ECS1501/101/3/2017

Tutorial Letter 101/3/2017

Economics 1A

ECS 1501

Semesters 1 and 2

Department of Economics

This tutorial letter contains important information

about your module.

BARCODE
 CONTENTS

Page

1 INTRODUCTION .......................................................................................................................... 3
2 PURPOSE AND OUTCOMES ...................................................................................................... 3
2.1 Purpose ........................................................................................................................................ 3
2.2 Outcomes ..................................................................................................................................... 3
3 LECTURER AND CONTACT DETAILS ....................................................................................... 4
3.1 Lecturer and Department .............................................................................................................. 4
3.2 University ...................................................................................................................................... 4
3.3 Library........................................................................................................................................... 4
4 RESOURCES ............................................................................................................................... 5
4.1 Prescribed textbook ...................................................................................................................... 5
4.2 MO document and tutorial letters .................................................................................................. 5
4.3 myUnisa ........................................................................................................................................ 6
4.4 E-tutors ......................................................................................................................................... 6
4.5 Face-to-face tutors ........................................................................................................................ 7
5 STUDY PLAN ............................................................................................................................... 8
6 ASSESSMENT ........................................................................................................................... 10
6.1 Assignments ............................................................................................................................... 10
6.1.1 Due dates for assignments ......................................................................................................... 10
6.1.2 Submitting assignments .............................................................................................................. 10
6.1.3 Assignment marks ...................................................................................................................... 11
6.2 Examinations .............................................................................................................................. 12
6.2.1 Examination admission ............................................................................................................... 12
6.2.2 Examination paper format ........................................................................................................... 12
6.2.3 Examination script reviews or re-marks....................................................................................... 12
6.2.4 Marks .......................................................................................................................................... 13
7 CONCLUSION............................................................................................................................ 13
8 ASSIGNMENTS ......................................................................................................................... 14
FIRST SEMESTER ASSIGNMENTS ..................................................................................................... 14
SECOND SEMESTER ASSIGNMENTS................................................................................................. 31

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1 INTRODUCTION
Dear Student
Welcome to Economics 1A, an introduction to Microeconomics. We hope that you will find this
module interesting and rewarding. We will do our best to make your study of this module
successful. You will be well on your way to success if you start studying early in the semester
and if you resolve to do the assignments properly.

2 PURPOSE AND OUTCOMES

2.1 Purpose

When you are credited with this module, you will have a basic knowledge of microeconomic
theory and you will be able to apply, analyse and interpret basic microeconomic concepts and
principles. The purpose of this module is to gain insight into the solving of basic economic
problems in different economic systems and to understand how households and firms take
decisions and prices are determined.

2.2 Outcomes
The main outcomes of this module are the following:
You must be able to
 conceptualise and apply the main economic problem in different economic systems and
use a diagram to explain how the economy functions
 explain and conceptualise the interaction between consumers and producers in a
perfectly competitive goods market
 conceptualise, apply, calculate and evaluate the price decisions of firms under perfect
market conditions in both the short and the long run
 conceptualise the factors that influence the labour market
More detailed module outcomes and assessment criteria can be found in each learning unit.

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3 LECTURER AND CONTACT DETAILS
3.1 Lecturer and Department
Your lecturers are available to help you with any queries concerning the prescribed content via
myUnisa. You can use the following e-mail addresses to contact the department:
 First Semester ecs1501-17-s1@unisa.ac.za
 Second Semester ecs1501-17-s2@unisa.ac.za

Direct all academic enquiries about the content of this module (i.e. not administrative queries) to
us. Ensure that you have your study material and student number with you when you contact
us.
You may also contact the administration manager at the Department of Economics,
Mr ST Mzangwa, at 012 433 4661.

3.2 University

If you need to contact the University about matters not related to the content of this module,
consult the brochure my Studies @ Unisa, which you have received with your study material.
This brochure contains information on how to contact the University (e.g. who to write to for
different queries, important telephone numbers, addresses, and details of the times certain
facilities are open). Below you will find some important e-mail addresses for the departments
that you might need to contact.
You can also send you enquiry directly to the following addresses:
 assign@unisa.ac.za, for assignments queries
 despatch@unisa.ac.za, for study material queries
 exams@unisa.ac.za, for queries on the examination
 finan@unisa.ac.za, for account queries
 Study-info@unisa.ac.za, for application and registration queries
 myLifeHelp@unisa.ac.za, for assistance with myLife e-mail accounts
 MyUnisaHelp@unisa.ac.za, for assistance with myUnisa

3.3 Library

For detailed information, go to the Unisa website at http://www.unisa.ac.za/ and click on

Library.
The library has compiled a number of library guides:
 finding recommended reading in the print collection and e-reserves –
http://libguides.unisa.ac.za/request/undergrad
 requesting material – http://libguides.unisa.ac.za/request/request
 how to contact the library/finding us on social media/frequently asked questions –
http://libguides.unisa.ac.za/ask

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4 RESOURCES
4.1 Prescribed textbook

Your prescribed textbook for this module for this year is

Mohr, P & associates. 2015. Economics for South African
students. 5th edition. Pretoria: Van Schaik.
You can obtain the prescribed book from the official booksellers of the
University. Refer to the list of official booksellers and their addresses,
which are listed in the my Studies @ Unisa brochure. If you have
difficulty locating your book at these booksellers, contact the
Prescribed Book Section at 012 429 4152 or send an e-mail to
vospresc@unisa.ac.za
Those of you who were registered for ECS1501 and ECS1601 previously and who have a copy
of the 4th edition (2008) of the prescribed textbook may use this textbook. However, the tutorial
letter containing the study instructions for each learning unit (MO001/3/2017), which you will
receive in hard copy, is based on the 5th edition of the prescribed textbook. We shall publish a
document under Additional Resources that reconciles the page numbers of the 4th edition
with the MO document.
However, note that this is the only study material that will be supplied based on the 4th edition.
All other study material will be based on the 5th edition of the prescribed textbook. This includes
the 200 series of tutorial letters that contains the answers to the assignments, as well as the
Power Point slides for each learning unit. If you decide to use the 4th edition of the textbook,
you should keep in mind that the page references used in these documents will not correspond
to those of your prescribed textbook.

4.2 MO document and tutorial letters

The MO document (new name for the study guide) covers all the academic content of the
module, refers you to the prescribed textbook and gives some additional explanations. It is not
necessary to study any work other than that specified in the MO document.
It is imperative for your own success to read all the tutorial letters immediately. This tutorial
letter (101/2017) contains administrative information about this module as well as the
assignments that you need to complete during the semester (section 8).
Tutorial Letter 102 is a glossary that contains definitions of important economics terms and
concepts in English, Afrikaans, isiZulu, isiXhosa, Sepedi and Setswana.
Tutorial Letter 103 gives you more information on the examination.
Solutions to the questions in the assignments will be sent to you in Tutorial Letters 201, 202 and
203. Each will be sent a couple of days after the specific assignment are due.

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 4.3 myUnisa

With internet access, you can quickly get resources and information on the Unisa online
campus, myUnisa. You can start at the main Unisa website at http://www.unisa.ac.za and then
click on the myUnisa orange block. This will take you to the myUnisa website. To go to the
myUnisa website directly, go to https://my.unisa.ac.za. When you are on the myUnisa website,
click on the Claim UNISA Login on the left-hand side of the screen. You will then be prompted
to give your student number to claim your initial myUnisa details and to get your myLife login
details.
You will see ECS1501-17-S1 (S2 in second semester) in the row of modules
on the top of the webpage. If you cannot find the module you require, click on
More Sites. Click on the module you want to open.

