it is capable of changing its use. Eg:-
land can be used for framing or housing.

6. Analyse the influences on the mobility of two factors of production. [6]

Ans Coherent analysis which might include: Availability of proper infrastructure (1) to move from
place to place (1) e.g. trains / roads (1) whether it is affordable or not (1).
Cost of living differences (1) whether workers can afford to move to another place (1) e.g.
housing costs, cost of education (1).
Availability of information (1) on jobs elsewhere (1).
Tax rate changes (1) lower tax rates could encourage workers to move to another country to take
advantage of lower taxes (1) / entrepreneurs could be encouraged to move to a lower tax economy
(1).
Regulation changes (1) could limit movement of labour or capital (1). Level of education (1)
could make labour more occupationally mobile (1).
 No reward for only identifying the factors of production. Accept other relevant factors e.g.
cultural differences (up to 3 marks each)

Chapter 4:- Production Possibility Curve (PPC)

1. Define Production possibility curve (PPC) (2)

Ans:- Production Possibility Curve (PPC) shows the maximum output of two types of products
and the combination of those products that can be produced using the existing resources and
technology.

2. What is the difference between a point inside and a point on a PPC? (2 marks)
Ans:- A point inside a PPC shows that there are unemployed resources. It is not an efficient point.
A point on a PPC shows that full use is being made of resources. It is an efficient point.

3. Explain two causes of a shift in a PPC. (4 marks)

Ans Ans:- A PPC may change its position if there is a change in the quantity of resources. It may
shift to the right due to an increase in the labour force resulting from more workers coming into
the country to live and work.

A PPC may also shift to the right if there is an increase in the quality of resources. Labour may be
of a higher quality if it has been better trained. This would enable it to produce more goods and
services.

4. Using PPC diagram, analyse the effect of advances in technology. (6 marks)

5. Using PPC diagram, analyse the effect of an increase in unemployment on a country's
output. (6 marks)

6. Using PPC diagram, analyse the effect of the destruction of the country’s output. (6
marks)
7. Using PPC diagram, analyse the effect in technology for one type of product. (6)

8. Differentiate between increases in actual output and potential output. (6)

Ans:- Actual output is growth that has actually happened in real life, where there is an increase in
aggregate demand (AD) while potential output is how much growth the economy could achieve
where increase in Productive potential output (PPO)

9. Explain why operating on the PPC is productively efficient. (4 marks)

Ans Operating on the Production Possibility Curve (PPC) is productively efficient because it
indicates that all resources are being fully and efficiently utilized.

At any point on the PPC, the economy is producing the maximum possible output of goods and
services with the available resources and technology. There is no waste, and resources are allocated
optimally, meaning it is impossible to produce more of one good without reducing the output of
another.
10. Explain why the PPC may move outwards over time. (4 marks)
Ans The PPC may move outwards over time due to technological advancements, increases in
resources, human capital development, capital investment, improved institutional frameworks,
and innovation. These factors enhance an economy's capacity to produce goods and services,
leading to economic growth and an expanded production possibility

Chapter 16- Money & Banking

1. Analyse the characteristics of money. (6)
Ans:- Characteristics of Money
1)Portability- this means that individuals are able to carry money with them and transfer it easily
to other individuals.
2) Durability- this means that the item must be able to withstand being used repeatedly.
Currency, coins, and notes meet this requirement.
3) Acceptability- this means that everyone must be able to use the money for transactions.
4) Divisibility- this means that money can easily be divided into smaller units of value. Today,
different coins and notes convey these fractional values.
For Eg.:- Indian Rupees 2000/-,500/-,200/-,100/-,50/-,20/-,10/-,5/-,2/-,1/-
5) Limited supply- this means that restrictions on the amount of money in circulation ensure that
values remain relatively constant for the currency. The Federal Reserve System (RBI in India)
holds responsibility of the limited supply of currency.
6) Uniformity- this means that all versions of the same currency must have the same purchasing
power.
2. Analyse the three functions of money. (6)
Ans The functions of money:

• Money is a medium of exchange, Money allows people to buy and sell products. Products
are exchanged for money and that money is used to buy other products.

• Money is a measure of value. Money can be used as a means to compare the values of goods
and services.

