Botswana uses both capital goods and labour in its diamond mining industry. The country had an average economic growth rate of 3.8% between 2015 and 2019 compared to a global average of 2.8%. Over this period, the country experienced a low inflation rate and a move away from protectionism and towards free international trade.

Mark scheme

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

1. [2] If more than two examples are given, consider the first two.
2. A good used to produce another good or service / a human-made good used for production (1) e.g. a machine (1).
3. [4] One mark each for each of two reasons identified and one mark each for each of two explanations.
4. Logical explanation which might include:
5. make the country's products internationally competitive (1) sell more exports / buy fewer imports (1)
6. create greater certainty (1) encourage investment / attract MNCs (1)
7. keep increase in costs low (1) may reduce claims for higher wages/ higher profits (1)
8. increase confidence (1) may increase demand / increase profits 1).
9. [6] Allow deregulation as an alternative to remove quotas or embargoes.
10. Reward removing / reducing bureaucracy, voluntary export restraints.
11. Reward but do not expect reference to exchange control.
12. Coherent analysis which might include:
13. remove tariffs (1) reduce price of imports (1) if firms have lower costs of production, they will be able to compete (1)
14. remove quotas / increase quota (limit) (1) remove bans / embargoes (1) increase quantity of imports / reduce limits on imports (1)
15. remove subsidies (1) firms' products will not be artificially cheap (1)
16. other countries may remove their protectionism (1) enabling exports to be sold without restrictions (1).
17. [8] Reward but do not expect reference to social welfare will be increased if social benefit exceeds social cost.
18. Why it might:
19. high global demand
20. can improve the current account of the balance of payments
21. create employment, both skilled and unskilled jobs
22. increase output / economic growth
23. may increase tax revenue.
24. Why it might not:
25. demand will fall in a recession
26. price may fluctuate
27. may be competition
28. can be accidents
29. can create external costs e.g. pollution
30. if mined by an MNC, profit may be sent to the home country
31. supply may be depleted
32. price may increase in the future so better to conserve diamonds now
33. may not be a large proportion of GDP.