In 2020, Australia had a high national minimum wage (NMW). The NMW is received by some people who work on Australian dairy farms. Australia produces milk and soft drinks. Milk is purchased by some people as an alternative to soft drinks. Some dairy farms and some small firms went out of business in 2020. The year saw an increase in the value of the country's floating foreign exchange rate.

Mark scheme

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

1. [1] To raise wages;
2. [1] to reduce poverty / raise living standards;
3. [1] reduce income inequality;
4. [1] to correct market failure / ensure fair wages / prevent exploitation of workers;
5. [1] to encourage job seeking / reduce unemployment;
6. [1] reduce emigration.
7. [1] Cause 1: Increase in demand for the currency; [1] due to a rise in exports / exports exceeding imports / current account surplus; [1] due to higher incomes abroad / lower inflation / deflation / lower prices for exports / better quality (goods).
8. [1] Cause 1: Increase in demand for the currency; [1] due to an increase in foreign investment in the country.
9. [1] Cause 1: Increase in demand for the currency; [1] due to a higher rate of interest; [1] which attracts hot money flows.
10. [1] Cause 1: Increase in demand for the currency; [1] due to speculation; [1] that the currency will rise in value.
11. [1] Cause 2: Decrease in supply of the currency; [1] due to a fall in imports / fall in current account deficit; [1] due to a fall in incomes at home / lower inflation / higher prices of imports / fall in quality of imports (goods).
12. [1] Cause 2: Decrease in supply of the currency; [1] due to the country's firms reducing investment in other countries.
13. [1] Cause 2: Decrease in supply of the currency; [1] due to a lower rate of interest in other countries; [1] which reduces hot money going out of the country.
14. [1] Cause 2: Decrease in supply of the currency; [1] due to speculation; [1] that other currencies will fall in value.
15. [1] Demand for milk is likely to fall / contraction in demand.
16. [1] The effect on the revenue of milk producers will depend on price elasticity of demand.
17. [1] If demand is elastic, revenue will fall; [1] as demand will fall by a greater percentage than the rise in price.
18. [1] If demand is inelastic, or demand is constant, revenue will increase; [1] as demand will fall by a smaller percentage than the rise in price.
19. [1] Demand for soft drinks is likely to increase; [1] the revenue of soft drinks producers is likely to rise; [1] as soft drinks are a substitute / alternative to milk.
20. [1] Why small firms might go out of business: may have high average costs.
21. [1] Why small firms might go out of business: less able to take advantage of economies of scale.
22. [1] Why small firms might go out of business: may be less likely to get a loan from commercial banks.
23. [1] Why small firms might go out of business: may have less retained profits.
24. [1] Why small firms might go out of business: may be new, testing out whether there is demand, inexperienced entrepreneurs.
25. [1] Why small firms might not go out of business: less likely to experience diseconomies of scale.
26. [1] Why small firms might not go out of business: may receive financial assistance from the government.
27. [1] Why small firms might not go out of business: may have customer loyalty.
28. [1] Why small firms might not go out of business: may be more flexible.
29. [1] Why small firms might not go out of business: may be a monopoly in a niche / specialist market.