• Money is a store of value. Money can be saved today for use in a future time period. Money
is a means of deferred payment.

• Deferred payments are purchases on credit – where the consumer can pay later for the goods
or service they buy. Money allows people to borrow and lend as payments can be made later
in a future time period.

3. Differentiate between commercial banks and central banks. (4)

• Ans Commercial banks are those banks that have many retail branches located in most cities
and towns.A Commercial Bank is a private sector bank which aims to make a profit by
providing a range of banking services Example: HSBC.
• Central bank that governs all other commercial banks in a country. Example: The Reserve
Bank Of India (RBI
4. Explain the two roles of commercial banks for firms. (6)
• Ans Accept deposits in the form of savings.

• Aid customers in making and receiving payments via their bank accounts.

• Give loans to businesses and private individuals.

• Exchange foreign currencies.

• Provide financial planning advice.

1. Accepting deposits-Demand deposits

• Saving deposits: made by those whose main purpose is to save. The commercial bank pays
interest to the depositor against his savings deposit. Banks impose restrictions on the
number and amounts of withdrawals during a period of time.

• Current account - Such type of deposits are kept by businessmen and industrialists who
receive and make large payments through banks. These are deposits which can be
withdrawn by the depositors at any time that they want. The bank does not pay interest on
demand deposits and cheques are used against these deposits.

• Accepting deposits-Time deposits

• Fixed deposits - can be withdrawn after a specified period and carry a higher rate of interest
are known as fixed deposits. Also known as Time deposits and are popular among
depositors both for their safety and their interest income.

2. Lending loans

• Bank Loans : They lend a certain sum of money for a specific period of time. An interest is
charged on the amount borrowed. Eg:- Home loan, car loan, personal loan, mortgage(gold)
loan

• Bank overdrafts: The customer is allowed to overdraw his or her account by some agreed
amount. Interest is only charged on the amount overdrawn.

3. Enables customers to make payments

• Debit cards

• Credit cards

• Demand Drafts (DD)

• Cheques

- Standing orders/ Direct Debits/ECS These enable depositors to instruct their banks to make
regular payments of fixed amounts. Useful for paying such items as rent, rates, insurance
premiums, mortgage payments, electricity, gas and telephone services.

- Credit cards : These plastic cards are now widely used by bank depositors. They enable
cardholders to buy goods and services from those shops, restaurants, garages etc. which have
joined the scheme, without paying in cash or cheque. Each cardholder is given a limit to his or
 her total spending, and receives a monthly statement of accounts.

- Foreign currency :- For people traveling abroad, and for households and firms making
payments to other countries, the banks provide foreign currencies.

- Cash dispensers/ ATM Facility : These machines are set into the outside walls of certain
banks and provide bank customers with a 24 hour service for the supply of banknotes. Each
bank customer is given a secret code number and a card. By keying in the card and code no.
the customer can obtain cash up to some agreed limit.

- Locker Facility: A bank provides locker facilities to the customers to keep their valuables or
documents safely. The banks charge a minimum annual fee for this service.

5. Analyse the three functions a central bank can perform for its government. (6)
Ans Ans Function of Central Bank
• Acts as a banker to the government. Tax revenue is paid into the government’s account at
the central bank, and payments by the government for goods and services are made out of
this account.
• Operates as a banker to the commercial banks. Holding accounts at the central bank
enables commercial banks to settle debts between each other and to draw out cash, if their
own customers are taking more cash from their branches than usual.
• Acts as a lender of last resort. This means it will lend to banks which are temporarily short of
cash.
• Manages the national debt. The national debt is the total amount the government owes.
Over time, government debt tends to build up. The central bank carries out borrowing on
behalf of the government by issuing government securities, for example government bonds,
pays interest on these and repays them when they fall due.
• Holds the country’s reserves of foreign currency and gold. The central bank keeps foreign
currency and gold to influence the exchange rate.
• Issues bank notes. The central bank is responsible for printing notes and destroying notes
which are no longer suitable for circulation. It also authorizes the minting of coins
• Controls the banking system. Many central banks play a key role in regulating and
supervising the banking system.
• Represents the government at meetings with other central banks and international
organizations such as the World Bank and the International Monetary Fund

