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Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ECONOMICS 9708/22
Paper 2 Data Response and Essay March 2017
MARK SCHEME
Maximum Mark: 40

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 March 2017 series for most Cambridge IGCSE®,
Cambridge International A and AS Level components and some Cambridge O Level components.

® IGCSE is a registered trademark.

This document consists of 7 printed pages.

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9708/22 Cambridge International AS/A Level – Mark Scheme www.dynamicpapers.com
March 2017
PUBLISHED
Question Answer Marks Guidance

1(a)(i) The United States (1 mark) 1

1(a)(ii) Services, or Invisibles (1 mark) 3 If the candidate provides details on one component e.g.
interest, profits and dividends this is not considered as three
Primary income (or Investment income, or Interest, Profits components and can score 1 mark maximum.
and Dividends) (1 mark)

Secondary income or Transfers (1 mark)

1(b) For identification of a relevant factor (1 mark) 4 The factors include:

• the price elasticity of demand for China’s exports to,
For explanation of this factor (1 mark) and imports from, Vietnam: i.e. whether the
Marshall-Lerner condition is satisfied
(2 marks maximum per factor) • the time period under consideration i.e. the
J-Curve
Please use the textbox to show the allocation of • the price elasticity of supply of China’s exports
marks to each part of the question. • whether the devaluation of the Dong offsets the
devaluation of the yuan
• tariffs, quotas and other forms of protectionism if
these are increased or imposed in response to the
devaluation of the yuan
• the relative rates of inflation in Vietnam and China

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Question Answer Marks Guidance

1(c) For a diagram: 1 mark for correct shift of curve and 1 mark 6 The diagram should show an increase in the supply of
for the change in equilibrium price and quantity Vietnamese goods as a result of the subsidy and a fall in their
(up to 2 marks) price. An explanation should also accompany this diagram.

and explanation (1 mark) of the expected help as a result

of subsidies for all Vietnamese goods.

(Up to 3 marks)

For a diagram: 1 mark for correct shift of curve and 1 mark The diagram should show a decrease in the demand for
for the change in equilibrium price and quantity Chinese goods or an increase in demand for Vietnamese
(up to 2 marks) goods in the case of a boycott.

and explanation (1 mark) of the expected help as a result

of the boycott of Chinese goods.

(Up to 3 marks)

No diagram: 2 marks maximum A diagram showing both an increase in supply and a

decrease in demand for Chinese goods/increase in demand
Please use the textbox to show the allocation of for Vietnamese goods is an acceptable approach.
marks to each part of the question.

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Question Answer Marks Guidance

1(d) For a clear understanding of the Principle of Comparative 6 The Principle of Comparative Advantage states that countries
Advantage with due reference to lower opportunity cost. should specialise in the production of those goods that they
(1 mark) can produce at the lowest opportunity cost. Those goods that
have the ‘potential to compete’ could be considered as infant
For application of the Principle of Comparative Advantage: industries and they are the ones that could develop the
• showing how the principle can be used to justify lowest opportunity cost. Economic theory suggests that these
support for infant industries (Up to 3 marks) industries should be supported.
• showing how the principle does not justify support
for industries that lack the required potential
(Up to 3 marks)

(4 marks maximum for application)

If the candidate justifies support without reference to the

principle of comparative advantage then 2 maximum for
application

For a reasoned conclusion with reference to the principle

of comparative advantage (1 mark)

Please use the textbox to show the allocation of

marks to each part of the question.

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Question Answer Marks Guidance

2(a) For knowledge and understanding of 8 Public goods, in contrast to private goods, are non-excludable
• public goods in terms of non-excludability and and non-rival (and non-rejectable). As a result if they were
non-rivalry (Up to 2 marks) provided by the private sector there would be the free-rider
and problem meaning that no profit could be made from their
• private goods in terms of excludability and rivalry provision.
in consumption (Up to 2 marks)

For application showing why profit can be made in the

supply of private goods (Up to 3 marks) but not in the
supply of public goods because of the free-rider problem
that means that a price cannot be charged (Up to 3
marks).
(4 marks maximum for application)