Your lecturers will communicate with you on the main module site. On this site, you will receive
online lectures (under Learning Units). You will be notified of important arrangements by
means of the Announcements tool. If you have a question, you are welcome to use the
Discussion Forum tool. Post your question under the appropriate topic under Discussion
Forum.
You will find all the tutorial letters and examination papers of previous years under Official
Study Material. Please note that the MO document is under Additional Resources as a PDF
document and under Learning Units as online lectures.

4.4 E-tutors
Except for the main webpage, each of you will also be allocated to an e-tutor webpage. You will
find your e-tutor webpage on myUnisa. It will be named ECS1501-16-S1-xxE, where the xx
refers to your e-tutor group number. E-tutors have been appointed to assist you with any
academic problem that you may encounter. You can expect the following from your lecturer and
e-tutor:
 a weekly e-mail sent from your lecturer to your myLife address, informing you about
your study instructions for that week (You can also find these under Announcements
on the main module webpage.)
 Power Point slides on each learning unit that will become available under Additional
Resources on the main module site (These have been developed to take you through
each learning unit and provide additional explanations where necessary.)
 together with the above-mentioned slides, a quiz on each learning unit, which will be
made available on the main module site You are encouraged to discuss these questions
with your fellow students on the Discussion Forum on your e-tutor site. Your e-tutor
will also provide feedback under the Discussion Forum, but only if you initiate the
discussion, for example, by providing your suggested answer.

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 academic support (If you have any questions about the contents of the module, discuss
them with your e-tutor and fellow students on the Discussion Forum of your e-tutor
site.)

Should you find that your e-tutor is not providing these services, contact one of your lectures so
that we can investigate the issue. The Discussion Forum on the main
ECS1501-17-S1 webpage will only be monitored until you are allocated to e-tutor groups.

4.5 Face-to-face tutors

Lecturers will not present any discussion classes for this module but there will be face-to-face
(F2F) tutor classes. Unisa offers F2F tutor services for students as additional academic support
at the various Unisa regional learning centres throughout the country.
An F2F tutorial is an organised session in which students and tutor(s) meet regularly at a
common venue and at scheduled times to discuss course material. If you are interested in such
sessions, you are advised to consult a learning centre closest to you to enrol for tutorials. The
necessary notes for the F2F tutorials are available under Additional Resources on myUnisa.
To enrol for F2F tutorials, you must contact the Unisa regional learning centre nearest to you
directly. The Department of Economics cannot assist you with enrolling.
Note that tutors are not necessarily available for all modules and/or at all learning centres. The
Department of Economics has no means of providing you with any tutorial support if you did not
follow the abovementioned steps.

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5 STUDY PLAN
The best way to be successful in this module is to work diligently from the start to the end of the
semester. The following study programme was drawn up to help you work through the module
systematically. The lecturers will also work according to this study programme.
First Semester
WEEK
ACTIVITY
STARTING
Study learning unit 1 (based on chapter 1 in your textbook) and do the activities at the
30 January
end of each section. Work on Assignment 01.
Study learning unit 2 (based on chapter 2 in your textbook) and do the activities at the
6 February
end of each section. Work on Assignment 01.
Study learning unit 3 (based on chapter 3 in your textbook) and do the activities at the
13 February
end of each section. Work on Assignment 01.
Study learning unit 4 (based on chapter 4 in your textbook) and do the activities at the
20 February
end of each section. Work on Assignment 02.
Study learning unit 5 (based on chapter 5 in your textbook) and do the activities at the
27 February
end of each section. Work on Assignment 02.
Study learning unit 6 (based on chapter 6 in your textbook) and do the activities at the
6 March
end of each section. Work on Assignment 02.
Study learning unit 7 (based on chapter 7 in your textbook) and do the activities at the
13 March
end of each section. Work on Assignment 03.
Assignment 01 is due on 13 March.
Study learning unit 8 (based on chapter 9 in your textbook) and do the activities at the
20 March
end of each section. Work on Assignment 03.
Study learning unit 9 (based on chapter 10 in your textbook) and do the activities at the
27 March
end of each section. Work on Assignment 03.
Study learning unit 10 (based on chapter 12 in your textbook) and do the activities at
3 April
the end of each section. Work on Assignment 03.
10 April Revise learning units 1, 2, 3 and 4.

Assignment 02 is due on 10 April.

17 April Revise learning units 5, 6, 7 and 8.

Assignment 03 is due on 18 April.

24 April Revise learning units 9 and 10.

Work through the self-evaluation exercises at the end of each learning unit in your MO
1 May
document.

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Second Semester
WEEK
ACTIVITY
STARTING
Study learning unit 1 (based on chapter 1 in your textbook) and do the activities at the
17 July
end of each section. Work on Assignment 01.
Study learning unit 2 (based on chapter 2 in your textbook) and do the activities at the
24 July
end of each section. Work on Assignment 01.
Study learning unit 3 (based on chapter 3 in your textbook) and do the activities at the
31 July
end of each section. Work on Assignment 01.
Study learning unit 4 (based on chapter 4 in your textbook) and do the activities at the
7 August
end of each section. Work on Assignment 02.
Study learning unit 5 (based on chapter 5 in your textbook) and do the activities at the
14 August
end of each section. Work on Assignment 02.
Study learning unit 6 (based on chapter 6 in your textbook) and do the activities at the
21 August
end of each section. Work on Assignment 02.
Study learning unit 7 (based on chapter 7 in your textbook) and do the activities at the
28 August
end of each section. Work on Assignment 03.
Assignment 01 is due on 28 August.
Study learning unit 8 (based on chapter 9 in your textbook) and do the activities at the
4 September
end of each section. Work on Assignment 03.
Study learning unit 9 (based on chapter 10 in your textbook) and do the activities at the
11 September
end of each section. Work on Assignment 03.
Study learning unit 10 (based on chapter 12 in your textbook) and do the activities at
18 September
the end of each section. Work on Assignment 03.
25 September Revise learning units 1, 2, 3 and 4.

Assignment 02 is due on 26 September.

2 October Revise learning units 5, 6, 7 and 8.

Assignment 03 is due on 2 October.

9 October Revise learning units 9 and 10

Work through the self-evaluation exercises at the end of each learning unit in your MO
16 October
document.

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6 ASSESSMENT
6.1 Assignments
There are three assignments per semester, which are included in this tutorial letter. For
examination admission, you need to submit Assignments 01 or 02. However, you can obtain a
good semester mark by submitting all the assignments; therefore, we strongly advise you to
submit all three assignments. From experience, we know that students that have submitted all
assignments have a better chance of passing the module.

6.1.1 Due dates for assignments

Since due dates are communicated well in advance in this tutorial letter, no late assignments
will be considered. Enquiries about the receipt of assignments and marks should be directed to
the Directorate of Student Assessment Administration and not to the lectures. Refer to the my
Studies @ Unisa brochure for more information.