6. Analyse in what circumstances a commercial bank will increase its lending. (6)
Ans A commercial bank will increase its lending if it thinks it will make more profit. For this to be
achieved there would have to be more demand for loans from creditworthy borrowers it thinks will
repay. Households and firms tend to borrow more when the economy is doing well. For instance,
households may borrow to buy a better home, expecting that higher pay in the future may help to
repay loans. Firms may also borrow more to expand to meet rising demand.
A commercial bank would also have to possess the funds to support any loans. It has to ensure that
it has enough liquid assets to meet its customers’ demand for cash. There also has to be enough
difference between the interest rate the bank can charge to lenders and the interest rate it pays to
savers. Some commercial banks may make other arrangements, such as taking a share of the profits
of the businesses they lend to. In such a case, a commercial bank would still have to expect a good
return.
 7. Explain two reasons why a large US commercial bank may charge a high price for its
services. (4) Source:- 0455/22/Oct/Nov/2022
Ans:- High spending on opening new branches / advertising campaigns / developing online
banking (1) need to get back costs / make a profit / may experience diseconomies of scale (1).

May offer high quality services (1) have high demand / customers willing to pay a high price (1).
High degree of monopoly / market power / control 32% of market (1) customers may have brand
loyalty / reluctant to switch banks / lack of substitutes / inelastic demand / can charge high
prices to earn high profits/raise total revenue / be a price maker (1).

High incomes in the US (1) many customers have the ability to pay a high price (1). Employ skilled
/ well educated workers (1) so may pay high wages / may have high costs of production (1)

8. Explain two reasons why a central bank may want to reduce borrowing. (4)
Ans It may want to reduce the inflation rate (1) caused by too much demand arising from
borrowing (1).
To reduce disposable income (1) and reduce (demand-pull) inflation (1). it may want to reduce a
current account deficit (1) people may be spending too much on imports (1).
Over lending by commercial banks (1) puts banking system at risk (1).
9. Explain two advantages banknotes have as a form of money. [4] Source:-
0455/22/M/J/20
Ans Generally acceptable (1) people are prepared to accept them in exchange for products and to
settle debts (1).
Portable (1) banknotes are light to carry around (1).
Divisible (1) notes of different denominations (1). Recognisable (1) notes have distinct features
on them known to the population (1).
Limited in supply (1) the central bank prints a set number of notes (1).
Homogeneous (1) all banknotes of the same value are identical (1).

10. Explain two functions a central bank performs for its government. (4)
Source:- 0455/22/May/June/2022

Ans Logical explanation which might include: The central bank acts as a banker for the
government (1) it accepts tax payments to the government / provides facilities for the
government to make payments / manages the national debt / lends to the government (1).
It operates the government’s monetary policy (1) e.g. changing interest rates / to influence
inflation (1).
It holds reserves of foreign currency (1) to influence the foreign exchange rate (1). It manages
the government’s debt (1) issuing government securities / paying interest on government
securities (1). It issues bank notes (1) influencing the money supply (1).
It may regulate commercial banks / banking system (1) to ensure they act responsibly (1).
It acts as a lender of last resort (1) lending to commercial banks / to prevent banks going out of
business / a financial collapse (1).
Chapter 17:- Households
1. Analyse the three factors that influence the amount of money that people save. (6)
Ans :- Factors influencing savings:

1. Income: Income is a significant factor that influences savings. People with higher incomes tend to
save more than those with lower incomes. This is because they have more disposable income, which
they can set aside for saving.
2. Wealth: Wealth is also an important factor that affects savings. Wealthier people tend to save
more because they have more financial resources and more significant financial security. They can
invest in various assets, such as stocks, bonds, and real estate, which provide them with long-term
returns.
3. Rate of interest: The rate of interest affects people's savings behavior. When interest rates are
high, people tend to save more because they can earn more on their savings. Conversely, when interest
rates are low, people tend to spend more because their savings are not generating as much income.
4. Tax treatment of savings: The tax treatment of savings also affects savings behavior. In some
countries, savings are taxed, and in others, they are not. Tax incentives can encourage people to save
more, as they can reduce their tax liability by contributing to tax-advantaged savings plans.
5. Range and quality of financial institutions: The range and quality of financial institutions can
also affect savings behavior. People are more likely to save when they have access to reliable financial
institutions that offer a range of savings products with competitive interest rates.
6. Age structure: The age structure of a population can also influence savings behavior. Younger
people tend to save less because they have lower incomes and may have more immediate financial
needs. Older people tend to save more because they are closer to retirement and have a greater need
for financial security.
7. Social attitude: Social attitudes towards savings can also impact savings behavior. In some
cultures, saving is highly valued and considered a virtuous behavior, while in others, spending is more
highly valued. Additionally, peer pressure can influence people's savings behavior, as people may feel
compelled to save more or less based on the behaviors of their friends and family members.
2. Analyse the three factors that influence the amount of money that people spend. (6)
Ans Factors influencing spending

