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Using the data in Figure 4 and other information provided, explain the likely change to Indonesia’s item used since 2013 - Edexcel - A-Level Economics A - Question 2 - 2018 - Paper 3
Question 2
Using the data in Figure 4 and other information provided, explain the likely change to Indonesia’s item used since 2013. Examine the effects on the profitability o... show full transcript
Worked Solution & Example Answer:Using the data in Figure 4 and other information provided, explain the likely change to Indonesia’s item used since 2013 - Edexcel - A-Level Economics A - Question 2 - 2018 - Paper 3
Step 1
Using the data in Figure 4 and other information provided, explain the likely change to Indonesia’s item used since 2013.
Answer
Since 2013, Indonesia has seen a stabilization in coal prices after a significant decline from 2011’s peak of around 55 by 2016. This price decrease has negatively impacted the profitability of Indonesia's coal exports, which make up a significant portion of its economy. As coal prices fell, revenues from coal exports decreased substantially, leading to a contraction in the broader economic indicators of growth, such as GDP. Lower coal prices have subsequently affected government revenue and the capacity for public investments. The trend highlights a dependency on commodity prices for economic stability.
Step 2
Examine the effects on the profitability of Indonesian rice farmers of the government’s increased investments in areas (Extract E, lines 43-48). Use a cost and revenue diagram to support your answer.
Answer
The government’s increased investments in infrastructure, such as roads and dams, aim to enhance agricultural productivity. With better transport facilities, Indonesian rice farmers can reduce wastage, lower transportation costs, and access larger markets. This results in an increase in revenue. The cost and revenue diagram would show the cost curve shifted to the left, indicating lower average costs due to improved efficiencies, while the revenue curve shifts upwards due to increased output and market reach. Thus, profits for rice farmers would likely increase as they can sell more at competitive prices.
Step 3
Discuss the benefits of aid to Indonesia.
Answer
Aid to Indonesia can bring multiple benefits. Financial assistance can provide resources for critical infrastructure projects, which can stimulate economic growth and enhance public services such as education and healthcare. Furthermore, aid aimed at agricultural improvements can directly benefit farmers, leading to increased food security and poverty alleviation. Additionally, foreign aid often comes with technical support and expertise that can improve local capacities and governance. Over time, these factors contribute to more sustainable economic development and an enhanced quality of life for citizens.