China is the world's largest producer of gold and India is the world's largest buyer of gold. Gold mining in China is becoming more capital-intensive which is making the supply of gold less price inelastic. The wages of workers employed in the industry are rising but other costs of production are falling.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [2] (a) An industry which has a high amount of capital/machinery compared with the amount of other factors, e.g. labour employed (2) An industry which uses a large amount of capital/uses capital instead of labour (1)
2. [4] (b) • long production period (1) this will make it difficult to adjust supply quickly (1) • inability to store the product (1) this means goods cannot be taken out of storage to meet higher demand (1) • time period under consideration (1) supply is more inelastic in the short run (1) • if there is a shortage of the raw material (1) it will be difficult to supply more in response to a rise in demand/price (1)
3. [6] (c) • fixed costs will remain unchanged (1) these costs do not change with output (in the short run) (1) example of a fixed cost (1) costs which are still present when output is zero (1) up to 2 marks • variable costs will rise (1) vary with output (1) example of a short run variable cost (1) all costs are variable in the long run (1) up to 2 marks • effect on average cost is uncertain (1) average cost may fall if economies of scale are experienced (1) average cost may rise if diseconomies of scale are experienced (1) up to 2 marks Note: maximum of 2 marks for each type of cost.
4. [8] (d) Up to 5 marks for why more people may be encouraged: • higher wages enable workers to enjoy more goods and services (1) increase living standards (1) • higher wages enable people to borrow more (1) banks are more likely to lend to high earners (1) • higher wages will enable workers to save more (1) increase ability to, e.g. finance children's education/provide for retirement (1) • higher wages may motivate some workers to work in the industry/wages are a key influence (1) increase workers' self esteem (1) • workers will be encouraged to switch from other industries (1) to undertake training to work in the industry (1) to gain the necessary qualifications to work in the industry (1) Up to 5 marks for why people may not be encouraged: : • wages may still be below those in other industries (1) • earnings may be higher in other industries (1) because of, e.g. higher bonuses or overtime payments (1) • workers may not be aware of the wage rise (1) • workers may lack the appropriate skills/qualifications (1) • workers take into account other factors/non-pecuniary factors (1) • may not work in that industry in that industry if, e.g. working hours are longer, holidays are shorter, worse working conditions, less chance of promotion, lower pensions, fewer fringe benefits, less job security, less job satisfaction, industry is based some distance away (maximum of 3 marks for reasons identified).