1.Disposable income: Disposable income is the income that remains after paying taxes and other
necessary expenses. It is a significant factor that influences spending because people tend to spend
more when they have more disposable income. When disposable income increases, people may be
more likely to spend money on discretionary items like travel, entertainment, or luxury goods.

2. Wealth: Wealth is also a significant factor that affects spending. Wealthier people tend to spend
more because they have more disposable income and are more likely to be able to afford expensive
items. They may also be more likely to invest in real estate, stocks, or other assets that generate
income, which can further increase their spending power.

3. Confidence about future prospects: Confidence about future prospects is a significant factor that
can influence spending behavior. When people are confident about their future prospects, they may
be more likely to spend money on discretionary items like vacations, home improvements, or new
technology. Conversely, when people are uncertain about the future, they may be more likely to save
money and cut back on spending.

4. Rate of interest: The rate of interest can also affect spending behavior. When interest rates are
high, people may be more likely to save money and less likely to spend, as they can earn more on
their savings. Conversely, when interest rates are low, people may be more likely to borrow money
and spend more because the cost of borrowing is lower.

5. Rate of income tax: The rate of income tax can also affect spending behavior. When income taxes
are high, people may be more likely to save money and less likely to spend, as they have less
disposable income. Conversely, when income taxes are low, people may be more likely to spend
more because they have more disposable income.

3. Explain three reasons why the government might encourage people to borrow more. (6)
Ans The government might want people to increase their spending [1], perhaps to stimulate
economic growth [1] and/or to lower unemployment [1].

Borrowing, if affordable, can enable people to enjoy a higher standard of living [1] as they can
purchase products, such as cars or furniture, beyond their income [1].
People may be encouraged to borrow for their future benefit [1], such as university students
borrowing to spend on their education [1] to increase their future earning potential [1].

4. Mr. Ram has spent 20% of his income, whereas Mr. Shyam has spent 60% of his
income on basic necessities. Does that mean Mr. Shyam has spent more in actual
amounts? Justify. [4]

5. Explain the effects of low confidence on both spending & borrowing. (4)

6. Analyse two reasons why rich households spend more than the average households. (4)
 7. Analyse two reasons why a high-income household may borrow more than a low-
income household. (6)
Ans

8. Explain two reasons why young workers may save less than middle-aged workers. (4) (TB)
Ans Young workers may save less than the middle-aged workers because they may earn less. Wages
tend to rise as workers approach middle-age. Having more income increases people’s ability to
save, they can afford to purchase the products needed for a reasonable standard of living and
have income left to save.
Young workers may be less concerned to save for their old age as it may seem a long way off. In
contrast, middle-aged workers may be concerned to build up a good pension.

9. Analyse the causes of a reduction in borrowing by households. (6) (TB)

Ans Households may borrow less if there is an increase in the rate of interest. A higher interest rate
will raise the cost of the loan, making it less affordable. It may also make banks more reluctant to
lend to some people as there may be greater concern about their ability to repay it.

A reduction in confidence in their future economic prospects may also make people less willing
to borrow. If they think there is a risk that they may lose their jobs in the future or experience a cut
in their wages, they may be concerned that they would not be able to repay any loan taken out,
for instance, to buy a better home.

There may also be changes in the attitude to borrowing. For instance, past experience of running
into difficulties repaying loans may make households less willing to take out future loans.
10. Explain two reasons why the government might discourage an increase in the amount borrowed
by households. [4]
Ans People may get into debt that they cannot afford [1], resulting in repossessions of property [1].

