September 2014 Paper 2

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PUNTE/MARKS: 150

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This question paper consists of 12 pages.

DEPARTMENT OF EDUCATION

DEPARTMENT VAN ONDERWYS

LEFAPHA LA THUTO

ISEBE LEZEMFUNDO

PROVINSIALE GEMEENSKAPLIKE VRAESTEL/

PROVINCIAL COMMON PAPER

GRAAD/GRADE 12

EKONOMIE/ECONOMICS

VRAESTEL/PAPER 2

SEPTEMBER 2014

Economics P2 Grade 12 2 September 2014

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INSTRUCTIONS AND INFORMATION

1. Answer FOUR questions as follows in the ANSWER BOOK:

SECTION A: COMPULSORY.

SECTION B: Answer TWO of the three questions.

SECTION C: Answer ONE of the two questions.

2. Answer only the required number of questions. Answers in excess of the required

number will not be marked.

3. Number the answers correctly according to the numbering system used in this

question paper.

4. Write the question number above each answer.

5. Read the questions carefully.

6. Start EACH question on a NEW page.

7. Leave 2–3 lines between subsections of questions.

8. Answer questions in full sentences and ensure that the format, content and

context of your responses comply with the cognitive requirements of the

questions.

9. Use only black or blue ink.

10. You may use a non-programmable pocket calculator.

11. Write neatly and legibly.



SECTION A (COMPULSORY)

QUESTION 1 30 MARKS – 15 MINUTES

1.1 Various options are provided as possible answers to the following questions.

Choose the answer and write only the letter (A–C) next to the question number

(1.1.1–1.1.8) in the ANSWER BOOK.

1.1.1 A perfectly competitive firm cannot make a long-term economic profit

because there are no …

A competitors.

B barriers to entry.

C fixed costs.

1.1.2 The slope of the demand curve for all imperfect markets is …

A downward sloping.

B upward sloping.

C horizontal.

1.1.3 Public goods are a cause of market failure because they are …

A rival

B divisible

C non-excludable

1.1.4 A firm who is producing at a quantity where average revenue is equal to

average cost is making a(n) …

A economic profit.

B economic loss.

C normal profit.

1.1.5 When consumers’ desire to purchase goods increases more quickly

than producers’ ability to supply goods, this can cause …

A cost-push inflation.

B demand-pull inflation.

C deflation.

1.1.6 An American who is entering South Africa is known as a(n) … tourist.

A inbound

B outbound

C business

1.1.7 An example of a renewable resource is …

A coal.

B oil.

C trees.



1.1.8 The … measures inflation and deflation for suppliers.

A CPI

B PPI

C CPIX

(8 x 2) (16)

1.2 Choose a description from COLUMN B that matches an item in COLUMN A. Write

only the letter (A–I) next to the question number (1.2.1–1.2.8) in the ANSWER

BOOK.

COLUMN A COLUMN B

1.2.1 price-taker

1.2.2 perfect information

1.2.3 natural monopoly

1.2.4 demerit good

1.2.5 inflation targeting

1.2.6 domestic tourism

1.2.7 acid rain

1.2.8 stagflation

A A product that has a negative externality

B Access to all relevant knowledge regarding a product and its market

C travel within the borders of one’s own country

D a market structure that occurs as a result of continuing economies of scale

E a situation in which low economic growth and sustained price increases occur at the same time

F a result of pollution that can cause serious damage to the environment

G a policy in which a central bank tries to keep price increases at a certain percentage

H a consumer or producer who has no control over the price

I a consumer or producer who has some control over the price

(8 x 1) (8)



1.3 Identify the concept described in each of the following statements. Write only the

term next to the question number (1.3.1–1.3.6) in the ANSWER BOOK.

