Rubber production in Liberia Liberia is a west African country that has faced a number of serious problems in recent years. These have included a civil war and in 2014 the outbreak of the Ebola epidemic. There have also been improvements. The unemployment rate was 85% in 2004 but had fallen to 4% in 2016. This reduction has influenced both emigration and wages. Workers have received higher wages although some economists think that the higher wages have increased the country's inflation rate which in 2016 was 8%. The country has a good supply of drinking water and a climate favourable to agriculture. More than 70% of the country's labour force is currently employed in agriculture. The country's main exports are rubber, iron ore, timber and gold. A US multinational company (MNC) runs the world's largest single natural rubber farming operation in Liberia. The price of rubber fell by 75% between 2011 and 2016. The global supply of rubber had exceeded demand as a number of countries imposed import restrictions on rubber. In response to the lower price the US MNC cut its production, but still made a loss. The MNC does not want to go out of business and is trying to survive by cutting its costs. In the long run it hopes to maximise profits. When some of its 7000 workers retire, they will not be replaced. The MNC has introduced new production techniques and diversified into growing cocoa and coffee. The Liberian government is providing subsidies to local rubber farmers to help them buy new equipment and introduce new farming methods. Despite the challenging situation, a number of local Liberian rubber farmers are increasing the size of their operations by buying up more land. Some others are diversifying by using wood from the rubber trees to make furniture. While helping its rubber farmers, the Liberian government is also encouraging the expansion of the secondary and tertiary sectors. Between 2014 and 2016 it increased its expenditure on healthcare but this was at the expense of a number of public sector investment projects. Table 1 compares the infant mortality rate and healthcare expenditure per head in selected countries in 2015. [Table 1 Infant mortality rate and healthcare expenditure per head in selected countries in 2015] | Country | Infant mortality rate (deaths per 1000 live births) | Healthcare expenditure per head (US$) | |---|---|---| | Cuba | 4.5 | 459 | | Hungary | 5.0 | 2096 | | India | 41.5 | 248 | | Liberia | 67.5 | 90 | | Turkey | 18.8 | 1148 | | UK | 4.4 | 3749 |

Mark scheme

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

1. [2] Survival / growth / profit maximisation / diversification
2. [1] Supply exceeding demand / diagram showing excess supply
3. [1] the existence of unsold rubber will encourage rubber producers to lower price
4. [1] Improved production methods
5. [1] lowering costs of production / increasing supply
6. [1] The imposition of import restrictions / diagram showing the effect of import reductions
7. [1] lowering demand for rubber / rubber producers may reduce prices to ensure their rubber is still competitive
8. [1] Government subsidies
9. [1] lowering costs of production / increasing supply / diagram showing supply increasing
10. [1] Higher wages may increase consumer expenditure
11. [1] increasing total (aggregate) demand / diagram showing total (aggregate) demand increasing
12. [1] causing demand-pull inflation
13. [1] if demand rises by more than money supply / the economy is at, or near, full capacity
14. [1] Higher wages may increase costs of production
15. [1] decrease total (aggregate) supply / diagram showing total (aggregate) supply decreasing
16. [1] causes cost-push inflation
17. [1] if wages rise by more than productivity / may cause a wage-price spiral
18. [1] Generally, yes, it would be expected that countries spending a higher amount would have a lower infant mortality rate
19. [1] because e.g. they would be able to afford more midwives/doctors
20. [1] Examples of supporting evidence e.g. Liberia spends the least and has the highest
21. [1] UK spends the most and has the lowest
22. [1] There is an exception, Cuba spends the 4th lowest and has the 2nd lowest infant mortality rate
23. Up to 3 marks for why it might:
24. [1] Jobs in the tertiary sector tend to be better paid
25. [1] may raise living standards
26. [1] working conditions tend to be better
27. [1] e.g. less dangerous
28. [1] demand for services tend to increase more than demand for primary products
29. [1] imports of services may be reduced
30. [1] exports of services may increase
31. [1] current account position may be improved
32. [1] Productivity/skills may be higher in the tertiary sector
33. [1] which may cause economic growth
34. [1] may make the country more developed
35. [1] A larger healthcare sector could reduce the infant mortality rate / increase life expectancy
36. [1] May attract MNCs/FDI
37. [1] increasing employment
38. Up to 3 marks for why it might not:
39. [1] The country may be better at producing primary or manufactured products
40. [1] the country has a climate suited to agriculture
41. [1] which may reduce economic growth
42. [1] There may be an opportunity cost in terms of less resources being available in the primary and secondary sectors
43. [1] Some jobs in the tertiary sector are low-paid
44. [1] example
45. [1] because they require fewer skills
46. [1] Many tertiary industries are based in cities
47. [1] this may lead to problems of rural-urban migration / overcrowding
48. [1] Liberia's resources are more suited to producing rubber
49. [1] which can be exported and bring in foreign exchange
50. [1] Imports of manufactured/primary products may increase
51. [1] Opportunity cost is the (next) best alternative foregone
52. [1] The US MNC could use its resources to produce rubber or cocoa/coffee
53. [1] The local farmers could sell rubber or rubber wood / make furniture
54. [1] The farmers could use the money to buy more land example, e.g. diversify into other areas / education for their children
55. [1] Subsidies to farmers could be used to help them in other ways e.g. education
56. Up to 4 marks for why it might:
57. [1] People may go to other countries in search of jobs
58. [1] A high rate of unemployment is likely to mean wages are low in the country / there is poverty in the country
59. [1] people may emigrate in search of higher wages
60. [1] A high rate of unemployment may mean poor healthcare / education / other services in the country
61. [1] people and governments not having the income to spend much on these services
62. [1] people may emigrate to get a higher standard of living
63. [1] People may have skills more appropriate to jobs in other countries / in greater demand in other countries
64. Up to 4 marks for why it might not:
65. [1] Jobs may not be available abroad
66. [1] unemployment may be higher in other countries
67. [1] there may be restrictions on immigration
68. [1] People may lack the skills to take up any available jobs in other countries
69. [1] People may have family ties
70. [1] restricting their mobility
71. [1] People may not be aware of jobs in other countries / lack of information
72. [1] There may be generous unemployment benefits in the country
73. [1] The costs of living may be low in the country
74. [1] which may discourage e.g. the retired from emigrating
75. [1] People may be deterred by cost of emigration
76. [1] People may be deterred by cultural differences in other countries
77. [1] Unemployment may be short term / believed to be short term / the unemployed may be optimistic about future economic prospects in the country
78. [1] if seasonal or frictional unemployment