• Borrowing money to fund current expenditure [1] could result in demand-pull inflation in the economy
[1].
• The funds could be used to purchase more imports [1], thus causing a current account deficit [1].
• An increase in demand for loans can result in higher interest rates [1], which makes it more difficult
for those on low incomes to borrow money [1].
 11. Analyse why household in one country may borrow more than household in another country. (6)

12. Analyse two reason why household may save less even though their income has increased. (6)
Ans MS: Logical explanation which might include:
Fall in the rate of interest (1) which would reduce the return from saving / spend/borrow rather than save
(1).
Inflation (1) spend more now before prices rise further / may reduce the real rate of interest (1).
Increase in confidence about the future (1) less motive to save for hard times / less concerned will
experience unemployment or fall in income (1).
Fall in range, number or reliability of financial institutions (1) which would reduce the safe places to save
(1).
Greater consumption opportunities / spend more / higher living standards (1) with the introduction of new
products / lower prices / may be able to afford private education / healthcare (1).
Increase in taxes (1) reducing disposable income (1).
Rise in family size (1) increasing household expenses (1).
Rise in debt (1) may reduce ability of households to e.g. to put money into a savings account (1).
Change in social attitudes (1) due to e.g. change in age of households (1).
(One mark each for each of two reasons identified and one mark each for each of two explanations.)

Chapter 18:- Workers

1. Explain the wage- factors that can affect an individual’s choice of occupation [6]
Ans WAGE FACTOR (ANY 3 wage factors)
1. Wages- Generally the higher the wage rate on offer, the more attractive the job. For instance, a person would
expect to be paid more as a doctor than as a cleaner.
2. Overtime pay- Overtime pay may be paid to the workers who work in excess of the standard working week.
It is usually paid at a higher rate.
3. Bonuses- A bonus is an extra payment. It can be paid to workers who :- produce above a standard amount,
finish a project ahead of time, secure a profitable contract or contribute to higher profits in some other way.
4. Commission - Commission is often paid to the sales people. It involves them receiving a proportion of the
value of the sales they make. It is given to salespersons for selling to a targeted no. of customers is a form of
performance-related pay.
5. Piece-rate wage: wage given based on the amount of output produced. The more output an employee
produces, the more wage he/she earns. This is used in industries where output can be easily measured and
gives employees an incentive to increase their productivity.

2. Explain the non - wage factors that can affect an individual’s choice of occupation [6]
NON WAGE FACTOR :- (Any 3 factors with explanation)
1. Job satisfaction- Nursing and teaching are not particularly well paid occupations and a number of
those undertaking them can earn more in other occupations. These jobs, however, can provide a high
degree of job satisfaction.
2. Type of work- Most people would rather do non-manual than manual work. This is because it is physically
less tiring and generally offers more mental stimulation. Non manual work also tends to be better paid.

3. Working conditions - Working conditions are an important determining factor. People like to work in
pleasant surroundings, with friendly colleagues and enjoying regular breaks.

3. Working hours - Occupations vary in terms of the number of hours expected from workers and the timing
of those hours. Managers and senior officials tend to work for longer hours than shopkeepers.

5. Pensions- With people living longer in most countries, occupational pensions are becoming an important
influence.

6. Fringe benefits - Fringe benefits are the extra benefits provided to workers by their employers. These may
include subsidized meals, health schemes and social and leisure facilities.

7. Job security- Many workers are attracted by occupations which offer a relatively high degree of job
security. Govt job has high job security

8. Career Prospects- People are often prepared to accept low wages at the start of their careers, if they think
that there is a good possibility that they will gain promotion to a well paid and interesting post.

9. Location - People may choose an occupation, which they can undertake closer to their home. This will
mean that they do not have to spend much money or time travelling to and from work.

