In Pakistan there is a limited choice of cars to buy. The country has a population of approximately 190 million but only about 120000 cars a year are produced there. The firms producing cars in Pakistan are protected from foreign competition by a range of methods of trade protection.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [2] (a) 1 mark each for each of two factors identified: car workers / labour; car factory / capital; car firm owner / entrepreneur; water/land
2. [4] (b) 1 mark each for each of two methods identified: tariffs; quotas; embargoes; exchange control; voluntary export restraint (VER); quality standards; subsidies; expensive paperwork. 1 mark each for each of two explanations given: tariffs - tax on imports will raise price of imports which may reduce demand; quotas – a limit on imports will restrict quantity of imports that can be purchased; embargo - a ban on imports will reduce quantity imported to zero; exchange control – a limit on availability of foreign currency will make it difficult to get the currency to buy imports; VER – agreements between governments to restrict exports to each other; quality standards – making it difficult / expensive to achieve requirements; subsidies - given to domestic producers to make them internationally competitive; expensive paperwork – increase the costs of exporting to the country
3. [6] (c) Social costs are private costs plus external costs (1). Private costs are the costs to the car firm/buyers of cars (1) example: e.g. wages paid to workers / price paid for the cars (1). External costs are likely to exist in the form of costs to third parties (1) firms/buyers will not take them into account (1) examples: e.g. air pollution / noise pollution / congestion (up to 2).
4. [8] (d) Up to 5 marks for why it might: Rising incomes (1) people may switch from other forms of transport e.g. bus travel / can afford to buy cars (1). Price may fall (1) cars become more affordable (1). Advances in technology (1) increasing availability of hybrid / electric cars / raise quality (1) any other relevant cause of a fall in price (1). Population is increasing (1) creating more potential buyers (1). Greater availability of bank loans / credit (1) cars may be purchased using bank loans (1). More effective advertisements (1) persuading people to buy more cars (1). Up to 5 marks for why it might not: Other forms of transport may become cheaper (1) example of a substitute (1). Concern for the environment may increase (1) causing people to walk or cycle (1). Prices of complements may rise (1) e.g. petrol / car parking charges / road tolls / inner city charges (1). Governments may increase taxes on car travel / impose restrictions on car use (1) to reduce external costs (1). There may be a global recession / higher unemployment (1) reducing people's confidence in buying cars (1).