Semester 1 – assignment due dates

Learning units covered in

Assignment Unique number Due date
assignment
01 811910 13 March Learning units 1, 2 & 3
02 610175 10 April Learning units 4, 5 & 6
03 862972 18 April Learning units 7, 8, 9 & 10

Semester 2 – assignment due dates

Learning units covered in

Assignment Unique number Due date
assignment
01 769132 28 August Learning units 1, 2 & 3
02 840426 26 September Learning units 4, 5 & 6
03 784328 2 October Learning units 7, 8, 9 & 10

6.1.2 Submitting assignments

All three assignments consist of multiple-choice questions only and they must therefore be
completed on a mark-reading sheet. Each assignment will have its own unique assignment
number (e.g. 811910). Fill in this unique assignment number on the cover page of the
assignment in the space provided for it.
You may submit your assignments, which you must complete on mark-reading sheets, either by
post or online via myUnisa. Keep a copy of your completed assignments, especially Assignment
01 and 02, which is compulsory for examination admission. If your assignment is lost before it
can be assessed, a copy will prove to the Examination Department that you have completed the
assignment.

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For detailed information and requirements on assignments, see the brochure my Studies @
Unisa, which you received with your study material.

Online submission
Follow these steps to submit an assignment via myUnisa:

 Log in using your student number and password on myUnisa.

 Select your module.
 Click on Assessment Info in the menu on the left-hand side of the screen.
 Click on the assignment number you wish to submit.
 Follow the instructions on the screen.

If you experience any problems when submitting your assignment electronically (cancellation,
resubmission, etc.), e-mail the myUnisa helpdesk at myUnisaHelp@unisa.ac.za.

If the status changes to RESUBMIT, it means that the assignment was received but you can
resubmit it if you like. Just note that resubmitting will overwrite all previous submissions and it
will be taken as the final submission. Therefore, if you resubmit after the due date, your
assignment will be considered late and will not be marked.
Assignments that are submitted by fax or e-mail will not be accepted and will not be marked.

Assignment boxes
Note that the date of receipt appearing on the system (myUnisa) may differ from the date at
which you deposited your assignment at a Unisa assignment box (e.g. Pretoria, Johannesburg,
Nelspruit, etc). The date on myUnisa is the date at which your assignment reached Unisa. The
assignment boxes are emptied regularly and the date at which it is received in the box will be
stamped on the assignment envelope. This means that, if your assignment is submitted at any
Unisa box on or before the due date, it will still be marked and contribute to your semester mark
– even if the actual capturing date on the system is after the due date.

6.1.3 Assignment marks

One mark will be awarded for each correct answer. No marks will be deducted for incorrect
answers. Assignment 01 and Assignment 02 will each contribute 30% to the semester mark,
while Assignment 03 will contribute 40% to your semester mark. To calculate you year mark
(semester mark) use the following formula:
𝑌𝑒𝑎𝑟 𝑚𝑎𝑟𝑘 = (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝑎𝑠𝑠.1 × 0.3) + (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝑎𝑠𝑠.2 × 0.3) + (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒𝑎𝑠𝑠.3 × 0.4)

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 6.2 Examinations

This module is offered over a semester period of approximately 15 weeks. This means that if
you are registered for the first semester, you will write the examination in May/June 2017 and
the supplementary examination in October/November 2017. If you are registered for the second
semester, you will write the examination in October/November 2017 and the supplementary
examination in May/June 2018.

6.2.1 Examination admission

For admission to the examination, you must submit Assignment 01 or Assignment 02. To
maximise your chances of obtaining a good semester mark, to gain more insight into the
module, and to achieve the intended learning outcomes, it is strongly recommended that you
submit all the assignments.

6.2.2 Examination paper format

Examinations are a formal two-hour examination session. The examination format recently
changed; examinations will now have two parts:

 Section A will be a written part. More information on how to prepare for the
written part will be given in Tutorial Letter 103. [30]
 Section B will consist of 35 multiple-choice questions. [35 x 2 = 70]
All the learning units will be covered in the examination. You can find some examination papers
on myUnisa, which will be posted under Official Study Material. For more information on the
format and content of the examination, please consult Tutorial Letter 103, also available under
Official Study Material.

6.2.3 Examination script reviews or re-marks

The applications for and the administration of re-marks of examination scripts are handled
solely by the Examinations Section and not by the academic departments. If you would like your
examination script to be reviewed, send an e-mail to scripts@unisa.ac.za or if you would like to
apply for a re-mark, send an e-mail to remark@unisa.ac.za.

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6.2.4 Marks
Your final mark is based not only on your examination mark but also on your semester mark. If
your final mark (as calculated by the method below) is 50% or more, you will pass ECS1501. If
your final mark is less than 50%, but between 40% and 49%, you will not pass ECS1501, but
will qualify for a supplementary examination. Irrespective of the semester mark obtained, you
must obtain a subminimum of 40% in the examination.

Use the following formula to calculate your final mark (if your examination mark is more than
40%):

𝑀𝑎𝑟𝑘𝑓𝑖𝑛𝑎𝑙% = (𝑀𝑎𝑟𝑘𝑠𝑒𝑚𝑒𝑠𝑡𝑒𝑟% × 0.2) + (𝑀𝑎𝑟𝑘𝑒𝑥𝑎𝑚% × 0.8)

In line with the Unisa assessment policy, your semester mark will not be considered if you have
received less than 40% in the examinations. In such an event, the mark you obtained in your
examination will be your final mark. In other words, if your semester mark was 50% but you
received 30% for the examination, your final mark will be 30%.

7 CONCLUSION
Do not hesitate to contact us, your lecturers, if you are experiencing problems with the content
of this tutorial letter or with any aspect of the module.

We wish you a fascinating and satisfying journey through the learning material and trust that
you will complete the module successfully.

Please work hard and enjoy this module.

Regards

ECS1501 lecturers

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8 ASSIGNMENTS
FIRST SEMESTER ASSIGNMENTS

ASSIGNMENT 01
UNIQUE NUMBER 811910
Due date: 13 March 2017
Content: Learning units 1 to 3
Weight: 30% of your semester mark
Submit: Via myUnisa or on a mark-reading sheet
This assignment was compiled by Mr Thabang Malatji.

1.1 Which one of the following statements is incorrect?

[1] Economics is the study of money.

[2] Economics is concerned with scarcity
[3] Economics can be described as the study of choice.
[4] Economics attempts to satisfy unlimited wants.

1.2 Opportunity cost refers to the value of _______

[1] all choices given up by individuals, firms and government.

[2] time forgone when a choice is made.
[3] the best alternative given up when a choice is made.
[4] all costs incurred when a choice is made.

Use the following graph, which shows the production possibilities curve (PPC) of the Wild Coast
Community Farm, to answer questions 1.3 to 1.6.

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1.3 If the Wild Coast Community Farm is producing at point H, which of the following
statements is incorrect?

[1] It is impossible to increase the production of one good without reducing the
production of the other good.
[2] Only 2 baskets of fish and 70 kg of potatoes are made available to consumers.
[3] The resources of Wild Coast Community Farm are not employed fully and efficiently.
[4] It is possible to produce either more kilograms of potatoes or more baskets of fish
using the same available resources.

1.4 Points H, D and G in the graph can be classified respectively as __________ levels of
production.

[1] efficient, inefficient and possible

[2] possible, efficient and impossible
[3] possible, possible and possible
[4] impossible, efficient and impossible

1.5 If an improved technique for catching fish and farming potatoes is invented, the PPC could
shift in such a way that the Wild Coast Community Farm can produce ________

[1] more than 5 baskets of fish and only 100 kg of potatoes.

