Preparation for Cambridge International Examinations

Advanced Subsidiary and Advanced Level

October/November Series
Mock Examinations 2018

ECONOMICS 9708/42

Paper 4 – Data Response and Essay 2 hours 15 mins

Section A – Data Response

Officials in Shanghai are encouraging couples to have two children. This is a reversal of China’s traditional
one-child policy, which was introduced in the late 1970s in a bid to reduce the country’s rapid population
growth. It has been estimated that China’s population would have been 1.7 billion rather than 1.3 billion if
the policy had not been introduced.
Shanghai’s change of policy has been prompted by a gender imbalance and by fears that the younger
generation will not be able to support the ageing population. Currently Shanghai’s over-60 population
exceeds 21% of the city’s residents and the proportion is expected to rise to 34% by 2020.
Demographers are predicting that China’s working population will start to shrink by 2015, the overall
population will peak in 2030, and China will become the first country to grow old before it has grown rich
and able to support a high proportion of pensioners.
In practice, predictions of population changes are relatively unreliable and it is difficult to judge whether a
country is at, above or below the optimum level.
The table below shows the birth and death rates for five countries in 2013.

Birth and death rates for five countries

1 (a) Define the ‘optimum population’. [2]

(b) Using the table, identify a country experiencing a natural decrease in population size and explain
your answer. [3]

(c) Comment on whether it can be concluded that Kenya had a faster increase in population in 2013
than Indonesia. [4]

(d) Explain two disadvantages of a rapid population growth. [4]

(e) Discuss whether China will struggle to support its pensioners in 2030. [7]
 2

Section B
Answer one question.
2 Adam Smith’s eighteenth century idea of an ‘invisible hand’ where the free market allocates
resources effectively and efficiently is false because the ‘invisible hand’ cannot work in a complex
modern economy.
Do you agree with this argument? [25]

3 In 2014, the average monthly salary in South Africa for an executive business manager in the
private sector was 60 000 rand; for a public sector nurse, 13 700 rand; for a cleaner, 3 600 rand.
These differences in wage rates can be entirely explained by the economic theory of the labour
market.
Discuss whether you agree with this conclusion. [25]

4 In 2016, a country’s largest yacht builder said it would have to make 350 people redundant. The
company, which builds luxury yachts, said demand had decreased in the recession.
(a) Explain, with the help of a diagram, how this situation could be incorporated into the marginal
revenue productivity theory of wage and employment determination. [12]
(b) The price of the company’s product was above the average total cost. Discuss whether in an
imperfectly competitive market structure a firm’s aim would necessarily mean it would stop
production if the price has to fall because of reduced demand. [13]

5 In a number of countries interest rates have remained low for a long time. Some people have been
unhappy with the low rates but others have been pleased. However, high interest rates also cause
different reactions.
(a) Explain why different groups of people may differ in their reaction to the level of interest rates.
[12]
(b) Discuss whether a low interest rate can help a government achieve its macroeconomic aims.
[13]

6 Choice is an essential part of economics. Sometimes consumers change their choices either when
shops have special offers on previously very expensive luxury products, or when advertising
persuades them to change their preferences.
Analyse how the economic theory of indifference curves can be used to construct a consumer’s
demand curve. Discuss whether this theory can explain the above changes in choice. [25]

7 Economic development and the exploitation of resources can result in structural change and
unemployment in some industries, increased environmental damage, overexploitation of fish
stocks, increased inequalities in the distribution of income and pressure on resources causing
inflation.
Explain what is meant by a developing economy and discuss whether it would be wise to conclude
from the above opinion that developing countries should, therefore, not seek to become
developed. [25]

9708/mock/18/22