Benefits of a trade union to an individual:

collective bargaining to improve pay

working on behalf of members in terms of working conditions, pension entitlement
protecting the rights of members, e.g. in a legal dispute
acting on behalf of members in discussions with government. [4]
Potential disadvantages of a trade union to economy:
there might be industrial action
powerful unions/industrial action could lead to disruption of the economy
this could lead to a firm going out of business, causing an increase in unemployment
this could affect output and damage reputation of country
powerful trade unions could lead to higher wages
making products uncompetitive in world markets.
Potential advantages of a trade union to economy:
can work with employers, not always against them
can work with government, e.g. to support legislation.
Discuss whether some large firms might benefit from reducing their size
Economies of scale:
internal, e.g. technical, marketing, financial, risk-bearing economies
external, e.g. available infrastructure, pool of skilled labour, local suppliers.
Diseconomies of scale:
internal, e.g. poor communications, low morale
external, e.g. congestion, higher transport costs.
Advantages of small firms:
cater to tastes and preferences of consumers
greater flexibility.
high rate of inflation.

Reasons for concern of inflation:

leads to a fall in the purchasing power of money
may undermine confidence in the currency
rise in export prices may make goods uncompetitive abroad
those on fixed incomes particularly badly affected
value of savings could be eroded.

Not such a problem of inflation:

could lead to higher profits for firms
may encourage firms to expand
borrowers may benefit fromhigh rate of inflation.

Advantages of government intervention:

indirect taxes to discourage consumption of demerit goods (dont need to use that term)
subsidies to encourage consumption of merit goods (dont need to use that term)
taxation to finance expenditure on public goods (dont need to use that term)
regulations to control private producers, e.g. on pollution and monopolies having market
dominance.
Limitations of government intervention:
consumption of demerit goods (dont need to use that term) might be discouraged, but
unlikely to end completely given inelastic demand, e.g. for cigarettes and alcohol
consumption of merit goods (dont need to use that term) might be encouraged, but still
a limit to extent of increase in consumption
available finance to provide public goods (dont need to use that term) might be
limited/restricted, especially if a large budget deficit
regulations may not be adequately policed/enforced.

Describe how the (i) occupational, (ii) age and (iii) geographical structure of a population is
likely to change as a country becomes more developed.
Occupational structure:
primary sector will continue to fall
secondary sector will first rise, and then fall
tertiary sector will continue to rise.
Age structure:
average age of the population will rise
there will be an ageing population
comments on BR and DR implying impact on age structure are worth 1 mark.
Geographical structure:
there will be a movement out of the rural areas
and into the urban areas.

Causes of a change in a countrys exchange rate:

a change in the demand for a currency on the foreign exchange market
a change in the supply of a currency on the foreign exchange market.

Discuss whether an improvement in a countrys current account position will result in an

increase in its employment.
Yes, if:
it is due to an improvement in the visible account, e.g. an increase in exports would most
likely lead to an increase in employment
it is due to an improvement in the invisible account: an increase in tourists coming to this
country would most likely lead to an increase in employment.
Not necessarily, if:
it is due to an increase in wages earned by residents working abroad
it is due to an increase in investment income, such as dividends
it is due to a charitable donation received from abroad.

Why workers might decide to move from the primary sector to the secondary sector of
an economy?
possible reasons for occupational mobility of labour:
higher wages
shorter hours
better working conditions
opportunity to learn new skills
better promotion/career opportunities/employment.
Why most firms want to maximise profits?
it is where the difference between total revenue and total cost is greatest/(MC=MR but
this is not in the syllabus)
profit is necessary for survival
this is the underlying assumption of firms, although there may be other goals
used to finance investment/expansion
used to finance research and development
used to reward shareholders/senior management.
Full employment
this occurs when all those willing and able to work at the given real wage are working,
i.e. all unemployment is voluntary
it is the level of employment at which those who wish to work have found jobs, with the
exception of those who are frictionally unemployed.

ageing population:
this occurs where people are living longer and therefore the average age of the
population is rising (2).
Possible problems:
a rise in the dependency ratio, i.e. the ratio of the working population to the dependent
population becomes lower
a change in the labour force; older workers may be less geographically and
occupationally mobile (the retirement age is likely to go up)
older workers may lack the required skills/training
a higher demand for health services
a higher demand for welfare services
a rise in the cost of pensions
all of this may require taxation to be increased
a change in the pattern of demand.
Discuss what would be the most effective policies to increase a countrys exports.
Possible policies:
bring about a fall in the exchange rate by devaluation (if a fixed exchange rate system)
or by allowing a depreciation (if a floating exchange rate system); this would make
exports less expensive and so demand for them would be likely to rise
this will increase total export revenue if PED is elastic
provide a subsidy which reduces the production costs of domestic firms, enabling them
to reduce prices
supply-side policies to increase the skills/qualifications of the labour force; this would
help to improve the quality of exports
government support for trade fairs/exhibitions in other countries to make people aware of
a countrys exports.
An answer which fails to consider which would be the most effective policies to increase a
countrys exports can gain no more than 6 marks.