[2] less than 5 baskets of fish and 100 kg of potatoes.
[3] a maximum of 5 baskets of fish and 100 kg of potatoes.
[4] more than 5 baskets of fish and more than 100 kg of potatoes.

1.6 What is the opportunity cost to Wild Coast Community Farm of moving from point E to C?

[1] 45 kg of potatoes for 2 baskets of fish

[2] 2 baskets of fish for 45 kg of potatoes
[3] 2 baskets of fish for 85 kg of potatoes
[4] 85 kg of potatoes for 2 baskets of fish

1.7 Which of the following is an example of a microeconomic issue?

[1] an increase in the rate of economic growth in Sub-Saharan Africa

[2] the total production of goods and services in the South African economy
[3] the fluctuations in the price of petrol in South Africa
[4] comparison of the net exports between South Africa and Mozambique

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1.8 Which of the following is a positive statement?

[1] In December 2015, the rand (ZAR) depreciated to a record low of R15 against the
US dollar.
[2] People with a degree in Economics make better decisions compared to those with a
degree in Logistics.
[3] The South African Reserve Bank’s repo rate of 7% is too high.
[4] An unemployment rate of 25% is more harmful than an inflation rate of 6%.

1.9 Which one of the following characterises the command system?

[1] Customs and beliefs inform economic behaviour.

[2] Economic activities are coordinated by the central authority.
[3] All factors of production are owned by the state.
[4] Decision-making is coordinated through the market mechanism.

1.10 Which of the following is most promoted by a centrally planned economy?

[1] private ownership of factors of production, no competition, self-interest

[2] public ownership of factors of production, no competition, no self-interest
[3] government ownership of factors of production, competition, self-interest
[4] centralised decision-making, competition, no self-interest

1.11 In a market system, the decision of “what to produce” is influenced by _____

[1] the availability of resources to be used in production.

[2] the cost of factors of production.
[3] consumer preference and profitability of goods and services.
[4] joint preferences of consumers and the central government.

1.12 What are the three major flows in the economy?

[1] total production, total expenditure and total savings

[2] total investment, total consumption and total production
[3] total spending, total production and total income
[4] total income, total spending and total savings

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1.13 Which one of the following options correctly lists examples of stock variables?

[1] population, wealth and immigration

[2] deposits, interest, capital and bank reserves
[3] assets, liabilities and depreciation
[4] loans, population and bottled water

1.14 What are the factors of production used in the production of goods and services?

[1] labour, money, machinery and land

[2] capital, money, entrepreneurship and natural resources
[3] land, labour, financial capital and entrepreneurship
[4] natural resources, labour, capital and entrepreneurship

1.15 Which one of the following is not an example of a capital good?

[1] technology
[2] a bridge
[3] a truck
[4] a sewing machine

1.16 If Maria invents a new product and sells it to retailers, what type of remuneration will she
earn?

[1] a wage
[2] income
[3] a profit
[4] interest

1.17 Total expenditure on production consists of _______

[1] total consumption expenditure, total capital formation, total government expenditure
and net export.
[2] total consumption expenditure, total household expenditure, total government
expenditure and net export.
[3] total consumption expenditure, total investment expenditure, transfer payment and
net export.
[4] total consumption expenditure, total private savings, total government expenditure
and net export.

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1.18 According to the circular flow of production, income and spending, ______

[1] households are on the demand side of both the goods market and the factor market.
[2] firms are then on the supply side of the factor market and on the demand side of the
goods market.
[3] households are on the supply side of both the goods market and the factor market.
[4] firms are on the demand side of the factor market and on the supply side of the
goods market.

Use the following diagram of the circular flow of income and spending to answer questions 1.19
and 1.20.

1.19 What do box A and arrow B represent?

[1] A = firms; B = spending on factors of production

[2] A = households; B = consumer spending on goods and services
[3] A = households; B = spending on factors of production
[4] A = households; B = income (wages, interest, etc)

1.20 What does arrow C represent?

[1] spending by firms on factors of production

[2] spending by households on the factor market
[3] income (sales revenue) to firms, generated on the factor market
[4] income (profit) to households, generated on the factor market

18
 ECS1501/101/3/2017

As part of our drive to improve our service, we need to get a clearer picture of our student
profiles. To help us in this, please answer the following questions (1.21 to 1.24):

1.21 Did you have mathematics in high school?

[1] Yes, and I got more than 60%

[2] Yes and I passed
[3] Yes but I did not pass
[4] I only had Mathematical literacy
[5] No.

1.22 What is your home language?

[1] Zulu
[2] Sepedi
[3] Afrikaans
[4] English
[5] Other

1.23 Which of the following best descripts your internet access?

[1] I have unlimited Internet access on a computer or laptop.

[2] I have limited internet access on a computer or laptop.
[3] I only have internet access on my smartphone.
[4] I do not have any access to the internet.

1.24 Which of the following is true about you?

[1] I am a full time student.

[2] I am a part time student.

19
 ASSIGNMENT 02
UNIQUE NUMBER 610175
Due date: 10 April 2017
Content: Learning units 4 to 6
Weight: 30% of your semester mark
Submit: Via myUnisa or on a mark-reading sheet
This assignment was compiled by Mr Willie le Roux.

2.1 For a particular group of 10 students, their ordering by height (shortest to tallest) is exactly
the same as their ordering by weight (lightest to heaviest). Within this group of students,
height and weight are _____

[1] negatively correlated.

[2] positively correlated.
[3] inversely related.
[4] unrelated.

2.2 The law of demand implies that _____

[1] as the demand for bunny chows increases, the price of a bunny chow will fall.
[2] as the price of a bunny chow increases, the quantity of bunny chows demanded will
decrease.
[3] as income increases, the quantity of bunny chows demanded will increase.
[4] as the price of a bunny chow increases, the quantity of bunny chows demanded will
increase.

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Question 2.3 is based on the diagram below.

2.3 At a price of R5 the __________ is 500.

[1] equilibrium quantity

[2] quantity demanded
[3] demand
[4] market clearing quantity

2.4 What does the law of supply imply?

[1] The price of bunny chows and the quantity of bunny chows supplied are inversely
related.
[2] As the price of bunny chows increases, the more bunny chows will be sold.
[3] As the supply of bunny chows increases, the price of bunny chows will increase.
[4] As the price of bunny chows decreases, the quantity of bunny chows supplied will
decrease.

2.5 Kgomotso decided to start selling lemonade on her street. The other kids in the
neighbourhood noticed that Kgomotso was making a lot of money selling lemonade. These
kids decided to open their own lemonade stands. What will happen when they open their
own lemonade stands?

[1] The quantity of lemonade supplied will increase.

[2] The supply of lemonade will increase.
[3] The supply of lemonade will not be affected.
[4] The quantity of lemonade demanded will decrease.

21
Question 2.6 is based on the following diagram which shows the supply of fish.

2.6 What could be the reason for the shift of the supply curve for fish from S to S 1?

[1] an increase in the number of fishing boats operating

[2] an increase in the cost of building fishing boats
[3] an increase in the cost of distributing fish
[4] a decrease in the price of fish

2.7 Antoinette is willing to pay R60 to see the movie, Forest Gump, for the fourth time. She
finds a theatre showing Forest Gump for R20. What is Antoinette’s consumer surplus?

