GRADE 11

MICROECONOMICS
AND
CONTEMPORARY ECONOMIC ISSUES

According to DBE Examination Guidelines for 2023

ECONOMICS PAPER 2
AMENDED

ESSAYS 2023-…
Advise learners NOT TO FOCUS on essays only since essay
consist of 27% and section B 53% and Section A 20 % per paper
Compiled by Noel M.Mashonga
Topic Page Question
NOVEMBER SCOPE ESSAY 2 -
STRUCTURE OF ESSAY 3
MICROECONOMICS
5 RELATIONSHIP BETWEEN MARKETS 4-30 5
7 PRICE ELASTICITY 31-38
CONTEMPORARY ECONOMIC ISSUES
11 GLOBALISATION 39-45 6
12 ENVIRONMENTAL DETERIORATION 46-48

From each according to his ability, to each according to his needs. - Karl Marx

GAUTENG

P a g e 1 | 48
 GRADE 11
ECONOMICS
NOVEMBER 2023 SCOPE ESSAYS
PAPER 1
QUESTION 5:
MACROECONOMICS
- Discuss in detail natural resources
as factor of production
(characteristics, importance, factors
affecting rent)
- Discuss in detail entrepreneurial
skills as factor of production.
- Compare and contrast the South
Africa mixed economy with a
centrally planned.
- Discuss in detail the economic
importance of the tertiary sector.
- Discuss in detail South Africa’s
infrastructure and its economic
importance
QUESTION 6:
ECONOMIC PURSUITS
❖ Discuss in detail the different
methods used to redistribute income
and wealth.
❖ Discuss in detail the characteristics
of developing countries.
❖ Discuss in detail the functions of the
South Africa’s Reserve Bank as a
Central bank
PAPER 2
QUESTION 5:
MICROECONOMICS
- Discuss the demand and supply
relationships with the aid of graphs in
detail (substitutes and compliments)
- Discuss in detail the characteristics of
perfect competition, and monopoly.
- Discuss in detail the price elasticity of
demand with the aid of graphs. (PED)
- Discuss in detail the price elasticity of
demand without the aid of graphs.
(PED)
QUESTION 6:
CONTEMPORAY ECONOMIC ISSUES
❖ Examine in detail the causes and
consequences of globalisation.
❖ Examine in detail the state of
environment/problems threating the
environment.
P a g e 2 | 48
 MARK
STRUCTURE OF ESSAY
ALLOCATION
Introduction
The introduction is a lower-order response. Max. 2
• A good starting point would be to define the main concept related to
the question topic.
• Do not include any part of the question in your introduction.
• Do not repeat any part of the introduction in the body.
• Avoid mentioning in the introduction what you are going to discuss in
the body.
Body
Main part: Discuss in detail/In-depth discussion/Examine/Critically Max. 26
discuss/ Analyse/Compare/Evaluate/Distinguish/Differentiate/Explain/Draw
a graph and explain/Use the graph given and explain/Complete the given
graph/Assess/Debate
A maximum of 8 marks may be allocated for headings/examples Max. 10
Additional part: Critically discuss/Evaluate/Critically evaluate/Debate/
Deduce/Compare/Distinguish/Interpret/How? /Suggest
A maximum of 2 marks may be allocated for mere listing facts.
Conclusion
Any higher-order conclusion should include: Max. 2
• A brief summary of what has been discussed without repeating facts
already mentioned
• Any opinion or value judgement on the facts discussed
• Additional support information to strengthen the discussion/analysis
• A contradictory viewpoint with motivation, if required
• Recommendations
TOTAL 40

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TOPIC 5: RELATIONSHIP BETWEEN MARKETS
QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Discuss in detail the demand and supply relationships with the aid of
graphs. (26 marks)
• How dependent is the product market on the factor market? (10 marks)

INTRODUCTION
A substitute is a good that can be used in the place of another good ✓✓
(Accept any other correct relevant introduction) (Max. 2)
BODY: MAIN PART
Demand for substitutes
• An increase in the price of a good increases the demand and the price of the
substitute good, ceteris paribus, and vice versa ✓✓
• The consumer can switch between the two goods and maintain the same degree
of satisfaction ✓✓

