Read the source material carefully before answering Question 1. Source material: Will Honduras become a more successful economy? Honduras fact file Population 2020 10m Population without access to electricity 0.83 m Unemployment rate 6.1% Inflation rate 4.2% Government budget deficit as % of GDP 9.5% Honduras is a lower middle-income country which relies heavily on trade with the US. More than half of Honduran exports go to the US and 40% of its imports come from the US. A high number of Hondurans work in the US and send money back home to their relatives. Honduras used to concentrate on growing bananas and coffee, gaining skills and a good reputation in those industries. Now, Honduras produces a greater range of products including clothes, chemicals and paper. This diversification has reduced the uncertainty arising from sudden changes in demand and supply. For example, tariffs could be imposed on Honduran coffee or there could be a report stating that eating bananas is good for health. While employment is declining in agriculture, it is increasing in the clothes industry in Honduras. Training for workers in the clothes industry is expected to increase and working conditions to improve. The firms are also using more capital goods. It is, however, uncertain what will happen to the prices of cotton, wool and other materials used to make clothes. A successful clothes industry has the potential to reduce poverty in Honduras. The Honduran government tries to reduce poverty by, for example, providing unemployment benefit. A major reason for the government seeking to lower poverty is to increase life expectancy. Table 1.1 shows levels of poverty (percentage of population living on less than $1.90 a day) and life expectancy in selected countries. Table 1.1 Percentage of population living in poverty and life expectancy in selected countries Country % of population living in poverty Life expectancy (years) Chad 38.1 54 Honduras 16.9 75 Kenya 37.1 66 Maldives 3.5 79 South Sudan 44.7 58 Sweden 0.2 83 A more successful Honduran economy would raise incomes. The country has a progressive income tax system, so there could be a significant rise in tax revenue. A more successful economy would also be likely to encourage more investment. Unemployment would be expected to fall which, in turn, could influence consumer spending.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2023). The mark or mark type is shown in brackets.

1. [1] Accept 8.0 or 8.3.
2. [2] If more than two benefits are given, consider the first three.
3. Accept increase trade for more exports.
4. Accept increase employment / lower unemployment for more job opportunities.
5. Sell more exports to the US (1).
6. Receive more money from Honduran workers in the US (1).
7. More job opportunities for Honduran workers in the US (1).
8. [2] One mark for an advantage identified and one mark an explanation.
9. Identification mark must come directly from the source material.
10. A relevant explanation mark can be given even in the absence of an identification.
11. Gain skills (1) raise productivity / raise efficiency / 'practice makes perfect' / lower costs of production / raise quality / increase output / supply / less waste (1).
12. Gain a good reputation (1) increase demand (1).
13. [4] One mark each for each of two ways identified and one mark each for each of two explanations.
14. If more than two reasons given, consider the first three.
15. One mark for taxing the rich and giving to the poor.
16. Logical explanation which might include:
17. Provision of unemployment benefit / state benefit / welfare benefit / benefits (1) raise income of those on low or no income / enable the unemployed to buy basic necessities / reduce absolute poverty (1).
18. Progressive income tax system (1) takes a higher proportion of the income of the rich / use some of tax revenue raised to increase spending to help those on low incomes (1).
19. [4] Coherent analysis which might include:
20. Demand and supply diagram:
21. Axes correctly labelled – price and quantity or p and q (1).
22. Original demand and supply curves correctly labelled (1).
23. Demand curve shifted to the right (1).
24. Equilibriums – shown by lines P₁ and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1).
25. If a candidate draws two diagrams, they may be able to get 3 marks:
26. 1 mark for axes
27. 1 mark for D & S labelled correctly
28. 1 mark for the demand curve shifted to the right.
29. They would not get the mark for the equilibriums as the two diagrams are likely to conflict on this.
30. [5] Responses do not have to be in the format suggested but they should address the expected/normal relationship, offer supporting evidence of that, highlight any exceptions to that, and analyse the overall data.
31. Coherent analysis which might include:
32. Expected relationship: Inverse / negative (1) the higher the level of poverty, the lower the life expectancy / the lower the level of poverty, the higher the life expectancy (1).
33. Supporting evidence: Sweden has the lowest % of population living in poverty and the highest life expectancy / The country / two countries / three countries / four countries with the lowest levels of poverty head had the longest life expectancy (1) the two countries, Chad and South Sudan, with the highest level of poverty had the lowest life expectancy (1).
34. Analysis of expected relationship: A high level of poverty is likely to mean poor healthcare (1) low nutrition / poor housing / poor sanitation / low levels of education (1).
35. Exception: Chad / South Sudan (1) Chad had a lower level of poverty but also a lower level of life expectancy than South Sudan (1)
36. Analysis of exception: Life expectancy is determined by other influences e.g. wars (1).
37. [6] Allow higher productivity / efficiency once either in connection with labour or capital.
38. Some points may be given in reverse e.g. price of raw materials may fall.
39. Not accepting subsidising the clothes industry as the source material indicates that it is a successful industry.
40. Award up to 4 marks for logical reasons why it might, which may include:
41. more training (1) better working conditions (1) may increase labour productivity / efficiency / skills (1) reduce labour costs (1)
42. more use of capital goods (1) may reduce disruption to production / make fewer mistakes / less waste (1) speed up production / increase productivity / efficiency (1)
43. improved working conditions (1) may reduce industrial action (1) more motivation (1)
44. successful clothes industry so firms may grow in size (1) more able to take advantage of economies of scale (1).
45. Award up to 4 marks for logical reasons why it might not, which may include:
46. price of raw materials may rise (1) may be subject to bad weather (1) exchange rate may fall / tariffs may be imposed on imported raw materials (1) reduce supply (1) country has experience of inflation (1)
47. unemployment may fall (1) making it more difficult for the clothes industry to recruit labour (1) strengthening the bargaining power of workers (1) raising wages / increasing labour costs (1)
48. providing training (1) and better working conditions will involve a cost (1)
49. more use of capital goods may involve initial high spending on equipment (1) firms may experience diseconomies of scale (1)
50. higher indirect tax / tax may be imposed (on clothes / clothes firms) (1).
51. [6] Award up to 4 marks for logical reasons why it might, which may include:
52. unemployment is already low (1) may move towards full employment (1) may push up wages (1) increase (average) costs (1) cause cost-push inflation / total supply less than total demand (1)
53. lower unemployment may increase incomes (1) causing a rise in consumer spending / purchasing power (1) increasing total demand (1) causing demand-pull inflation / total demand higher than total supply (1).
54. inflation already exists (1) which may lead workers to expect it to continue (1) increasing wage claims (1).
55. Award up to 4 marks for logical reasons why it might not, which may include:
56. may be higher investment (1) could increase total supply / total supply may rise in line with total demand (1) reducing cost-push inflation (1)
57. lower unemployment could reduce spending on unemployment benefit (1) increase tax revenue (1) reduce the budget deficit (1) reduce the growth in total demand (1) some of higher tax revenue could be spent on supply-side policy / unemployment may have fallen due to supply-side policy (1)
58. the extra income may be saved / spent on imports (1) due to uncertainty about the future (1)
59. A fall in unemployment does not necessarily mean a rise in employment (1) the unemployed could have e.g. retired / emigrated (1).