Section A Answer all questions in this section. 'The Government of country X has decided to end international trading agreements with neighbouring countries.' (Lines 15–16) Analyse the likely impact on AP of this decision.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2018). The mark or mark type is shown in brackets.

1. International trading areas – agreements such as free trade
2. Economic slowdown – decrease in economic growth, rising unemployment, currency depreciation
3. Depreciating currency – exports will be more competitive
4. Slowdown – wage rates in country X will grow more slowly
5. country X interest rates are likely to stay low
6. All imported materials will be more expensive,
7. country X consumers will have less disposable incomes,
8. Will AP need to increase prices?
9. Costs of all overseas projects will increase
10. General disadvantages around uncertainty, such as banks' attitude towards lending and investor nervousness.
11. Reference to data in Table 1, e.g. may be able to trade more freely with USA and Asia
12. Imported products, including processed raw materials such as hair and beauty ingredients from overseas will be more expensive.
13. Falling country X incomes but are cosmetic products luxuries? Some may see as necessities.
14. Cost of new factory, further growth options will increase
15. New trade agreements could increase sales and market share in other countries/greater awareness
16. Slowdown in Country X will weaken market conditions and sales but this could be offset by better sales elsewhere due to competitive prices
17. Could this affect the decision to relocate more production overseas?
18. Higher cost of raw materials could feed through into price rises