[1] R0
[2] R20
[3] R40
[4] R60

2.8 If Busani, a butcher, sells meat at a price exactly equal to the price he is willing to sell it
for, then _____

[1] his producer surplus is R0.

[2] his willingness to sell is less than his producer surplus.
[3] his producer surplus is negative.
[4] he will never make a profit.

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 ECS1501/101/3/2017

2.9 When the price of mangoes is ______ the equilibrium price, we would expect there to be a
______, causing the market to put ______ pressure on the price of mangoes until it reverts
back to the equilibrium price.

[1] below; surplus; upward

[2] below; shortage; downward
[3] above; shortage; downward
[4] above; surplus; downward

2.10 If the market for bread is described by the following equations

𝑄𝑑 = 210 − 0,6𝑃 and 𝑄𝑠 = −96 + 1,1𝑃
what are the equilibrium price and equilibrium quantity for bread?

[1] P = 67; Q = 170

[2] P = 180; Q = 102
[3] P = 228; Q = 73
[4] P = 612; Q = 28

2.11 A relative price is _____

[1] the ratio of one price in terms of another.

[2] the difference between one price and another.
[3] the absolute value of price differences.
[4] the relative effect of a change in price on the quantity demanded.

2.12 Some studies have shown that eating chocolate before a test can increase brain activity,
thereby causing students to score higher in the examination. At the time of the release of
these studies the major cocoa producing countries are all experiencing severe dry periods
as a result of the El Nino effect. What is the likely outcome of this scenario on the market
for chocolates?

[1] a higher equilibrium price but the equilibrium quantity could either increase, decrease
or stay the same
[2] a higher equilibrium quantity but the equilibrium price could either increase, decrease
or stay the same
[3] a lower equilibrium quantity but the equilibrium price could either increase or stay the
same
[4] both the equilibrium price and equilibrium quantity will decrease

23
2.13 If apples and pears are substitutes in consumption, then a disease that affects apple trees
will most likely _____

[1] reduce the price of both apples and pears.

[2] increase the price of both apples and pears.
[3] reduce the price of apples and increase the price of pears.
[4] increase the price of apples and reduce the price of pears.

2.14 Suppose the government enforces an effective price ceiling for beer, one would expect
_____

[1] the quantity of beer offered for sale to be less than the quantity purchased.
[2] the quantity of beer offered for sale to be more than the quantity purchased.
[3] the quantity of beer offered for sale to be the same as the quantity purchased.
[4] that the market for beer won’t be affected.

2.15 What does the price elasticity of demand measure?

[1] the slope of the demand curve

[2] the responsiveness of the quantity demanded of a good to changes in the price of the
good
[3] how sensitive the quantity demanded of a good is to changes in income
[4] how sensitive the price is to changes in the quantity demanded

2.16 What happens to the price elasticity of the demand of coal when the quantity of coal
demanded is measured in kilograms instead of tons?

[1] The price elasticity will be more elastic.

[2] The price elasticity will be less elastic.
[3] The price elasticity will be neither more nor less elastic.
[4] The price elasticity will be undefined.

2.17 The price elasticity for the demand for food is most likely to be _____

[1] 0,3.
[2] 1,8.
[3] 2,6.
[4] 5,2.

24
 ECS1501/101/3/2017

2.18 A 10 percent increase in the price of spinach results in a 20 percent decrease in the
quantity of spinach demanded. What is the price elasticity of demand for spinach?

[1] 0,5
[2] 2
[3] 10
[4] 20

2.19 If a lower price of crude oil leads to lower oil revenue for oil producing countries, this
suggests that the world demand for oil is _____

[1] elastic.
[2] inelastic.
[3] unitary elastic.
[4] perfectly elastic.

2.20 What type of goods are gas and electricity if the cross elasticity of demand between these
two goods are positive?

[1] normal goods

[2] inferior goods
[3] complements
[4] substitutes

25
 ASSIGNMENT 03
UNIQUE NUMBER 862972
Due date: 18 April 2017
Content: Learning units 7 to 10
Weight: 40% of your semester mark
Submit: Via myUnisa or on a mark-reading sheet
This assignment was compiled by Ms Kafayat Amusa.

3.1 What does the term “utility” mean in economics?

[1] the amount an individual is willing to spend on certain goods

[2] the satisfaction a person receives from spending all their income
[3] the degree of satisfaction a consumer receives from consuming a good or service
[4] the cost-minimising process of a consumer

3.2 Tito’s Buffet provides an “all-you-can-eat” service on Sundays. If Jade maximises her
utility, then the marginal utility of the last bite that Jade eats will _____

[1] be equal to zero.

[2] be greater than the second to last bite of food Jade eats.
[3] be equal to the price of the meal.
[4] depend on how much Jade likes to eat buffet meals.

3.3 Marginal utility is defined as _____

[1] the utility obtained from consumption of the last unit of a good.
[2] the change in total utility resulting from an increase in the units of a good consumed.
[3] the difference between units of a good consumed that increases total utility by one
unit.
[4] total utility divided by the number of units consumed.

26
 ECS1501/101/3/2017

3.4 According to the law of diminishing marginal utility _____

[1] total utility decreases at a decreasing rate as consumption of a good or service

increases.
[2] the consumption of additional units of a good or service adds less and less to total
utility.
[3] marginal utility declines faster than total utility as more of a good or service is
consumed.
[4] as more units of a good or service are increasing beyond a certain point, total utility
first declines and then increases.

3.5 In economics, "the long run" is referred to as ________

[1] a period in which the amounts of labour are fixed.

[2] a period in which the amounts of capital are variable.
[3] a period in which the amounts of all factors of production can be changed.
[4] a period in which the amounts of all factors of production are fixed.

3.6 With regard to production, which of the following statements correctly explains diminishing
returns?

[1] The marginal product of a factor is falling and negative.

[2] The marginal product of a factor is positive but falling.
[3] The marginal product of a factor is positive and rising.
[4] The marginal product of a factor is constant.

3.7 The law of diminishing marginal returns refers to the situation in which _______ eventually
declines as more of the variable input is employed, given a certain amount of the fixed
input.
[1] average revenue
[2] marginal product
[3] average cost
[4] marginal cost

3.8 If the average fixed cost and average variable cost for producing 6 units of shoes are R64
and R16, respectively, what is the total cost at this level of output?

[1] R10,66
[2] R80
[3] R480
[4] R1 040

27
Use the table below to answer questions 3.9 and 3.10 that follow.

Q AFC AVC AC TFC TVC TC

1 50 110 60
2 25 95 190 240
3 16,67 146,67 440,01
4 156 170 630

3.9 What is the TFC at each level of output?

[1] 10
[2] 25
[3] 50
[4] 60

3.10 What is the AVC for the third level of output?

[1] 61
[2] 130
[3] 160
[4] 300

3.11 What will happen if a shoe firm sells its shoes at a price lower than the opportunity cost of
the inputs used in the production process?

[1] The firm will make both accounting and economic profits.
[2] The firm will make both accounting and economic losses.
[3] The firm will possibly make an economic profit and an accounting loss.
[4] The firm will possibly make an accounting profit but will make an economic loss.

3.12 If a perfectly competitive firm’s marginal cost is greater than its marginal revenue at its
current level of production, what must the firm do to increase its profit?

[1] Reduce the price of its product.

[2] Decrease its output.
[3] Increase the price of its product.
[4] Increase its output.

