Universal basic income (UBI) UBI is a scheme where a government provides everyone with a payment, regardless of their circumstances. Such a scheme can help a number of groups including the sick and the old. In 2016, the Indian government was looking at a UBI as an alternative to its existing system of state benefits. A politician in Costa Rica proposed a UBI of $337.5. Finland started a two-year experiment with a version of UBI in 2017. A guaranteed minimum income might help some of the poor who currently do not receive state benefits and may reduce inequality. In a number of countries, income and wealth inequality is increasing. For instance, in Russia 16% of the population live below the official poverty line and 10% of the population own 87% of the country's wealth. State benefits are relatively low in Russia and the country has one income tax rate of 13%. One cause of the rise in the gap between the rich and the poor in Russia has been the effect on prices and profits arising from the privatisation of a number of state monopolies. Differences in annual average incomes (annual GDP per head) between countries can affect life expectancy as shown in Table 1.1. Table 1.1 Annual GDP per head and life expectancy in selected countries in 2016 Country Annual GDP per head (US$) Life expectancy (years) Costa Rica 16200 78.8 Finland 42000 80.8 India 7400 68.6 Mali 2300 55.7 Monaco 76000 89.5 Russia 26200 70.4 In Finland, a country with an average monthly income per head of $3500, the trial UBI is $600 per month. This does not cover everyone's needs in a country with high prices, high tax rates and periods of very cold weather. In India, the average monthly income per head is almost the same as Finland's UBI. A UBI could help the unemployed including the temporary unemployed. Governments welcome a reduction in unemployment. This is because it increases output and enables governments to reduce spending on state benefits for the unemployed. Governments could then increase spending on other areas including education and healthcare.

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. 8 old
2. 8 sick
3. 8 unemployed
4. 8 being on state benefits
5. 8 being in need of, but not receiving state benefits in their country
6. Proportional (1) AND the same rate / people with different incomes paying the same % / all paying 13% (1).
7. 25% (2).
8. Correct working: $337.5 × 12 / $16 200 (1).
9. Generally, the higher the annual GDP per head, the longer the life expectancy (1) e.g. rich people are likely to have better nutrition / healthcare (1).
10. The two countries, Monaco and Finland, with the highest annual GDP per head have the longest life expectancy (1). The country with the lowest annual GDP per head, Mali, has the lowest life expectancy (1).
11. Russia or Costa Rica is an exception (1) e.g. Costa Rica has a lower annual GDP per head but a higher life expectancy than Russia (1).
12. 8 Opportunity cost is the best alternative (1) foregone (1)
13. plus
14. 8 The opportunity cost of UBI (1) is the existing system of state benefits (1)
15. or
16. 8 The opportunity cost of spending on unemployment benefits (1) is spending on education / healthcare (1)
17. Up to 3 marks for why it might:
18. A monopoly is a single seller (1) has high market power (1) is a price maker (1) demand for its product may be inelastic (1) due to lack of substitutes (1) can raise revenue by raising price (1) may be seeking to maximise profit (1).
19. A monopoly may be inefficient (1) due to lack of competition (1) resulting in higher costs and prices (1).
20. Up to 3 marks for why it might not:
21. A monopoly may have low average cost of production (1) due to economies of scale (1) example (1).
22. A monopoly may not be a profit maximiser (1) example of another objective (1).
23. A monopoly may have a product with elastic demand (1) e.g. may be producing a luxury (1).
24. A monopoly may be concerned that charging high prices will encourage new firms to enter the market (1) reducing its market power (1).
25. A monopoly may fear government intervention (1) and keep prices low (1).
26. A monopoly may be government controlled (1) and charge low prices (1).
27. Lower prices in India (1) an Indian household may have greater purchasing power / be able to buy more goods and services (1)
28. Colder weather in Finland (1) which is likely to increase people's willingness to spend / greater need to spend to keep warm (1)
29. Lower tax rates in India (1) greater purchasing power / higher disposable incomes (1)
30. Up to 4 marks for why it might:
31. The unemployed will have a higher income (1) they may spend more (1) total (aggregate) demand may increase (1) firms may expand (1) take on more workers (1).
32. Enables the unemployed to spend on education and training (1) and improve their chances of getting a job (1).
33. Up to 4 marks for why it might not:
34. Unemployment benefit may become higher than the wages the low paid may receive (1) this may encourage some people to stop working (1) increase voluntary unemployment (1).
35. Higher state benefits may be financed by increased taxation (1) total (aggregate) demand may not rise (1).
36. Government spending money on education and training (1) may have greater impact on reducing unemployment (1).