CAIE IGCSE Economics 1.2 Factors of Production Topic Practice

Read the source material carefully before answering Question 1.
Source material: Changes in the Malawian economy

Malawi is a low-income East African country. It is often affected by natural disasters including droughts, floods and storms. In January 2022, Malawi was hit by Storm Ana. This damaged agricultural crops, factories, forests and power stations.

More than three-quarters of Malawi's labour force are employed in agriculture. Two of the country's main crops are tea and sugar. The quantity of tea offered for sale is affected by weather conditions, government subsidies and the price of fertilisers. The global market for sugar has been affected by health reports which identified the possible harmful effects of consuming too much sugar.

Three of the priorities of the Malawian Government are to develop new industries, raise education standards and develop more sustainable sources of energy. The proportion of Malawian children who finish their primary education ( 5-11 years of age) is relatively low. Table 1.1 shows GDP per head and the percentage of children who complete primary education in selected countries in 2022.

Only a small proportion of Malawi's population has access to electricity. Most households rely on wood and charcoal for cooking and heating. Using wood as a fuel contributes to the destruction of the country's forests and reduces air quality. The country does, however, get 3000 hours of sunshine a year. This means it could develop solar energy. There would be an initial cost to install solar panels and to reduce the risk of storm damage. Solar energy plants (also known as solar farms) can take up a large area and create visual pollution. However, a successful solar energy industry could decrease Malawi's imports of fuel and might affect its exchange rate.

Malawi's foreign exchange rate fell in 2022. The country's currency, the kwacha, bought fewer US dollars. This depreciation affected Malawi's current account of the balance of payment, its inflation rate and its economic growth rate. Some economists suggested that the Malawian Government should stop the kwacha falling further in value.

Identify two capital goods used in Malawi.

Some markets in Belgium are in equilibrium. The country produces a wide range of goods and services with different degrees of price elasticity of demand. The Belgian Government wants the economy to move to a production possibility point beyond its current production possibility curve (PPC). Belgium's scientific industry is one industry which is doing well. Workers in this industry are highly specialised.

Discuss whether or not firms benefit from their workers undertaking training.

Read the source material carefully before answering Question 1.

St. Kitts and Nevis is a small, two-island country in the Caribbean. The country's three main industries are tourism, financial services and agriculture. Tourists are attracted by the country's beaches, coral reefs, forts, rainforests and shipwrecks. However, if rainforests continue to be cut down and soil erosion continues to pollute the coral reefs, killing off marine life, tourism may be discouraged. The St. Kitts and Nevis Government is also concerned that the social costs of tourism exceed the private costs.

St. Kitts and Nevis's financial services include a growing banking sector. Among the country's commercial banks are a few foreign multinational companies (MNCs). These MNCs are attracted by the country's relatively high incomes, the absence of personal income tax and a relatively high literacy rate.

Some of the country's main agricultural products are carrots, onions, peanuts and sweet potatoes. In 2017, the St. Kitts and Nevis Government introduced a training scheme to raise the productivity of onion farmers.

Other important industries in St Kitts and Nevis include healthcare and fishing. Table 1.1 shows healthcare spending as a percentage of GDP and life expectancy in six selected countries in 2022.

The small size of St. Kitts and Nevis's fishing industry means that it imports large quantities of fish. The country's fishing boats are small and some lack up-to-date equipment. A larger fishing industry, with bigger boats, may bring a number of benefits to the country.

Changes in the structure and performance of industries in St. Kitts and Nevis may alter the country's price level. Between 2018 and 2020, the country experienced deflation. This affected people's purchasing power, saving and debts. It also affected the country's exports and firms' investment decisions.

Identify two examples of the factor of production 'land' in St. Kitts and Nevis.