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    Examiners use only

    Team Leaders use only

    Surname Initial(s)

    Signature

    Centre

    No.

    Turn over

    Candidate

    No.

    Question LeaveNumber Blank

    1

    2

    3

    4

    Total

    Paper Reference(s)

    4350/2HLondon ExaminationsIGCSEEconomics

    Paper 2H

    Higher Tier

    Wednesday 7 May 2008 MorningTime: 2 hours 15 minutes

    Materials required for examination Items included with question papers

    Nil Nil

    Instructions to Candidates

    In the boxes above, write your centre number, candidate number, your surname, initial(s) and signature.Check that you have the correct question paper.Some questions must be answered with a cross in a box ( ).If you change your mind about an answer, put a line through the box ( ) and then mark your newanswer with a cross ( ).Answer ALL the questions. Write your answers in the spaces provided in this question paper. Do notuse pencil. Use blue or black ink.

    Information for Candidates

    The marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).There are 4 questions in this question paper. The total mark for this paper is 100.There are 20 pages in this question paper. Any blank pages are indicated.Calculators may be used.

    Advice to Candidates

    Write your answers neatly and in good English.You are advised to spend the same amount of time on each of the 4 questions.

    Paper Reference

    4 3 5 0 2 H

    This publication may be reproduced only in accordance withEdexcel Limited copyright policy.

    2008 Edexcel Limited.

    Printers Log. No.

    H31373AW850/4350/57570 5/3/3/2/

    *H31373A0120*

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    Answer ALL the questions.

    Question 1

    China Bicycle, one of Chinas biggest manufacturers, closed in 2005. One of the reasons for

    its closure was fierce competition from foreign bicycle producers.

    (a) Figure 1a shows the demand and supply of bicycles in China before foreign

    competition.

    Figure 1a

    The Market for Bicycles made in China

    Price

    D

    Quantity

    (i) Indicate on Figure 1a the original price, P1, and original quantity, Q1. (2)

    (ii) Draw a new demand curve, D2, to show the effect of fierce competition from

    foreign bicycle producers.

    (1)

    (iii) Label the new equilibrium price P2

    and the new equilibrium quantity Q2.

    (2)

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    (b) Apart from foreign competition, one other reason for the closure of China Bicycle was

    the growth in car ownership in China.

    (i) Cars and bicycles are substitute goods. Place a tick in the correct box to show the

    price elasticity of demand of a good which has a close substitute.

    Inelastic

    Unitary

    Elastic

    (1)

    (ii) Using Figure 1b, with reference to your answer in (b)(i) draw a diagram to

    illustrate the impact of a fall in the price of bicycles on the total revenue received

    by producers. Briefly explain your diagram.

    Figure 1b

    Price

    Quantity

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................(4)

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    (c) (i) Bicycles and cars are manufactured goods. Identify two factors which determine

    the price elasticity of supply of manufactured goods.

    1 ..............................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    2 ..............................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

    (ii) Consider the factors you have identified in (i). Which factor do you consider to

    be more important? Explain your answer.

    ................................................................................................................................

    ................................................................................................................................

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    (5)

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    (d) In Chinas capital city, Beijing, a thousand new cars are bought each day and this may

    lead to problems of pollution and congestion. In order to reduce these problems the

    government could encourage people to use public sector transport rather than cars.

    (i) With the aid of an example explain what is meant by public sector transport.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

    (ii) What is the term used to describe an economy which consists of both public and

    private sector firms?

    ................................................................................................................................

    ................................................................................................................................(1)

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    (iii) With the aid of Figure 1c, explain how the use of government subsidies can

    increase the demand for public transport.

    Figure 1c

    Price

    S

    Pn

    D

    Quantity

    Explanation: ...........................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

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    (5) Q1

    (Total 25 marks)

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    Question 2

    Figure 2a shows the percentage contributed to GDP by the different sectors of the economy of

    Malawi in 2000 and 2005.

    Figure 2a

    (a) (i) Which sector of the economy contributed a lower percentage of GDP in 2005

    than in 2000?

    ................................................................................................................................

    ................................................................................................................................

    (1)

    (ii) Give an example of an occupation in the sector named in (a)(i).

    ................................................................................................................................

    ................................................................................................................................

    (1)

    (iii) What is meant by productivity of labour?

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

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    (iv) Identify and explain two ways in which the government can increase productivityin the tertiary sector of an economy.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................(4)

    (b) In 2003 a daily charge of 5 was introduced on cars and lorries travelling into London.The aim of the charge was to reduce externalities in London.

    (i) Identify two externalities which result from cars and lorries in a city.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................(2)

    (ii) Suggest one other method to reduce externalities caused by lorries.

    ................................................................................................................................

