Luxembourg is a country with a high level of economic development. Its government intervenes in an attempt to overcome some of the disadvantages which might exist in a market economic system. Some of the country’s firms operate in competitive markets but some are monopolies. Households in the country save a high proportion of their income. Immigration is the main cause of the country’s growth in population.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. [1] Rate of interest.
2. [1] Level of (disposable) income / earnings / wealth / taxation.
3. [1] Confidence / economic outlook.
4. [1] Advertising / availability of saving schemes.
5. [1] Strength of financial institutions.
6. [1] Age of / number of dependents in household.
7. [1] Social convention / culture.
8. [1] Cost of living / spend on basic necessities / inflation.
9. [2] A monopoly is the only firm or has dominant market share / no effective competition / substitutes / controls the market, meaning it can influence market conditions significantly.
10. [2] Monopolies have high barriers to entry, making it difficult for new firms to enter the industry.
11. [2] A monopoly is a price maker, able to set the price because demand is inelastic / it is the only choice for consumers.
12. [2] A monopoly can control supply, potentially causing higher prices and making high profits.
13. [2] A monopoly may have a unique product, which could result from profits reinvested in R&D.
14. [2] A monopoly is typically large in size, benefiting from economies of scale / low average costs.
15. [2] Pull factor: People may move to gain higher income / move to high-income countries / countries with higher wages, which allows them to increase goods and services they can consume / achieve a higher standard of living.
16. [2] Pull factor: People may move to countries with more job opportunities / lower unemployment.
17. [2] Pull factor: People may move to gain better healthcare, increasing life expectancy / quality of life.
18. [2] Pull factor: People may move to gain better education / attend university, increasing their children's chance of gaining employment / and high pay.
19. [2] Pull factor: People may move to be with family members in another country.
20. [2] Push factor: People may move to countries to escape conflict / high crime / high corruption.
21. [2] Push factor: People may move to escape racial and religious intolerance.
22. [2] Push factor: People may move to escape famine.
23. [2] Push factor: People may move to escape pollution / climate change / seek a better environment.
24. [2] Push factor: People may move to escape poverty.
25. [2] Push factor: People may move to escape high taxes / to increase safety.
26. [1] Government intervention can provide merit goods, which may be under-consumed in a pure market system.
27. [1] Government intervention can restrict demerit goods, which may be over-consumed.
28. [1] Government intervention can provide public goods, which would not be supplied by the private sector.
29. [1] Government intervention can provide products or benefits for those with low purchasing power.
30. [1] Government intervention can regulate monopolies / prevent mergers.
31. [1] Government intervention can address external costs such as pollution.
32. [1] Government intervention can set price ceilings to keep prices low.
33. [1] Government intervention can set minimum wages to reduce exploitation of workers.
34. [1] Government intervention may fail due to government failure.
35. [1] Government may lack accurate information.
36. [1] Government decisions may take time / be bureaucratic.
37. [1] Government intervention may reduce incentives.
38. [1] Government intervention may be affected by corruption.