Question 22N.3.HL.TZ0.2

Wheat prices have been rising (from August 2020 to February 2021) [1]

And one of the following: [1]

• Wheat prices are volatile
• Wheat prices increased from around US$4.90 in August 20 to around US$6.60 in February 21
• The period saw two peaks (in Oct 20 and Jan 21)
• Wheat prices levelled off after (Nov 20 or Jan 21)
• Any other valid piece of information shown should be awarded.

A response which merely details the data may be awarded [1].

Reasons may include:

• The price of wheat has been rising; it had increased by 35$$% in 6 months. Elimination of the tariff would keep wheat prices low and help to maintain the competitiveness of Turkish flour (in its export markets).
• Russia had recently decided to introduce a tax on its wheat exports. Elimination of the tariff would keep wheat prices low and help to maintain the competitiveness of Turkish flour (in its export markets).
• Elimination of the tariff would decrease the costs of producing wheat and thus the price of flour in Turkey, reducing inflationary pressure.
• By eliminating the tariff on wheat imports, Turkey may hope that Russia will reciprocate and eliminate the tax on wheat exports.
• The Turkish government supports trade liberalization as a policy for efficiency / growth / development / diplomacy
• There may have been a poor harvest in Turkey and thus the policy would help to prevent the domestic wheat price from increasing / ensure food security
• Any other valid reason.

6 $\times$ 1.2 $\times$ 0.5 = 3.6

6 $\times$ 1.2 $\times$ 0.5 = 3.6

Any valid working is sufficient for [1].

3.6 + 3.6 = $7.2 million

An answer of 7.2 without workings is sufficient for [1]. For full marks to be awarded, the response must provide valid working and include correct units.

An alternative approach which may be rewarded is to calculate the net change in CS + PS only

Change in CS = 0.5 $\times$ 1.2 $\times$ (64 + 70) = 80.4
Change in PS = 0.5 $\times$ 1.2 $\times$ (30 + 36) = 39.6 (decrease)

Any valid working is sufficient for [1].

Change in social surplus = 80.4$-$ 39.6 = $40.8 million

For full marks to be awarded the response must provide valid working and include correct units.

TR1 = 7.20 $\times$ 36 = $259.20

TR2 = 6 $\times$ 30 = $180 [1]

Change = 180 – 259.20 = $-$79.20 [1]

Any valid working is sufficient for [1].

OFR may be applied if either the initial or the final revenues collected is correct and the subtraction is performed correctly.

$-$79.2 * 1/0.134

$-$591 044 776 OR $-$591.04 million [1]

Rounding to two decimal places is not required for the first option above i.e, –591 044 776 is sufficient and 591 044 776.12 is not required.

OFR applies if an incorrect US$ figure is converted correctly into TL, and [1] may be awarded; the mark is awarded for accurately converting a US$ figure to a TL figure.

A candidate may be awarded [1] for converting accurately before applying to (an incorrect) figure for revenue (i.e. 1/0.134 = 7.46)

A valid alternative approach is
TR1 = 7.20 $\times$ 36 = $259.20
TR2 = 6 $\times$ 30 = $180 [1]
Change = 180 $-$ 259.20 = $-$79.20 [1]

Any valid working is sufficient for [1].

1/0.134 = 7.46
$-$79.2 * 7.46
= – 590 832 000 OR $-$590.83 million [1]

OFR may be applied if either the initial or the final revenues collected is correct and the subtraction is performed correctly.

For full marks to be awarded the response must provide valid working and specify the decrease.

NB TL units are not required, since “in TL” is referred to in the question.

355 000 $\times$ 0.55 $-$ 355 000 $\times$ 0.40 [or, 355 000 $\times$ 0.15) [1]

Any valid working is sufficient for [1].

TL 53 250 [1]

OR

354 999 $\times$ 0.55 $-$ 354 999 $\times$ 0.4 = 195 249.45 $-$ 141 999.60 = 53 249.65

OR

354 999 $\times$ 0.15 = 53 249.85

Responses may also take the approach of calculating the initial and the final tax paid

Initial tax paid = 22*0.15 + 27*0.2 + 131*0.27 + 420*0.35 +355*0.4 = 333.07

Final tax paid = 22*0.15 + 27*0.2 + 131*0.27 + 420*0.35 +355*0.55 = 386.32 [1]

Any valid working is sufficient for [1].

Change = 386.32 $-$ 333.07 = TL53 250 [1]

For full marks to be awarded the response must provide valid working and include correct units.

For constructing a Lorenz curve below the diagonal (which need not be drawn) with correct labels on the axes [1]

For an accurately constructed Lorenz curve [1]

The vertical axis should be labelled cumulative % of income, or % of income and the horizontal axis should be cumulative % of population or % of population. A title is not necessary.

{correct points: (0,0); (20, 6.20); (40, 17.00); (60, 31.80); (80, 52.40); (100,100)}

For identifying that Turkey’s spending on education is low compared with other countries.

NB The response must refer to education.

Refer to paper 3 markbands, available under “your tests”  tab > supplemental materials.

Possible policies may include (but are not restricted to):

• Increasing the progressivity of direct taxes
• Reducing reliance on indirect taxes
• Implementing or increasing a wealth tax
• Investing more in education
• Investing more in health care
• Investing more in human capital
• Increasing transfer payments (or, conditional cash transfers)
• Provide universal basic income
• Improving access to labour markets
• Measure(s) to improve equality of opportunity
• Policies to reduce discrimination
• Increase the minimum wage
• Any other valid policy.