3. Analyse why doctors are paid more than nurses. [6]

Ans:- • Doctors need higher qualifications (1) take longer to train (1) reduces supply (1) makes supply more
inelastic (1).
• Doctors are more skilled (1) more productive / efficient (1) in higher demand (1).
• Doctors may have a more powerful professional organisation / trade union (1) giving them greater bargaining
power (1).
• Doctors maybe a different gender to nurses (1) discrimination may occur (1)

4. Analyse why workers with the same skills may be paid different wage rates. [6]
Ans •Some workers may have stronger bargaining power (1) because they are in trade unions/ in stronger trade
unions (1).

•Some workers may be more willing to accept lower paid jobs (1) because they e.g. regard job security to be
more important (1).

•The demand for workers may be different in different countries/areas/industries (1) the demand for labour
may be different in the different industries/countries (1).

•The supply of workers may be different in different countries/areas (1) the wage rate will tend to be higher
where supply is lower (1).

•Workers may be in the public or the private sector (1). In some countries, the public sector is better paid (1).

•Workers may have more experience (1) may have more responsibility (1).

•A group of workers may be discriminated (1) example of such a group (1).

•Some workers may not be aware similarly skilled workers are being paid more (1) and so may remain in a
lower paid job (1).
 •Overtime may be paid at a higher rate (1)

5. Explain two reasons why someone may choose to become a doctor. (4)
Ans Logical explanation which might include:
High pay (1) resulting in high living standards / caused by low supply / high demand / high number of job
vacancies / strong bargaining power / high qualifications / high skills (1). \
Vocation (1) wanting to help people (1).
Interest / job satisfaction (1) enjoying the challenges involved (1).
Status (1) doctors are highly regarded (1). Family tradition (1) parents may have been doctors (1).
High pensions (1) enabling high living standards during retirement (1).
May be good working conditions (1) working inside (1).
Job security (1) difficult to replace / essential service (1). (Fringe / non-wage) benefits (1) e.g. pension schemes
(1)

6. Explain two reasons why low-skilled workers may be highly paid. [4]
Ans The demand for skilled workers is likely to be higher (1) due to their higher productivity / education (1)
expectation of a higher rate of return / sales (1) better quality goods and services (1) resulting in greater
profits (1).

The supply of skilled workers is likely to be lower / more inelastic (1) due to the shortage of people with skills
/ qualifications (1).

Skilled workers may have more bargaining power (1) harder to replace / may cause more disruption by taking
industrial action (1).

7. Explain two reasons why some top sportspeople have high earnings. [4]
Ans Logical explanation which might include:

High demand / inelastic demand for top sportspeople (1) large crowds watch top sportspeople / events (1)
top sports events can be sold to TV firms for large fees (1) high merchandise sales / sponsorship deals / high
gate receipts / can generate high profits for firms (1).

Low supply / inelastic supply of sportspeople / lack of substitutes (1) high bargaining power (1) top sports
people are skilled / talented (1) it may take years of training (1) high level of experience (1) some sports are
dangerous (1)

8. Why bankers are paid more than fishermen. [6 marks]

Ans Ans :- Bankers need higher qualifications (1) take longer to train (1) reduces supply (1) makes supply more
inelastic (1).

•Bankers are more skilled (1) more productive / efficient (1) in higher demand (1).

• Bankers may have a more powerful professional organisation / trade union (1) giving them greater bargaining
power (1).

9. Why do earnings differ among workers having the same skills? [6]
Ans Some workers may have stronger bargaining power (1) because they are in trade unions/ in stronger trade
unions (1).
• Some workers may be more willing to accept lower paid jobs (1) because they e.g. regard job security
to be more important (1).
• The demand for workers may be different in different countries/areas/industries (1) the demand for
labour may be different in the different industries/countries (1).
 • The supply of workers may be different in different countries/areas (1) the wage rate will tend to be
higher where supply is lower (1).
• Workers may be in the public or the private sector (1). In some countries, the public sector is better
paid (1).
• Workers may have more experience (1) may have more responsibility (1).
• A group of workers may be discriminated (1) example of such a group (1).
• Some workers may not be aware similarly skilled workers are being paid more (1) and so may remain
in a lower paid job (1).
• Overtime may be paid at a higher rate (1).

10. Analyse why an actor may decide to become a teacher. [6]

Ans Coherent analysis which might include:

Wage rate may be higher (1) enable more goods and services to be purchased (1) higher living standards (1)
demand for teachers may increase (1).

