In 2012 oil was discovered in Kenya, but in 2014 an American firm stopped its plans to explore for oil in the Arabuko Sokoke forest in the country. The relative sizes of Kenya's primary, secondary and tertiary sectors are changing. The amount of capital goods in the country is also increasing.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] Manufacturing/turning raw materials into goods (1) e.g. car production, house building (1).
2. [4] 1 mark each for each of two benefits identified: ∞ increase output / income ∞ increased employment / lower unemployment ∞ improved current account position / higher exports ∞ increased tax revenue 1 mark each for each of two explanations given: ∞ the output of oil will contribute to the country's GDP / increase economic growth ∞ better quality of life / standard of living ∞ jobs will be created extracting/processing the oil ∞ oil may be exported / less oil imported ∞ oil may be taxed; higher output and higher incomes will increase tax revenue
3. [6] Private costs are the costs to the oil firms (1) e.g. cost of operating an oil rig (1). Social costs are private costs plus external costs (1) that affect everyone (1). External costs are likely to exist (1) firms will not take these into account (1) e.g. air pollution, water pollution, reduction in fertility of nearby land (maximum 2 marks for relevant examples).
4. [8] Up to 5 marks for why it might: May increase economic growth (1) more capital goods will enable more goods and services to be produced (1) more output may raise living standards (1) increase employment (1). May reduce costs of production (1) prices fall (1) new capital goods may incorporate advanced technology (1) lower average costs may make products more internationally competitive (1) improve current account position (1). May be no opportunity cost (1) if they are unemployed resources (1). Up to 5 marks for why it might not: May involve an opportunity cost (1) example (1) may have to switch resources from producing consumer goods (1) lower living standards in the short run (1) may result in fewer jobs / higher unemployment (1) this will be structural unemployment (1). There may be no need for more capital goods (1) there may be no demand for extra output (1) existing capital goods may be idle (1).