This document was derived from the Economics Scope for Economics Year 1 (Witswatersrand) . It covers concepts on work, choice and scarcity .

1. WORK, CHOICE AND SCARCITY
Question 1
a)The Marginal Rate of Substitution is a trade-off that a person is willing to
make between two goods at a given point on the indifference curve. The MRS
changes as we move along the indifference curve.

2. S
..What is opportunity cost?

3. b) Marginal Rate of Transformation : measures the quantity of one good that
must be sacrificed to acquire an additional one. This is the slope of feasible
frontier.
Please take note :
c) Explain clearly with the aid of a diagram ,why an individual’s optimal choice
must be at a point where MRS=MRT.

4. QUESTION 2

8.  Please give the student the graph from drafted notes to try out
 Refer back to Q2 in the past paper
Question 3 – refer to the memo . Only additional notes are given in this text
3a) feasible set is the set of goods that the consumer can afford to purchase

9. b) Use a diagram to explain why an individual’s indifference curves can never
cross?
Indifference curves never intersect because by definition , all points on the
same curve represent equivalent satisfaction. If two curves were to overlap ,
then that would create a graph

11. MCQs
Q1) D

13. Notes have been provided for the latter questions
Q2) C
Q3) B
Q4) E
Q5) E
2022 PAPERS
Q5) D ….refer back to the diagram of the feasible frontier
Q7) B
MRT = change in y/ change in x (gradient)
 Anything that is in the Feasible frontier is not feasible

14.  Increasing MRT= increasing opportunity cost
constant MRT = constant opportunity cost
Decreasing MRT = decreasing opportunity cost
Q9) C
Q10) – PLEASE SKIP FOR NOW
Q11) A
Employment Rents
-Employees are paid more than their reservation option ( receiving
employment rents) , so they prefer to be employed
Employment rent= cost of job loss , which includes :
-Lost income while searching for a job
-costs required to start a new job eg relocation
-loss of non-wage benefits eg medical insurance
-social costs ( stigma of being unemployed )
Reservation wage= value of next best option
Employment rent = wage – reservation wage- disutility of effort
Q14) E
Opportunity costs represents the potential benefits that an individual ,
investor or business misses out on when choosing one alternative over
another.
Economic costs are also known as opportunity costs, looking at the
potential difference between taking one action over another . They
measure both the explicit and implicit costs. Accounting costs are
explicit costs that occur in exchange for a defined good or service .
Q18) Marginal Product and Diminishing returns

15. The law of diminishing marginal returns ; as you add variable resources
to fixed resources the additional output will eventually decrease .
Workers Pizza Marginal Product
0 0 _
1 5 5
2 15 10
3 20 5
4 22 2
5 22 0
6 18 -4
Law of diminishing marginal returns applies in short run while at least
one production variable is kept constant
 Question 1 – Please refer to Question Paper
2020 QUESTION PAPER