The price of gold rose in 2016. This encouraged owners of gold mines to employ more resources to increase the supply of gold. The level of competition in gold production varies in the different gold producing countries. A number of countries, including India, impose a tariff on imported gold.

Mark scheme

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

1. [1] Labour/miner
2. [1] land / gold ore
3. [1] capital/equipment
4. [1] enterprise/owner
5. [1] To discourage the purchase of the foreign gold / reduce the demand for imported gold
6. [1] to improve the current account position on the balance of payments
7. [1] To raise revenue
8. [1] to fund government expenditure
9. [1] If gold is an infant industry
10. [1] enable domestic industries to grow
11. [1] increase output / become more competitive / efficient / natural resources discovered
12. [1] Protect domestic gold industry
13. [1] protect jobs / keep unemployment low
14. [1] encourage expansion of domestic firms
15. [1] Retaliation
16. [1] in response to trade restrictions on gold imposed by other countries
17. [1] In perfect competition there are many sellers
18. [1] in monopoly there is only one
19. [1] In perfect competition there are no barriers to entry and exit / free entry and exit
20. [1] in monopoly there are barriers
21. [1] Firms in perfect competition are price takers
22. [1] a monopoly is a price maker
23. [1] In perfect competition there is perfect knowledge
24. [1] that other firms may not be aware of e.g. the profit being earned by a monopoly
25. [1] In perfect competition there is a low degree of market concentration
26. [1] in monopoly it is 100%
27. [1] In perfect competition there are perfect substitutes / homogenous products / identical products
28. [1] in monopoly there are no substitutes / a unique product
29. Up to 5 marks for why it should:
30. [1] Will create employment
31. [1] raise output / higher economic growth
32. [1] increase incomes
33. [1] increase living standards
34. [1] It can be exported
35. [1] demand may be high now
36. [1] improve trade in goods
37. [1] improve the current account position
38. [1] More tax revenue can be earned
39. [1] enable the government to spend more on e.g. education/healthcare
40. Up to 5 marks for why it should not:
41. [1] It will stop future generations
42. [1] being able to benefit from its sale / reduce economic growth
43. [1] as resources will be depleted
44. [1] as a result of higher demand
45. [1] e.g. due to higher income
46. [1] The price of gold may rise in the future
47. [1] now may not be the best time to sell it
48. [1] The exchange rate may currently be low
49. [1] which may reduce the revenue that the country can gain from exporting the gold
50. [1] Advances in technology
51. [1] may lower costs of extraction in the future
52. [1] Gold mining may cause external costs
53. [1] example e.g. pollution
54. [1] In the long run, gold may have to be imported
55. [1] increasing the current account position
56. [1] It may lead to overspecialisation
57. [1] potential for structural unemployment