1.3.1 a characteristic of goods in perfect competition in which they are exactly

the same

1.3.2 a usually illegal form of collusion in which businesses make a formal,

public agreement to limit competition

1.3.3 the combination of internal and external costs

1.3.4 price increases that occur as a result of the factors of production

becoming more expensive

1.3.5 Travel to places outside the borders of one’s own country

1.3.6 the gradual increase of the earth’s temperature as a result of

greenhouse gases

(6 x 1) (6)

TOTAL SECTION A: 30



SECTION B

Answer TWO of the three questions in this section in the ANSWER BOOK.

QUESTION 2 : MICROECONOMICS 40 marks – 20 minutes

2.1 Answer the following questions.

2.1.1 Name two market structures that are imperfect markets.

(2 x 1) (2)

2.1.2 Explain why firms will engage in price-fixing.

(2)

2.2 Study the graph below, and answer the questions that follow.

2.2.1 What important point does point S represent?

(2)

2.2.2 Why is the average cost curve always above the average variable cost

curve?

(2)

2.2.3 Explain why the demand curve is horizontal.

(2)

2.2.4 What quantity will a firm produce when the price is P? Explain why.

(2 x 2) (4)

MC

D

AC AVCPrice,Revenue,

Cost

Quantity

Individual Firm - Perfect Competition

MRAR

P

S

0




2.3.1 What is the name for this kind of graph?

(2)

2.3.2 What kind of inefficiency does point I represent?

(2)

2.3.3 If a firm is producing at point E, but point O is more reflective of

consumers’ demand, what kind of inefficiency is occurring?

(2)

2.3.4 Will a firm produce at point M? Why or why not?

(2 x 2) (4)

2.4 Explain what negative externalities are and why they are a cause of market failure.

(2 x 4) (8)

2.5 How do the different competition authorities in South Africa promote competition?

(2 x 4) (8)

[40]

Quantity of Good B

Quantity of Good A

Production Possibilities Frontier

0

B

B2

B1

B3

A A1

M

E

I

O



QUESTION 3 : CONTEMPORARY ECONOMIC ISSUES 40 marks – 20 minutes


3.1.1 Name two institutions that produce inflation data.

(2 x 1) (2)

3.1.2 Explain why tourism can cause improvements in infrastructure.

(2)

3.2 Study the table below, and answer the questions that follow.

Change in enterprise-surveyed formal non-agricultural employment by sector*

Sector

Change over one quarter at annualised

rate 3rd qr 2013

Change over four quarters to 3rd qr

2013

Cumulative job losses (-) gains (+)

Number Per cent Number Per cent

4th qr 2008 to

1st qr 2010

2nd qr 2010 to

3rd qr 2013

Finance, insurance, real-estate and business services

-6 500 -1,4 10 600 0,6 -163 400 86 400

Manufacturing -2 500 -0,9 -5 000 -0,4 -118 300 -37 500

Trade, catering and accommodation services

7 300 1,7 7 300 0,4 -75 700 62 000

Construction -3 600 -3,3 -7 700 -1,8 -52 100 7 200

Total mining -9 100 -6,9 -13 400 -2,6 -35 900 8 600

Electricity -200 -1,6 -600 -1,0 -3 300 6 200

Private transport, storage and communication services

-600 -0,9 -2 400 -0,9 -2 000 700

Community, social and personal services

4 500 4,3 1 500 0,3 13 400 12 700

Private sector -10 700 -0,7 -9 700 -0,2 -437 300 146 300

* Seasonally adjusted

Source: South African Reserve Bank, Quarterly Bulletin March 2014

3.2.1 Which two sectors listed above will be most affected by tourism?

(2 x 2) (4)

3.2.2 Why does tourism create more jobs than most other industries?

(2)

3.2.3 The data above is seasonally adjusted. How is tourism affected by

different seasons?

(2 x 2) (4)



3.3 Study the table below, and answer the questions that follow.

Headline consumer price inflation expectations Per cent, as surveyed in the fourth quarter of 2013

Average inflation expected for:

Financial analysts

Business representatives

Trade union representatives

All surveyed participants

2013 5,9 6,2 6,0 6,0

2014 5,6 6,4 6,1 6,1

2015 5,5 6,5 6,4 6,1

Source: Bureau for Economic Research, Stellenbosch University

3.3.1 Why is consumer price inflation referred to as “headline” inflation?

(2)

3.3.2 How do inflation expectations influence actual inflation?

(2)

3.3.3 Did financial analysts think that inflation was going to increase or

decrease over the following years?

