CAIE A-Level Business A2 6.1.1 Political and Legal Topic Practice

Note

- Only reward advantages

- If more than two advantages are referred to, reward the best two.

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Responses may include:

AO1 Knowledge and understanding

Definition or explanation of nationalisation: ownership of a business is transferred from private to public (Max K1).

Possible advantages include:

- Government control over the development of a scarce resource.

- Funding for research and production can be guaranteed.

- Profits paid to the government not to shareholders.

- Enables lithium production in country G even if this is marginally profitable or loss making.

- Minimises possibility of foreign takeover.

- Restricts monopoly power to charge high prices.

- Can ensure that the business acts in the public interest e.g. reducing externalities

AO2 Application

Limited application, ${ }^{\text {APP }}$ applies knowledge to LBM once.

Developed application, ${ }^{\text {APP }}$-APP applies knowledge to LBM twice.

Max one ${ }^{\text {APP }}$ for application for the first advantage and max or ${ }^{\text {APP }}$ for application for the second advantage.

- LBM is the only business in country G planning to mine lithium.

- Government concern that demand from industry for lithium in country G will not be met in the long-term.

- Prevent a hostile takeover from a multinational business.

- LBM is currently unprofitable, but revenue is forecast to rise rapidly.

- Possibility of future price rises/profits as demand to supply ratio increases.

- Pollution from production of lithium

- Lithium is an essential raw material used in batteries for electric vehicles, smartphones and other products.

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AO3 Analysis
Limited analysis AN - candidate shows one link in the chain of analysis.
Developed analysis L2AN - candidate shows two or more links in the chain of analysis.
- By controlling the only source of lithium in Country G, the government can ensure that local industry demand is met,
preventing supply bottlenecks AN and supporting key economic sectors like electric vehicles thus promoting economic
growth L2|AN .
- Nationalisation prevents a hostile takeover by a multinational business, ensuring future forecast rapidly rising revenue
remains within the country AN , which can then be used by the government to fund public services or infrastructure
L2 /AN.
- The government can absorb the initial losses of the currently unprofitable LBM to secure control over a crucial long-
term resource, mitigating uncertainty regarding private sector commitment AN and therefore encouraging investment in
manufacturing in country GL2AN .
- Government control means control of supply to battery producers, maximising country G production capabilit, AN and
therefore reducing reliance on foreign import L2AN
- Profits to the government likely to be higher source of income than tax receipts from profits to shareholders and will
therefore support government spending on its objectiv $\epsilon$ AN .
Accept all valid responses
Exemplar answer demonstrating skills:
The government is currently very concerned that demand from industry in Country G for lithium will not be met in the long-
term. By nationalising LBM, the government can dictate production priorities, ensuring that adequate supply is maintained
domestically, thereby preventing supply bottlenecks and supporting key economic sectors that rely on this raw material.
This ultimately safeguards long-term industrial and economic stability within Country G.
Although LBM is currently unprofitable, losing $2-3 million per year, its revenue is forecast to rise rapidly once mining
begins. By nationalising the business, the government ensures that this potentially high future revenue is retained within the
country's public finances. This retained profit can then be directed towards public services, infrastructure development, or
subsidising local industries, rather than flowing out of Country G to a foreign multinational