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 ECS1501/101/3/2017

3.13 A profit-maximising firm sells its product for R300, but continues to produce even though it
is making a loss. This suggests that _______

[1] the marginal cost is less than the price.

[2] the average fixed cost is less than the price.
[3] the average variable cost is less than the price.
[4] the average total cost is less than the price.

3.14 A perfectly competitive firm is described as a market with _______

[1] a few firms producing differentiated goods.

[2] a few buyers, many sellers and the production of differentiated goods.
[3] many buyers, many sellers and the production of homogenous goods.
[4] a large number of firms that each individually sets the price of their goods.

3.15 The determination of the price of a product in a perfectly competitive market is where the
_______

[1] supply and demand curves intersect.

[2] quantity supplied and quantity demanded intersect.
[3] marginal cost equals the price of the product.
[4] marginal revenue equals the marginal cost.

3.16 When a perfectly competitive industry is in a long-run equilibrium, all the firms in the
industry will _______

[1] earn an economic profit.

[2] make an economic loss.
[3] earn a normal profit.
[4] earn zero profits.

3.17 At what price should a firm produce to maximise profits in a perfectly competitive market?

[1] where price equals marginal cost

[2] where price equals marginal revenue
[3] where price equals total revenue
[4] where price equals average revenue

29
3.18 Which of the following correctly characterises a perfectly competitive labour market?

[1] a large number of firms and a large number of workers

[2] imperfect information
[3] employees and employers having individual control over the market wage rate
[4] very few skilled workers

3.19 What is the most probable reason that market labour supply curves are upward sloping?

[1] Higher wages are a deterrent to workers.

[2] Higher wages attract workers away from their second-best alternatives.
[3] As the price of labour rises, the demand for labour increases.
[4] The market labour supply curve is perfectly elastic at the market-determined wage
rate.

3.20 Which of the following is true of the profit-maximising level of employment in a perfectly
competitive labour market?

[1] The marginal revenue product equals the value of marginal product.
[2] The marginal revenue product equals the marginal cost of labour.
[3] The marginal product equals the marginal revenue product.
[4] The marginal product equals the marginal cost of labour.

30
 ECS1501/101/3/2017

SECOND SEMESTER ASSIGNMENTS

ASSIGNMENT 01
UNIQUE NUMBER 769132
Due date: 28 August 2017
Content: Learning units 1 to 3
Weight: 30% of your semester mark
Submit: Via myUnisa or on a mark-reading sheet
This assignment was compiled by Mr Willie le Roux.

1.1 Economics is _____

[1] a study of the ethics of making money.

[2] the study of how scarce resources are allocated in an attempt to satisfy unlimited
wants.
[3] the study of direct and indirect relationships between inputs and outputs in various
production methods.
[4] a sub discipline of business management.

1.2 Scarcity requires households to _____

[1] cooperate.
[2] compete.
[3] trade.
[4] make choices.

Questions 1.3 to 1.6 are based on the following diagram.

31
1.3 At what point is the economy experiencing a high rate of unemployment?

[1] point A
[2] point B
[3] point C
[4] point D

1.4 If the economy is at point B and wishes to increase its output of food, it must _____

[1] put unemployed resources to work.

[2] also increase the production of clothing.
[3] reduce the output of clothing.
[4] move the economy to point D.

1.5 Celia is a potato peeler for CanCan Foods. She decides to quit her job and instead work
as a seamstress at CoverUp Clothing. This would cause _____

[1] an outward shift of the production possibilities curve.

[2] an inward shift of the production possibilities curve.
[3] a movement towards point D.
[4] a movement along the production possibilities curve.

1.6 Suppose a scientific breakthrough makes free solar power available in unlimited quantities.
The likely effect would be to move ______

[1] from point A to point B.

[2] from point A to point C.
[3] from point B to point C.
[4] towards point D.

1.7 Which one of the following must be held constant when drawing a production possibilities
curve?

[1] the total resources available

[2] the allocation of resources between alternative uses
[3] the buying power of consumers
[4] the unemployment rate

32
 ECS1501/101/3/2017

1.8 A macroeconomist might be concerned with the effect of _____

[1] big companies colluding to exploit the consumer.

[2] taxation on unemployment rates.
[3] agricultural wage levels on the price of wheat.
[4] the oil price on motor vehicles sales.

1.9 How are resources allocated in most societies?

[1] by decree of a central planner or the government

[2] through the combined actions of numerous households and firms
[3] based on the policy directives issued by central banks
[4] by a relatively few large corporations

1.10 How is the allocation of output between consumer goods and military equipment
determined in a country such as South Africa?

[1] the price mechanism

[2] government decisions
[3] the market system
[4] the military history of South Africa

1.11 How does Adam Smith’s “invisible hand” direct economic activity?

[1] through subconscious messages

[2] through mass media advertising
[3] through social media pages
[4] through prices

1.12 The major flows in the economy are _____

[1] total production, net exports and personal income.

[2] net national income, net national product and savings.
[3] total production, total income and total spending.
[4] investment, capital stock and imports.

33
1.13 When considering the following economic variables, we can say _____

[1] capital, wealth and natural resources are stock variables, whereas investment, profit
and loss are flows.
[2] capital, wealth and income are stock variables, whereas investment and profit are
flows.
[3] investment, income and profit are stock variables, whereas capital, wealth and
natural resources are flows.
[4] saving is a stock variable, but investment is a flow.

1.14 In the circular flow model, ________ represent a real flow.

[1] wages paid to labour

[2] household savings
[3] goods consumed by households
[4] taxes collected by government

1.15 In the circular flow model, ________ represent/s a nominal flow.

[1] goods consumed by government

[2] labour employed by firms
[3] goods exported to other countries
[4] incomes received by households

1.16 Thembi works in a chocolate factory. Overtime worked by her is considered _____ and
she earns _____.

[1] entrepreneurship; profit

[2] labour; wages
[3] labour; profit
[4] human capital; interest

1.17 What is human capital?

[1] machinery that meets or exceeds the Department of Labour’s health and safety
regulations for use by humans
[2] all capital owned by individuals or corporations, but not by governments
[3] the skill and knowledge of workers
[4] all capital owned by individuals, but not by firms or governments

34
 ECS1501/101/3/2017

1.18 How would an economist view a commercial forest that provides raw material inputs for a
wood pulp mill?

[1] as part of the factors of production, natural resources

[2] as part of the capital stock of the economy
[3] as the unproductive use of land and therefore not a factor of production
[4] as an unproductive asset, since it may take several years before the forest is ready
for harvesting

1.19 When Herman got hired as a gardener, he bought a six-pack of beer to celebrate. He is
therefore _____

[1] a buyer in the market for goods and a seller in the market for factors of production.
[2] a seller in the market for goods and a buyer in the market for factors of production.
[3] a buyer in the market for goods and a buyer in the market for factors of production.
[4] a seller in the market for goods and a seller in the market for factors of production.

1.20 Aggregate spending on South African production comprises _____

[1] private consumption, government spending, private investment and net exports.
[2] private consumption, government transfers, private investment and net exports.
[3] private consumption, government investment, private savings and net exports.
[4] private consumption, government spending, private investment and spending by
foreigners on South African goods.

