IGCSE Economics 3.3.2—Wage determination Topic Practice

Read the source material carefully before answering Question 1.

Source Material: The eSports industry and Malta

eSports is now recognised as a sports competition, just like playing other competitive sports such as football and basketball. In eSports, participants compete through video games either as an individual or as part of a team. eSports also attracts large audiences who watch these online competitions. eSports is growing rapidly, both in terms of revenue generated and in the number of viewers. Demand has increased because of increases in incomes and decreases in the price of the technology needed to play or watch eSports. A change in social attitudes has also increased female participation in eSports.

The fast growth in this industry has attracted both private and public sector investment. Private sector firms sponsor various eSports teams and also advertise their products during eSports competitions. Public sector investment has come from the governments of China, Denmark, Malaysia and Malta, mainly in development and training programmes for young eSports participants. The government of Malta, a small island country, hopes to make Malta a main centre for eSports in Europe, to attract visitors for eSports events. The aim is for the eSports industry to contribute $1 \%$ to Malta's GDP, provide 3000 more jobs and improve the current account of its balance of payments.

Malta's service sector has always been important and contributes approximately $90 \%$ of its GDP. Malta is an attractive tourist destination due to its mild weather. The island is used as a location for many movies and TV series, which also attracts visitors who want to see the filming locations. However, to ensure growth is sustainable, the government sees the importance of economic diversification and does not want the economy to overspecialise.

To achieve this, the labour force has to be adaptable and the government has to invest in education and training. The government provides new scholarship schemes, organises work placements and brings in professionals from other countries to help train Maltese students. However, there are concerns that these measures may be too expensive and take too long to have a significant impact on the economy.

Female participation in the labour force is also encouraged. Table 1.1 shows the proportion of women in the labour force (\%) and GDP per head ($) of selected countries in 2019.

Explain how a change in social attitudes would lead to greater participation by women in the labour force.

Read the source material carefully before answering Question 1.

Source material: the challenges facing Pakistan

Pakistan faces a number of economic challenges. These include responding to a rising population, improving its trade in goods balance, controlling the country's inflation rate and increasing the country's economic growth rate. To overcome these challenges, the Pakistani government is trying to increase investment. Currently, a high proportion of the country's resources are used to produce consumer goods.

The government is subsidising entrepreneurs and charities to open low-cost schools. It wants to reduce the dropout rate from schools and to raise educational standards. Some parents do not recognise the advantages that a merit good such as education can give their children, for example better health and better job opportunities. Some of the poor need their children to work from a young age to support the family. Government reforms have not yet led to a significant rise in teachers' wages but have improved school buildings and the number of children attending. The qualifications required to teach may be increased in the future.

Improved education may affect the number of skilled workers who emigrate and may raise the quantity and quality of goods and services produced. Any resulting higher income may influence the value of imports purchased, as shown in Table 1.

Pakistan has relatively high import tariffs. Revenue from import tariffs is $45 \%$ of total tax revenue. The tariffs on vehicles, some of which have inelastic demand, are particularly high. Future Pakistani tariffs may be influenced by changes in other countries' trade policies, as well as other factors.

Answer all parts to Question 1. Refer to the source material in your answers.

Discuss whether or not the supply of teachers in Pakistan is likely to increase in the future.

Read the source material carefully before answering Question 1.
Source material: Will Germany continue to be a strong economy?

Germany is a country with a trade surplus and a high GDP per head. It also has a budget surplus (government tax revenue greater than expenditure), a high HDI and a low inflation rate.

In recent years, German firms have exported a higher value of goods and services. This has contributed to the growth of world trade, caused partly by a fall in transport costs. A relatively large number of German firms produce both in Germany and in other countries, helped by better communications.

Germany is a major producer and exporter of luxury cars. Demand for luxury cars was influenced in 2018 by increases in incomes in Germany and abroad, a rise in the price of US luxury cars and, in some countries, a fall in the price of petrol.

Improvements in the quality of education and information on job vacancies have made it easier for workers to change jobs in Germany. This greater ability to change jobs has helped to reduce unemployment and to increase the country's output.

Fewer workers in the German car industry are now members of a trade union. As shown in Table 1.1, trade union membership in Germany has declined in recent years.

A challenge facing Germany is its ageing population. The effect of an older labour force is uncertain. It may mean firms become reluctant to invest in new technology, but a shortage of young workers may encourage firms to buy more capital goods.

Germany's population may fall and there will soon be fewer Germans aged under 30 than over 60 unless immigration continues at a relatively high rate. Immigration might increase both the country's labour force and its government's spending on education.

Analyse whether the strength of German trade unions increased from 2013-2016.

In the diagram, X represents the original equilibrium point in the labour market for engineers. An increase in the skills of engineers results in an increase in productivity.

Which point represents the new equilibrium in the labour market for engineers?

What is a trade union?

Which task is not a function of a trade union?

A German car manufacturer builds a factory in India. A group of Indian workers at the factory join a trade union.

What would this trade union be expected to do for the workers?

What does not have an effect on wages in a free market economy?

The economic problem results in choices and opportunity cost. People have to decide what job to do and where to live. In recent years Australia has recruited teachers from a number of countries including Canada, the UK and the US. Most of these teachers specialise in a single subject.

Analyse why the wages of all teachers may increase.

Unemployment in the United Kingdom (UK) fell in December 2021 to 4.1\%. Market forces would usually mean that wages would increase due to this lower unemployment. However, workers' living standards did not increase. New international trade deals were not made fast enough to offset the decreasing trade between the UK and the European Union.

Analyse how market forces can increase wages.