Greater job security (1) actors often experience frictional/casual unemployment (1).

More sociable/convenient working hours (1) may fit in more with having children (1) teachers may also enjoy
longer holidays (1). Working conditions may be better (1) may be a safer environment (1) may have better
pensions (1).

May find they are better qualified / suited to be a teacher (1) more likely to be successful in the career (1).

May gain more job satisfaction (1) enjoy helping children learn (1).

Chapter 19:- Trade Union

1. Define Trade Union. (2)
Ans They are organizations that promote and protect the interest of their members to improve
wages and working conditions

2. Define Closed shop. (2)

Ans it is when all the workers are the members of the trade union.

3. Define Industrial action. (2)

Ans It refers to any actions taken by the trade union if their demands are not fulfilled. It is when
workers attempt to disrupt production as a way of influencing employers.

4. Explain the 3 forms of Industrial action. (6)

• Ans FORMS OF INDUSTRIAL ACTION

a. Strike- Workers stop working entirely, often forming picket lines outside the
workplace to prevent or dissuade others from entering.
b. Overtime ban - Employees refuse to work any overtime, which can disrupt
operations that rely on additional working hours.
c. Go slow – Workers intentionally reduce their pace of work, resulting in decreased
productivity without fully stopping work
d. Lockout – Shut the workplace and prevent employees from entering the workplace
and performing their jobs.
 e. Picketing- certain influential people stationed at the gate of the factory and dissuade
the workers from reporting to work

5. Analyse the function of trade unions. (6)

• Ans Function of Trade Union

a. Negotiating improvements in wages and other non-wage benefits

b. Defending employees’ rights at job place
c. Improving working conditions such as securing better hours of work and better health and
safety policies
d. Improving pay and other benefits
e. Including holiday entitlement, sick pay and pensions
f. Encouraging firms to increase worker’s participation in business decision making
g. Supporting members who have been dismissed or who are taking industrial action
h. Developing the skills of union members by providing training and education courses.
i. Providing social and recreational amenities for the members.

6. Explain the impact of industrial Action on:- (8)

- Consumer
- Producer
- Workers
- Economy
Ans Impact of industrial action on consumers:
• Consumers may not receive the delivery of the product on time, causing delay
• Consumers may have to pay higher prices if producers decide to pass on their increased costs.
Impact of industrial action on workers:
• They do not receive salary during strike period
• Some of them may lose job if demand for the product falls
• Few workers may get some money from Union Strike Fund but it may not be sufficient for all
the workers.
Impact of industrial action on producers:
• As strike begins, their output falls, leading to a fall in revenue and profits
• Firm’s reputation may go down
• Increase in the fixed costs of the firm as they have to still bear the cost of rent,etc.
• May lose its loyal customers due to delay

Impact of industrial action on the economy:

• As output falls, the real GDP falls, Economic growth rate falls.
• Firms may decide to invest elsewhere
• Reputation of the country also falls.
• Government tax revenue decreases

7. Explain the factors affecting the strengths of the Trade Union. (6)
• Ans Consistent demand for the product: If the industry in which the trade union operates is
in high demand, it can provide job security and bargaining power to the union, making it
stronger.
 • High level of economic activity: A strong economy can provide favorable conditions for
unions to negotiate better wages and benefits for their members.
• Higher number of members: A larger membership base can give the union more bargaining
power and influence in negotiations.
• High level of specialized and skilled members: If the members possess specialized skills
and knowledge, it can make them more valuable to the employer and give the union more
leverage in negotiations.
• Cost of wages is a smaller proportion of the total costs: If wages represent a smaller
proportion of the employer's total costs, it can be easier for the employer to concede to the
union's demands without significant impact on the bottom line.
• Level of profits:- profit making firm's worker may be stronger in asking for higher wages
compared to a loss making Firm.
8. Analyse why some workers might not belong to a Trade Union. (6)
Ans • union doesn’t exist in a particular line of work

• person is self-employed

• cost of annual fee/subscription is expensive

• worker doesn’t agree with views/actions of union

• employees are satisfied with their pay and working conditions

• they are illegal in some countries.