As part of our drive to improve our service, we need to get a clearer picture of our student
profiles. To help us in this, please answer the following questions (1.21 to 1.24):

1.21 Did you have mathematics in high school?

[1] Yes, and I got more than 60%

[2] Yes and I passed
[3] Yes but I did not pass
[4] I only had Mathematical literacy
[5] No.

35
1.22 What is your home language?

[1] Zulu
[2] Sepedi
[3] Afrikaans
[4] English
[5] Other

1.23 Which of the following best descripts your internet access?

[1] I have unlimited Internet access on a computer or laptop.

[2] I have limited internet access on a computer or laptop.
[3] I only have internet access on my smartphone.
[4] I do not have any access to the internet.

1.24 Which of the following is true about you?

[1] I am a full time student.

[2] I am a part time student.

36
 ECS1501/101/3/2017

ASSIGNMENT 02
UNIQUE NUMBER 840426
Due date: 26 September 2017
Content: Learning units 4 to 6
Weight: 30% of your semester mark
Submit: Via myUnisa or on a mark-reading sheet
This assignment was compiled by Ms Kafayat Amusa.

2.1 Demand is defined as _____

[1] the amount of goods and services a consumer needs.

[2] the amount of goods and services a producer can produce.
[3] the amount of goods and services an individual is willing to buy, given his/her ability
to afford the goods and services at the given market price.
[4] the amount of goods and services a producer is willing to sell at the given market
price.

2.2 Why does market demand differ from individual demand?

[1] Market demand is concerned with the ability of the market to afford goods and
services.
[2] Market demand is concerned with demand from each individual.
[3] Market demand comprises all quantities demanded by all individuals in the economy
at each price level.
[4] Market demand comprises all quantities demanded by a single individual in the
economy at one price level.

2.3 A week ago, Themba bought five 1kg bags of potatoes at R5 each. This week she bought
two 1kg bags of potatoes at R15 each. What can we conclude from Themba’s experience?

[1] The rise in the price of a kilogram of potatoes has resulted in a decrease in Themba’s
demand for potatoes.
[2] The rise in the price of a kilogram of potatoes has resulted in a decrease in the
quantity of potatoes Themba demanded.
[3] There is a negative relationship between the price of potatoes and the demand for
potatoes.
[4] There is a positive relationship between the price of potatoes and the quantity
demanded of potatoes.

37
Use the figure below to answer question 2.4.

2.4 If Sarah’s annual salary increases from R300 000 to R500 000, what change would one
expect in the figure above?

[1] Sarah’s quantity demanded of socks will increase from point E to point A.
[2] Sarah’s quantity demanded of socks will increase from point B to point D.
[3] Sarah’s demand for socks will increase from point B to point D.
[4] Sarah’s demand for socks will increase from point A to point E.

2.5 According to the law of supply_____

[1] quantity supplied and price are positively related.

[2] quantity supplied and price are inversely related.
[3] quantity demanded and price are positively related.
[4] quantity supplied and quantity demanded are positively related.

2.6 Beef R Us is a mass producer of beef in Gauteng. If the price of meat rises by 10% from
2016 to 2017, which of the following is mostly likely to happen?

[1] The supply of meat by Beef R Us will decrease.

[2] The quantity supplied of meat by Beef R Us will increase.
[3] The quantity demanded of meat will increase.
[4] The demand for beef will increase.

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 ECS1501/101/3/2017

2.7 In late 2016, cases of mad-cow disease were reported in cattle in Kuvukiland. Cattle
farmers therefore had to take extra precautions in terms of finding healthier grazing areas
and providing safe drinking water for their cattle. Which of the following shows the impact
of this disease correctly?

[1] [2]

[3] [4]
S

2.8 Which of the following will cause an increase in supply?

[1] An increase in the wage rate from R3 000 to R5 000

[2] A decrease in labour productivity by 60 per cent
[3] The planting of non-resistant drought crops in a drought period
[4] A decrease in the water tariff in the grape-growing regions of South Africa

39
Use the following functions that show quantity demanded and quantity supplied to answer
questions 2.9 and 2.10.

𝑄𝐷 = 600 − 30𝑃
𝑄𝑆 = −300 + 120𝑃

2.9 What are the equilibrium price and quantity?

[1] P = R10 and Q = 300.

[2] P = R2 and Q = 540.
[3] P = R6 and Q = 420.
[4] P = R2,50 and Q = 500.

2.10 If the price is R8, then there will be a _____

[1] shortage of 300 units.

[2] shortage of 660 units.
[3] surplus of 360 units.
[4] surplus of 300 units.

2.11 A price floor imposed by government above the equilibrium price will _____

[1] result in a market shortage of the product.

[2] cause quantity demanded to exceed quantity supplied.
[3] cause quantity supplied to exceed quantity demanded.
[4] have no impact on the market of the product.

2.12 What is consumer surplus in economics?

[1] Consumer surplus is computed by subtracting the quantity demanded from the
quantity supplied.
[2] Consumer surplus is the difference between the price a consumer pays for a good
and the price he/she is willing to pay for the good.
[3] Consumer surplus is the difference between what consumers planned to spend and
what producers planned to spend.
[4] Consumer surplus is the dead-weight loss from both the producer and the consumer
surpluses.

40
 ECS1501/101/3/2017

2.13 Which of the following correctly explains the conditions under which the effect on
equilibrium quantity is indeterminate?

[1] Demand increases and supply increases.

[2] Demand decreases and supply increases.
[3] Demand and supply decrease.
[4] Demand remains constant and supply increases.

2.14 If you assume the price of passenger airplanes rises significantly, what will happen to the
demand curve of jet fuel?

[1] It will shift rightward.

[2] It will shift leftward.
[3] It will not change.
[4] It will become steeper.

2.15 Suppose an increase in the supply of good B results in a drop in the price of good B, what
will happen to good A?

[1] The demand will increase.

[2] The quantity demanded will increase.
[3] Demand will decrease.
[4] The quantity demanded will decrease.

Use the following demand schedule on pens to answer question 2.16.

Price (R) Quantity demanded (pens)

20 5 000
19 10 000
18 15 000
17 18 000
16 22 000

2.16 What is the price elasticity of demand when the price of a pen falls from R19 to R17?

[1] 0,67
[2] 2
[3] 5,14
[4] 7,6

41
2.17 The income elasticity of demand for a Samsung flat-screen television is 2. A 10 per cent
decrease in consumer income will _____

[1] decrease the quantity of Samsung flat-screen televisions purchased by 10%.

[2] increase the quantity of Samsung flat-screen televisions purchased by 10%.
[3] increase the quantity of Samsung flat-screen televisions purchased by 20%.
[4] decrease the quantity of Samsung flat-screen televisions purchased by 20%.

2.18 When the price of tea drops by 6%, there is a 12% increase in the demand for milk. What
is the cross elasticity of demand for milk with respect to the price of tea?

[1] +0,5
[2] -0,5
[3] -2,0
[4] +2,0

2.19 South African Airways (SAA) states that the peak holiday-travel season for the airline is
between April and October. If the demand for air travel is inelastic during the peak period
and it is elastic from November to March, then which of the following is true?

[1] A rise in price will increase SAA’s total revenue in the off-peak months, but will
decrease total revenue in the peak travel months.
[2] A rise in price will decrease SAA’s total revenue in the off-peak months, but will
increase total revenue in the peak travel months.
[3] A drop in price will decrease total revenue in the off-peak months and increase total
revenue in the peak travel months.
[4] A rise or drop in price will have no discernible impact on SAA’s total revenue.

