Explain the relevance of economic rent and transfer earnings when comparing the wages of skilled workers and unskilled workers.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2019). The mark or mark type is shown in brackets.

1. Definitions of economic rent and transfer earnings. Supply and demand factors in determining wage levels. The relevance of elasticity of demand and supply in the labour market. Application to skilled and unskilled workers.
2. L4 (9-12 marks): For an explanation of the meaning of economic rent and transfer earnings and how these may differ between markets. Factors affecting the demand for labour and the supply of labour and their effect on the wages of skilled and unskilled workers. The relevance of elasticity of demand for and supply of labour.
3. L3 (7-8 marks): For an explanation of the meaning of economic rent and transfer earnings and how these may differ between markets. Factors affecting the demand for labour and the supply of labour or elasticities of supply and demand for labour and their effect on the wages of skilled and unskilled workers.
4. L2 (5-6 marks): For an explanation of the meaning of economic rent and transfer earnings and how these may differ between markets.
5. L1 (1-4 marks): For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial.
6. Discussion and analysis of wage theory in imperfectly competitive labour market. Trade unions influence on wage rates; the negotiation of a higher wage. Examples could include minimum wage, higher labour productivity (higher MRP) and monopsony.
7. L4 (9-13 marks): For a discussion of two ways in which trade unions may increase wages and of the extent to which each of these benefits the workers. (Max. 11 if no conclusion)
8. L3 (7-8 marks): For a discussion of one way in which trade unions may increase wages and of the extent to which this benefits the workers.
9. L2 (5-6 marks): For a discussion of one way in which trade unions may increase wages.
10. L1 (1-4 marks): For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial.
11. Alternatively, candidates may discuss a range of economic factors which reduce the benefits of an increase in wages e.g. higher taxation, inflation, working conditions.
12. L4 (9-13 marks): For a discussion of 3 well explained economic factors. (Max. 11 if no conclusion).
13. L3 (7-8 marks): For a discussion of 2 well explained factors or 3 less well explained factors.
14. L2 (5-6 marks): For a discussion of 1 well explained factor or 2 less well explained factors.
15. L1 (1-4 marks): For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial.