HCI H2 Prelim 2024 Paper 1 Mark Scheme

Question 1: Fast fashion and Food (a) Explain the relationship between world GDP and clothing sales volume from 2000 to 2015. [2] Explain the positive/direct [1] relationship between world GDP and clothing sales (Q): Demand for clothes is positive YED (normal good). As GDP increases implies increase in income and hence demand for clothes, quantity (Q) increase. [1] (b) With reference to Extract 1 and using a diagram, explain how the trend in figure 1 demonstrates that allocative inefficiency will worsen in the fast fashion market. [5] Figure 1 shows rising clothing sales i.e. increase demand. Production of fast fashion generates negative externalities. In extract 1, carbon emission and water pollution from textile dyeing cause external costs on third parties eg. Lower crop yield for farmers (reduced profits) due to climate change, health problems for residents (increased healthcare costs) around waterways. [1] These external costs are not factored in by producers and consumers of fast fashion. They will consume and produce up to MPB=MPC at Qm where they only consider their own cost and benefit. [1] The external cost however causes a divergence between MSC and MPC. The society is better off at MSC=MSB at Qse where allocation of resources is efficient. [1] There is over allocation of resources to fast fashion as at Qm, the cost to the society outweighs the benefit causing the deadweight loss, area A. [1] As the demand MPB to MPB1 for fast fashion increases, the deadweight loss grows even larger, area A to area B. [1] Price MSC=MPC+ MPB1=MSB1 B MPB=MSB MPC A

Fail to draw diagram, max 4m. (c) Using a diagram, explain one revenue or one cost reason for “fast fashion companies and retailers (to) have no incentives to change its current business model when it’s proven to be so profitable so far” (Extract 1). [3] Cost/revenue diagram expected. 1 diagram to show AR/MR increase resulting in increased profit due to ‘rapid design and marketing’ to appeal to taste and preference of consumers + explain [3] Or 1 diagram to show AC/MC fall resulting in increased profit due to ‘cutting production costs by using synthetic and chemically treated materials’ to reduce variable cost + explain [3]. If students failed to link to increase profit, max 2m Can accept answers which show profit of firms will fall if the firm changes its business model. (d) With reference to Extract 3, explain the type of market structure ultra-processed food (UPF) operates in. [2] Oligopoly [1]. A few large firms dominate the industry with high MCR evidence in Extract 3 eg. MCR for Soda is 93% for 3 firms [1]. (can accept other egs. in the case) (e) “It is up to consumers to actively choose to avoid fast fashion brands, and to support more sustainable and socially conscious labels in order to alleviate the devastating envir