2(b) For analysis: 12 Merit goods are under-consumed because of incomplete

information.
• explaining how maximum prices might work to
increase provision with due reference to the The question relates to the under-consumption of merit goods
strengths and weaknesses of this approach. and successful answers will focus upon the way in which
(Up to 6 marks) policies can increase consumption as required. References to
price are only relevant as they relate to the quantity
• explaining how education campaign might work to consumed.
increase provision with due reference to the
strengths and weaknesses of this approach. Maximum prices set the price of the merit good below
(Up to 6 marks) equilibrium so that the merit good becomes more affordable.
This will make consumers more willing to buy, but a shortage
(8 marks maximum for analysis) will develop so quantity consumed will actually fall unless the
government takes further action such as subsidising
For evaluation assessing which is the most effective in production.
increasing consumption with due reference to the
strengths and weaknesses explained in the analysis. (Up Education campaigns are designed to improve information
to 3 marks) and providing a reasoned conclusion (1 mark) and as a result increase the demand for the merit good,
raising price and leading to an extension in supply. The
weakness of this method is that these campaigns tend to be
expensive and they may not be successful if poorly designed.

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Question Answer Marks Guidance

3(a) For knowledge and understanding of the concept of 8 The supply of a product might be inelastic because:
price elasticity of supply
• it has a long production period
For an accurate formula (Up to 2 marks) • There are few available to supply from stock
(If no formula then allow 1 mark for an understanding of • There is a shortage of resources required to produce
what the concept measures) it
• The time period under consideration is also relevant
For some elaboration e.g. distinction between elastic and and can exacerbate the above
inelastic (Up to 2 marks)
(4 marks)

For application to show the reasons for the inelasticity of

supply of a product.

For any one factor explained (Up to 3 marks)

So at least 2 factors explained required for full marks

for application.
(4 marks maximum for application)

3(b) For analysis of measures that might be taken by 12 Candidates should consider the causes of inelasticity and
businesses to increase the elasticity of supply suggest ways in which businesses might attempt to
• For explaining any one way in which businesses counteract each one. For example, they might increase
might attempt to increase the elasticity of supply stocks so that supply can be increased form stock when
and an assessment of the strengths and prices rise. Evaluative comment might be that this is
weaknesses of this approach (Up to 6 marks) expensive and impractical for certain products. Another
method is increasing the required resources for example
(8 marks maximum for analysis) training labour. Again this might prove expensive and be
impractical if the economy is at full employment. Since this
For evaluation assessing whether the measures taken are relates to businesses rather than government subsidies or
likely to be successful with due reference to the strengths other government policies are not relevant. Measures that
and weaknesses explained in the analysis. (Up to 3 marks) increase the quantity supplied rather than the elasticity of
and reaching a conclusion on whether any are likely to be supply should not be credited.
successful (1 mark)

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Question Answer Marks Guidance

4(a) For knowledge and understanding of what is used as 8 Candidates should make reference to cash and bank
money in a modern economy (Up to 4 marks) deposits. There should be some understanding of the various
forms of near money.
For a statement of what money is in terms of general
acceptability in settlement of debt (1 mark) The Quantity Theory of Money is not necessary but can be
credited. Candidates should describe how an increase in the
For an explanation of what acts as money in a modern money supply can trigger spending and cause demand-pull
economy. Cash and bank deposits. (Up to 3 marks) inflation.

No reference to bank deposits maximum of 2 marks.

For application showing how an increase in the money

supply can cause inflation. (4 marks)

4(b) For analysis that explains 12 The internal consequences include the haphazard re-
• The internal consequences of inflation distribution of income, the negative impact upon savings and
(Up to 6 marks) investment, shoe-leather costs and menu costs. The external
• The external consequences of inflation consequences are that the goods of the economy that
(Up to 6 marks) experiences inflation will become uncompetitive with
consequences for that economy’s balance of payments and
(8 marks maximum for analysis) exchange rate.

For evaluation assessing the circumstances under which The external consequences might be less serious if the rate
the internal consequences might be more serious for an of inflation in an economy is lower than that in competitor
open economy (3 marks) and including a conclusion nations. Also, the impact of the inflation might be offset by a
regarding whether this is likely to occur (1 mark) decline in the exchange rate.

(4 marks maximum)

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