September 2014 Paper 2

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Hierdie vraestel bestaan uit 12 bladsye./
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
Copyright reserved Please turn over
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
MR
AR
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
S
Wage
Quantity
Minimum Wage
W
Q0 Q1 Q2
Unemployment
W1
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)

Copyright reserved
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

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