With reference to Figure 2, Extract A and your own knowledge, discuss the limitations of using GDP to compare living standards between countries. (14)

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance.
The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.

Quantitative skills assessed
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written, graphical, tabular and numerical forms.

Knowledge, Application and Analysis ( 8 marks) - indicative content
- Subsidies - cash grant to encourage production and consumption
- Reduces costs of production for rice growers
- Subsidy is used for capital goods, fertiliser and water

Subsidy diagram
Consumers
- Price paid lowers from Pe to \(\mathrm{P}_{1}\)
- Consumer surplus increases from ABP e to ACP \({ }_{1}\)
- Quantity consumed increases from \(\mathrm{Q}_{\mathrm{e}}\) to \(\mathrm{Q}_{1}\)

Producers
- Increase in amount received increases from \(0 \mathrm{P}_{\mathrm{e}}\) to 0 G for each item sold
- Producers' revenue increases from \(\mathrm{OP}_{\mathrm{e}} \mathrm{BQ}_{\mathrm{e}}\) to \(\mathrm{OGEQ}_{1}\)
- Producer subsidv is EFPeG
- Producers increase quantity sold, from \(\mathrm{Q}_{\mathrm{e}}\) to \(\mathrm{Q}_{1}\)

Government
- Increased welfare of its citizens as they can now access cheaper rice
- Popular amongst farmers
- Boosts export revenue income that can be used to buy capital goods and other imports
- Boosts rice production creating economic growth

Workers
- Higher output, results in more workers being needed
- Creates more job security whilst the subsidy is paid
- Producers have more revenue so can afford to pay more
Evaluation (6 marks) - indicative content
- Magnitude- depends on the level of the subsidy set- if too low then little impact on economic agents
Consumers
- Higher output may cause land to become less fertile and quality of the rice to fall
- Will not benefit those that prefer varieties grown in other countries
- Depends on the proportion of rice that makes up an Indian consumer's diet
Producers
- May become reliant on the subsidy
- May struggle if the subsidy is removed
- May see a decline in the quality of the crop and the amount they can
- Increased water use/fertiliser use reduces availability for farmers of other crops

Government
- Spending by the government will be the area ECP \({ }_{1} \mathrm{G}\), cost \(\$ 6.9\) bn in 2021
- Opportunity cost- the money spent on rice subsidies cannot be used elsewhere
- Removing the subsidies is difficult- resulted in mass protests and the subsidy was reinstated
Workers
- If the subsidy is removed and output falls- risk of job losses
- May keep workers in low-skilled jobs for longer