2.20 You are told that the demand for Iwisa maize meal is more price elastic than the demand
for all maize meal as a whole. Which of the following correctly explains this statement?

[1] Maize meal is a necessity.

[2] Iwisa maize meal is a luxury product.
[3] There are more substitutes for Iwisa maize meal than for maize meal as a whole.
[4] There are fewer substitutes for Iwisa maize meal than for maize meal as a whole.

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 ECS1501/101/3/2017

ASSIGNMENT 03
UNIQUE NUMBER 784328
Due date: 2 October 2017
Content: Learning units 7 to 10
Weight: 40% of your semester mark
Submit: Via myUnisa or on a mark-reading sheet
This assignment was compiled by Ms Kgomotso Nchoe.

3.1 What does an economist understand by the term “utility”?

[1] how often we consume a good

[2] how much it costs to buy a good
[3] how much satisfaction or benefit we get from consuming a good
[4] how much satisfaction a consumer gets from the substitution of one good for another

3.2 The table below shows the total utility schedule for a consumer of lemonade. Use the table
to answer the question below.

Glasses of lemonade Total Marginal

consumed utility utility
0 0
1 90
2 190
3 270
4 350
5 420
6 420
7 400

At what glass of lemonade will the consumer begin to experience diminishing marginal
utility?

[1] the first glass of lemonade

[2] the third glass of lemonade
[3] the fifth glass of lemonade
[4] the seventh glass of lemonade

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3.3 Given the following table, answer the question. If the price of ice tea is R4 per can, the
price of Red Bull is R5 per can and the consumer has R23 to spend, what combination of
goods should the consumer buy to be in equilibrium?

Total utility Total utility

Quantity
(ice tea) (Red Bull)
1 20 60
2 48 105
3 64 140
4 76 170
5 76 180

[1] 1 can of ice tea and 2 cans of Red Bull

[2] 2 cans of ice tea and 1 can of Red Bull
[3] 3 cans of ice tea and 2 cans of Red Bull
[4] 2 cans of ice tea and 3 cans of Red Bull

3.4 The weighted marginal utility for both milkshakes and beef burgers is 15 at a price of R6
and R9, respectively. When the price of milkshake falls from R6 to R4, which one of the
following statements will be correct?

[1] Marginal utilities of the beef burger and milkshake will not be equal to the price ratios
of the products.
[2] The consumer will consume more of the milkshake.
[3] The consumer will consume more of both beef burgers and milkshakes.
[4] The weighted marginal utility of milkshakes will be greater than that of beef burgers.

3.5 How long is "the short" run in economics?

[1] one year or less

[2] a period in which all inputs are fixed
[3] the time in which all inputs are variable
[4] a period in which the quantity of at least one input is fixed and the quantities of the
other inputs can be varied

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 ECS1501/101/3/2017

3.6 Which one of the following statements is correct?

[1] The economic cost of production includes explicit cost and economic profit.
[2] Opportunity cost = Explicit costs + Implicit costs.
[3] Normal profit does not form part of a firm’s costs of production.
[4] If total revenue equals total economic cost, the firm makes an excess profit.

3.7 The law of diminishing returns applies only in cases where _____

[1] fixed factors of production become increasingly utilised.

[2] there is at least one factor of production.
[3] production cost increases.
[4] production cost decreases.

3.8 Which one of the following statements about production in the short run is incorrect?

[1] Inputs can be used in infinite divisible amounts.

[2] Prices of the product produced are given.
[3] "Short run" is a period in which a firm can change quantities of inputs in the
production process.
[4] A firm can expand output by increasing the quantity of its variable inputs.

3.9 Suppose a firm produces 15 units per month and it has a total variable cost (TVC) of R5
000 per month. If its average fixed costs (AFC) are R350 per month, what are its total
costs per month?

[1] R350
[2] R5 000
[3] R5 250
[4] R10 250

3.10 Which of the following is true when the marginal cost curve is below the average cost
curve?

[1] The average cost curve has not yet reached its minimum.
[2] The total cost curve has already reached its maximum.
[3] Total costs are falling.
[4] Diminishing returns have not yet set in.

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3.11 Which one of the following characteristics is associated with perfect competition?

[1] influence over the market price

[2] product differentiation
[3] economic profit in the long run
[4] complete information

3.12 In the short run, when should a firm stop (shut down) production?

[1] Average revenue (AR) is less than average cost (AC), and average cost (AC) is less
than average variable cost (AVC).
[2] Average revenue (AR) is equal to, or greater than, average variable cost (AVC).
[3] Average revenue (AR) is greater than average cost (AC).
[4] Marginal revenue (MR) is greater that marginal cost (MC).

3.13 Which one of the following statements is correct?

[1] Under perfect competition, every individual market participant can influence the price
of the product.
[2] Under perfect competition, a seller has an incentive to charge a price that is lower
than the prevailing market price.
[3] Under perfect competition, a seller has an incentive to charge a price that is higher
than the prevailing market price.
[4] Perfect competition can exist only if there is no government intervention influencing
buyers or sellers.

3.14 If a perfectly competitive firm increases its production from 4 to 5 units and the market
price is R15 per unit, then_____________

[1] total revenue for 4 units will be R15.

[2] total revenue for 5 units will be R75.
[3] average cost for 4 units will be R15.
[4] total revenue for 5 units will be R60.

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 ECS1501/101/3/2017

3.15 At Q1 in the diagram below, the firm is ___________

[1] maximising profits.

[2] maximising losses.
[3] minimising losses.
[4] in equilibrium.

3.16 In a perfectly competitive market in the long run, which statement is incorrect?

[1] The industry is at equilibrium when all firms are making normal profits.
[2] There are no incentives for firms to enter or leave the industry.
[3] Perfectly competitive firms earn normal profits only in the long run when market
participants have incomplete information.
[4] Economic profits are lost or losses are eliminated by competition from new firms
entering the market or existing firms leaving the market.

3.17 Which of the following statements about the difference between the labour markets and
goods markets are incorrect?

[1] The functioning of the labour market is also affected by non-economic

considerations.
[2] The remuneration of labour is profit.
[3] The remuneration of labour includes benefits such as medical and pension benefits.
[4] Goods are transferable, while labour services are embodied in the persons
concerned.

3.18 Which of the following will not shift the market supply of labour?

[1] a change in the wages of the workers

[2] a change in the size of the population due to a change in birth or death rates
[3] trade union action
[4] a change in the labour-force participation rate, for example, more women starting to
work

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3.19 Trade unions can employ various strategies in an attempt to increase the wage rates of
their members. Which one of the following options will not tend to be accompanied by
lower employment (increased unemployment)?

[1] Enforce a higher (disequilibrium) wage through strike action.

[2] Work with the employers to increase the demand for the product.
[3] Restrict the supply of labour.
[4] Lobby the government to institute a minimum wage above the equilibrium wage.

3.20 The following diagram illustrates the imposition of a minimum wage (W m) in a perfectly
competitive labour market, which one of the following statements incorrect?

[1] The minimum wage, Wm, may have been introduced in an attempt to ensure a certain
minimum standard of living for all workers.
[2] With the imposition of Wm, the supply curve of labour will shift outward.
[3] At Wm, there is an excess supply of labour.
[4] The imposition of W m may increase the employers’ costs of production.

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