9. Analyse why some worker may join the trade union. (6)

0455/23/M/J/18
In 2016, the trade union representing doctors in the UK was involved in collective bargaining
with the government over proposed changes to doctors’ contracts. The trade union considered
that the aim of the changes was to reduce the cost to the government of providing healthcare. It
may also result in fewer individuals training to become doctors in the future.
▪ Identify two influences on the strength of a trade union’s collective bargaining power.
[2]
 ▪ Explain the likely impact of trade unions on the welfare of their members. [4]
Ans

Chapter 13:- Market Economic System

1. Define the Market economic system. (2)
Ans When all the resources are owned, controlled, managed, and financed by the private individual
and there is no government intervention. Price are determined by market force or price mechanism.
Eg:- Hongkong, Singapore.

2. Explain why public goods would not be supplied in a market economic system.
[4]
Ans

3. Discuss whether or not a market economy benefits an economy. (8)

Ans Advantages of Free Market Economy
a. Freedom of Choice for Production of Goods and Services: In a market economy, businesses
and consumers have the freedom to choose what to produce and purchase based on their
preferences and market demand.
b. Greater Variety of Goods and Services: Due to the competition and consumer demand, a market
economy typically offers a wide range of products and services. This variety allows consumers to
find exactly what they need, from basic necessities to luxury items.
c. High Quality of Goods and Services: The presence of competition motivates businesses to
improve the quality of their products and services to attract and retain customers. Companies
strive to offer better quality to gain a competitive edge.
d. Increased Innovation: Competition in the market encourages innovation. Businesses constantly
seek to develop new products, improve existing ones, and find more efficient production methods
to stay ahead of competitors.
e. Efficient Allocation of Resources: The price mechanism in a market economy helps balance
 supply and demand, leading to efficient allocation of resources. Prices adjust to reflect shortages
and surpluses, guiding producers and consumers in their economic decisions.
f. Incentive for Maximum Profit: Private ownership in a market economy drives businesses to
maximize profit. This profit motive encourages efficiency, innovation, and responsiveness to
market demands, fostering overall economic growth.
g. Availability of Luxury Goods: A market economy caters to diverse consumer preferences,
including luxury goods. As incomes rise, consumers demand more luxury items, and businesses
respond by offering high-end products and services.
h. Production of Demerit Goods: While not inherently positive, the production of demerit goods
(e.g., tobacco, alcohol) is part of the freedom in a market economy. Consumers have the choice to
purchase these goods, reflecting individual freedom and market diversity.
i. Minimal Government Intervention: In a market economy, businesses operate with minimal
government interference. This lack of intervention allows for greater flexibility and
responsiveness to market conditions, promoting efficiency and growth.
j. Motivation for Profit-Driven Production: The primary aim of businesses in a market economy
is profit. This profit-driven approach encourages businesses to be efficient, innovative, and
customer-focused, contributing to economic dynamism and progress.

Disadvantages of Free Market Economy

a. Less Provision of Necessities: In a market economy, the production of goods and services is
driven by profit motives rather than societal needs. This can lead to underproduction of essential
goods and services like affordable housing, basic healthcare, and food for low-income
populations, as these may not be as profitable as luxury or non-essential items.
b. Unequal Distribution of Income and Wealth: Market economies often result in significant
income and wealth disparities. Those who own capital and have higher skills can accumulate
wealth, while those in lower-paying jobs or without capital can struggle, leading to economic
inequality and social stratification.
c. More Negative Externalities: The pursuit of profit can result in businesses neglecting the
environmental and social impacts of their activities. Pollution, deforestation, and other forms of
environmental degradation are common as companies prioritize cost-cutting and profit over
sustainable practices, leading to negative externalities that harm society.
d. Less Provision of Public Goods: Public goods such as streetlights, parks, and national defense
are often underprovided in a market economy because have little incentive to produce them as
they cannot easily charge individuals for their use. This leads to a reliance on government
intervention to provide these essential services.
e. Less Provision of Merit Goods: Merit goods like education and healthcare are often under-
consumed in a market economy, Without government subsidies or provision, these essential
services can become inaccessible to many.
f. Higher Unemployment and Poor Working Conditions: The profit motive in a market economy
can lead to job insecurity, as companies may prioritize cost-cutting measures such as automation
and outsourcing.