(2)

3.3.4 Why are trade union representatives concerned about inflation, and

how do they use inflation statistics in their negotiations with employers?

(2 x 2) (4)

3.4 Explain how tourism can be effective in reducing poverty.

(4 x 2) (8)

3.5 How can the government use market-related measures to protect the

environment?

(4 x 2) (8)

QUESTION 4 : MICROECONOMICS AND CONTEMPORARY ECONOMIC ISSUES

40 marks – 20 minutes


4.1.1 Name two forms of collusion.

(2 x 1) (2)

4.1.2 Explain why externalities make it necessary for the government to

intervene to protect the environment.

(2)




4.2.1 What is the purpose of a minimum wage?

(2)

4.2.2 With the minimum wage above, what quantity of labour is demanded

and what quantity of labour is supplied?

(2 x 2) (4)

4.2.3 If the minimum wage were not present, how would the wage be

determined?

(2)

4.2.4 What is the unintended effect of the minimum wage shown above?

(2)

D

D

S

SWage

Quantity

Minimum Wage

W

Q0 Q1 Q2

UnemploymentW1

E



4.3 Study the extract below, and answer the questions that follow.

Within an environment of slowing output growth in 2013, the annual average headline consumer price inflation rate in South Africa remained contained within the inflation target range at 5,7 percent, having accelerated only marginally compared with the preceding year. Having slightly exceeded the inflation target range in July and August 2013, headline inflation moderated to 5,4 per cent in December, before quickening to 5,8 percent in January 2014. Recent movements in consumer price inflation can largely be ascribed to fluctuations in food and petrol price, with underlying inflationary pressures remaining fairly stable.

The inflationary impact of the lower exchange value of the rand has thus far been more visible in domestic producer price inflation than in consumer price inflation.

Source: South African Reserve Bank, Quarterly Bulletin March 2014

4.3.1 What is the inflation target range for South Africa?

(2)

4.3.2 Which measurement of inflation excludes the prices of things like food

and petrol?

(2)

4.3.3 Why would a lower exchange value of the rand cause inflation?

(2)

4.3.4 What is the difference between producer price inflation and consumer

price inflation?

(2 x 2) (4)

4.4 Explain why perfect competition is the most beneficial market structure for

consumers.

(4 x 2) (8)

4.5 Discuss why global warming is a problem and what can be done to fight it.

(2 x 4) (8)


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SECTION C

Answer ONE question in this section in the answer book.

STRUCTURE OF THE ESSAY MARK

ALLOCATION

Introduction Max. 2

Body:

Main part: Discuss in detail / In-depth discussion/ Examine / Critically discuss / Analyse / Compare / Evaluate / Distinguish / Explain / Assess / Debate

Max. 26

Additional part: Give own opinion / Critically discuss / Evaluate / Critically evaluate / Draw a graph and explain / Use the graph given and explain / Complete the given graph / Calculate/ Deduce / Compare / Explain / Distinguish / Interpret / Briefly debate

Max. 10

Conclusion Max. 2

TOTAL 40

QUESTION 5 : MODULE 40 marks – 35 minutes

The government sometimes intervenes in the market in order to make prices more

favourable for the consumer or producer.

Discuss how the government uses maximum prices, minimum prices and subsidies

to influence the price and what the effects of such interventions are

Draw a fully-labelled graph demonstrating a maximum price

QUESTION 6 : MODULE 40 marks – 35 minutes

Inflation is sometimes referred to as public enemy number one because of its negative

effects on society.

Discuss the different types of inflation and their causes, the ways of measuring

inflation, as well as the negative effects that inflation brings

Explain the different methods the South African Reserve Bank can use to fight

inflation

TOTAL SECTION C: 40

GRAND TOTAL: 150

September 2014 Paper 2

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