    ................................................................................................................................(1)

    (iii) What method is likely to be most successful in reducing the external costs onLondon roads? Give reasons for your answer.

    ................................................................................................................................

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    (c) Figure 2b shows a table of the costs and revenues for two delivery firms, Giant and Dwarf.

    Figure 2b

    Giant Delivery Dwarf Delivery

    Total Cost 20,000 2000

    Units delivered 10,000 (i) ...................................... (1)

    Average cost (ii) .................................... (1) 4

    Complete the table above.

    (iii) Giant and Dwarf are firms in the private sector of the economy. Distinguish

    between the main aims of firms in the private sector and firms in the public sector

    of the economy.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

    (iv) Privatisation has taken place in many countries. Examine the relative costs and

    benefits of privatisation in improving the efficiency in an economy.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

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    ................................................................................................................................

    (5) Q2

    (Total 25 marks)

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    Question 3

    Figure 3a shows the German governments budget in 2006.

    Figure 3a

    (a) (i) Place a tick in the correct box to show whether the German government has a

    budget deficit

    budget surplus

    budget equilibrium.

    (1)

    (ii) Using the data in Figure 3a, explain your answer.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

    (iii) Complete the following sentence: The use of government expenditure and

    government revenue to control the economy is called ......................................

    policy.

    (1)

    Turn over

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    (b) A government can raise revenue by increasing direct taxation and indirect taxation.

    Direct taxes are often progressive and indirect taxes are often regressive. With the aid

    of numerical examples distinguish between progressive and regressive taxation.

    (i) Progressive:

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (3)

    (ii) Regressive:

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (3)

    (iii) ExplainExplain one advantage and one disadvantage to the economy of a reduction in

    direct taxes.

    Advantage: ..............................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    Disadvantage: .........................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (4)

    (iv) Identify one other way, apart from taxation, that a government raises revenue.

    ................................................................................................................................

    ................................................................................................................................

    (1)

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    (c) (i) The control of unemployment in an economy is a government objective.

    Identify one other economic objective of a government.

    ................................................................................................................................

    ................................................................................................................................(1)

    (ii) With the aid of examples explain what is meant by

    1. structural unemployment

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

    2. seasonal unemployment.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

    (iii) Evaluate the effectiveness of supply side policies in reducing structural

    unemployment.

    ................................................................................................................................

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    ................................................................................................................................

    (5)

    Turn over

    Q3

    (Total 25 marks)

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    Question 4

    The United States (US), Canada and Mexico are members of the North American Free

    Trade Area (NAFTA). Figure 4a shows a map of NAFTA and data for the trade in goods

    between Mexico and the other member countries.

    Figure 4a

    Imports to Mexico:

    US: $116.6 bn

    Canada: $5.6 bn

    Exports from Mexico:

    US : $166.5 bn

    Canada: $2.8 bn

    (a) (i) Briefly explain what is meant by the balance of trade.

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

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    Study the information in Figure 4a. Calculate the overall balance of trade for Mexico

    with

    (ii) United States

    ................................................................................................................................

    ................................................................................................................................

    (1)

    (iii) Canada.

    ................................................................................................................................

    ................................................................................................................................

    (1)

    (b) The current account of the balance of payments consists of the visible and invisible

    exports and imports. Study the following items and indicate where in Figure 4b theytheyshould appear in the current account of the balance of payments of Mexico.

    Example: Cars from the United States. Place A in the correct box.

    (i) Hats sold to America. Place B in the correct box.

    (ii) A Mexican businessman flying on a Canadian airline. Place C in the correct

    box.

    (iii) Canadian tourists staying in a Mexican hotel. Place D in the correct box.

    Figure 4b

    Visible exports Visible Imports Invisible Exports Invisible Imports

    Example=A

    (3)

    Turn over

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    (c) (i) Identify two reasons why governments protect domestic industries from foreign

    competition.

    1 ..............................................................................................................................

    2 ..............................................................................................................................

    (2)

    (ii) Identify two methods of protecting domestic industries from foreign

    competition.

    1 ..............................................................................................................................

    2 ..............................................................................................................................

    (2)

    (iii) Examine the extent to which one method identified in (c)(ii) is likely to besuccessful in reducing imports.

    ................................................................................................................................

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    ................................................................................................................................

    ................................................................................................................................

    (4)

    (d) (i) What is meant by a trading bloc?

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    (2)

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    Q4

    (Total 25 marks)

    Discuss how the formation of a trading bloc such as NAFTA affects

    (ii) countries outside the bloc

    ................................................................................................................................

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    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

    ................................................................................................................................

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    ................................................................................................................................

    ................................................................................................................................

    (4)

    (iii) countries inside the bloc.

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    (4)

    TOTAL FOR PAPER: 100 MARKS

    END

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