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 maximum marks for sub-sections. 1 2 3 4 Total Mark 10 3 5 7 10 Total Mark 12 4 6 8 12 Total Mark 13 4+ 6+ 8+ 13 Total Mark 15 5 8 11 15
Page 3 Mark Scheme Syllabus Paper ECONOMICS – JUNE 2004 9708 4 © University of Cambridge International Examinations 2004 Section A. Question 1. a) Overtime reduced, health insurance taken from wages, higher unemployment, some on strike, stock market decline. [1 each, to a max. of 3] b) i) employers wished to reduce costs, or profits were reduced or employers could pass on extra cost to employee because of increase in unemployment. [1 each, to a max. of 2] ii) company may have had higher profit levels, company may have produced product with inelastic demand so could raise price cost of labour may have been a low % of total cost there may have been an increase in demand for product there may have been an increase in productivity there was an effective trade union there was a wish to end the strike These are alternatives. Not all are required. [1 each, to a max. of 3] c) There is uncertainty of the overall effect of the reduction in the incomes. - It depends on whether a wider view of incomes is taken, including social security and other benefits. - If the wider view is taken gains from stock market have to be included and these have declined. - Depends on whether workers regard the change as short or long term. Depends on the proportion of workers that the change has affected. - Do know that most of those affected were below management level – may therefore have been on lower incomes. - Do not know level of unemployment before 2001, only that it is now 5.9% - Do not know whether any jobs have been created, and what wage levels they paid.  d) Headline is concerned about lower earnings because of the likely reduction in consumer spending. Can explain effect of reduction in spending using the analysis of the multiplier showing how national income will change as a result. Maximum of 3 if no development of multiplier. 
Page 4 Mark Scheme Syllabus Paper ECONOMICS – JUNE 2004 9708 4 © University of Cambridge International Examinations 2004 Section B. 2.a) Explanation of income role of income and price in the two effects. Indifference curves are not on the syllabus but budget lines are. L4) For a reasoned and clear explanation with accurate development of theory. 9 - 12 L3) For a fair but undeveloped explanation. 7 - 8 L2) For a limited but acceptable attempt to consider the effects. 5 - 6 L1) For an answer which has some basic correct facts but includes irrelevancies and errors of theory. 1 - 4 b) Discussion of difficulties of interpreting marginal analysis. Measurement of utility, measurement of value of marginal unit, problem of relating marginal utility/price of various goods, difficulties of adding utilities. Pareto is not required but the principle of someone better off without anyone worse is on syllabus – as is cost benefit analysis.
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