In the first half of 2022, Guyana's GDP grew by 36.4%. Most of this growth was due to higher output in the primary sector. The government used some of the tax revenue generated from this growth to fund long-run development projects such as infrastructure and education. However, in the short run, there was a rise in house prices.
Analyse why house prices may increase.
Analyse why house prices may increase.
Coherent analysis which might include the following.
Increase in demand (1) due to lower interest rates (1) increasing borrowing for house purchases (1) higher population (1) higher incomes (1) increasing ability to purchase houses (1) higher confidence (1) increasing willingness to buy houses (1).
Decrease in supply (1) reduction in subsidies on new house building (1) increased taxation on housing (1) government building fewer houses (1) stricter planning regulation (1) land is used for other things e.g. infrastructure (1).
Increasing cost of production of new houses (1) cost of labour (1) cost of raw materials (1) cost of land (1) increased costs passed on to buyers of houses as higher prices (1).
Less government intervention (1) removal of price controls (1).
6
MAXIMUM 4 MARKS for identification of reasons without analysis in terms of demand and / or supply.
The price of petrol increases in a country with a market economic system.
What is a consequence of this?
More cars are bought.
The costs of road transport increase.
The quantity of petrol supplied falls.
There is a shortage of petrol.
B
In recent years, the quantity of Latvia's factors of production has changed. Since 2008, its capital has increased and its land has not changed significantly, but its labour force and its enterprise have decreased. Enterprise and conditions of supply can affect firms' prices. In 2022, the Latvian Government increased the country's national minimum wage (NMW). Its NMW did, however, remain one of the lowest in the European Union.
Analyse how changes in conditions of supply can affect a firm's prices.
Analyse how changes in conditions of supply can affect a firm's prices.
Coherent analysis which might include:
- Increase in costs of production ( 1 ) due to rise in wages / raw material costs / capital goods costs / tariffs (1) raise price (1) to maintain profit (1).
- Natural disasters ( 1 ) can create a shortage ( 1 ) raise price (1).
- Changes in weather ( 1 ) good weather can create a surplus in supply e.g. agriculture (1) prices fall (1) or poor weather can create a shortage (1) prices rise (1)
- Increase in indirect tax / corporate income (corporation) tax (1) a firm may pass this onto consumers as higher prices (1) especially if demand is inelastic (1).
- Government subsidies to firms (1) reduce the cost of production (1) the firm may be able to gain the same revenue and profit (1) with a lower price (1).
- Discovery of new source of raw materials ( 1 ) enabling the firm to supply (1) more at a lower price (1).
- Advances in technology (1) example (1) could lower costs of production (1) reducing price (1).
- Improvements in education and training (1) raise productivity (1) lower prices (1).
6
Only allow one mark for reference to a rise in price and one mark for reference to a fall in price.
MAX 4 marks if not identifying change in conditions of supply.