• The above graphs shows the markets for two goods, Product A and Product
B✓✓
• The equilibrium price of Product A is R12, while that of Product B is R7 ✓✓
• Assume there is a big decrease in the supply of Product A (So to S1)
because of a severe drought. This leads to an increase in Product A’s price to
R16✓✓
• The law of demand states that when prices increase (from R12 to R16) the
quantity demanded wil decrease (from 100 to 70) ✓✓
• Some consumers will switch from Product A to Product B✓✓

P a g e 4 | 48
 • The demand curve for Product B will shift to the right (Do to D1) and the
equilibrium price will shift from R7 to R10✓✓
• While an increase in Product B also occurs, it is still relatively cheaper than
Product A (R10 relative to R16) ✓✓

Demand for complimentary goods

• According to the law of demand, a decrease in the price of a product will
increase the quantity of the product demanded. ✓✓
• As more of the product is used, households will also use more of the
complement. ✓✓

• An increase in the price of Product A decreases the demand and the price of
the complementary good, Product B , ceteris paribus, and vice versa✓✓
• Consumers will buy less of product A and shifts the demand curve to the left
from D1 to D0 and, there is a decrease in the equilibrium price of Product
B✓✓
• They can lose business and revenue if the demand for their goods falls
without them being aware that it is going to happen✓✓
• Therefore they need to respond to the price changes that occur to other
goods that could affect them quite quickly✓✓

ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
P a g e 5 | 48
 ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST

How dependent is the product market on the factor market?

• The factor market is a market where factors of production are bought and
sold✓✓
• The product market is a market where goods and services are bought and
sold ✓✓
• The product market depends on the factor market for the availability of factors
of production ✓✓
• When the supply of one factor of production changes, it will affect both the
factor market and the product market ✓✓
• A change in supply of cow hides would affect the hide market negatively
because there would be a decrease in the supply of hide ✓✓
• That would also affect shoe manufacturing and there would be fewer shoes
and bags available in the product market for shoes and bags ✓✓
• When the demand for shoes in the product market increases, the demand for
factors of production in the factor market will also increase ✓✓

(Accept any other correct relevant response)

CONCLUSION
Understanding the relationship between substitutes and complement any goods and
keeping track of price changes is important to suppliers of these goods, as it will
have a direct effect on their profit✓✓
(Accept any other correct relevant higher order conclusion)

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QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
Discuss in detail the demand relationships with the aid of graphs.(26 marks)
Introductions
The quantity of a good or service that the consumes are able and willing to buy at a
specific price and at a specific time✓✓
Main body
• Demand implies that people will want to buy more of a product when the price
of product is lower, for example at a sale✓✓
• This inverse relationship between quantity demand and price is the reason for
the negative gradient of the demand curve ✓✓
• The demand curve is a line that slopes downwards from left to right✓✓

Substitutes
• Substitutes are products that can be used in the place of another
product✓✓
• A complement product on the other hand is used with another product ✓✓
• Some products have specific relationships that will affect demand e.g. if
you want to buy beef but it is too expensive, you will buy a cheaper
alternative✓✓
• When you decide to purchase chicken instead of beef, you buy the
substitute product✓✓
• Example of substitutes products are butter and margarine, coffee and tea
and diesel and petrol. (Remember maximum of 8 headings/examples)
• Consumers may purchase only one product for consumption. ✓✓
• A price increase in one product will cause a greater demand for the
substitute product. ✓✓
• E.g. when the price for butter goes up, you buy margarine instead ✓

The price of butter

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 • Graph above shows an increase in the price of butter due to decrease in
supply✓✓
• The supply curve SS has shifted to the left to form S1S1✓✓
• The original price of butter was P and now the price is higher at P1✓✓

The demand for margraine

• The graph above for the substitute product, margarine✓✓

• Owing to price increase of butter, more people will buy margarine. ✓✓
• This will cause the demand curve DD to expand to form the new demand
curve D1D1. ✓✓
• Owing to this increased demand for the substitute product, which is margarine
price of margarine will increase from P1 to P2 and the quantity demanded will
increase from Q to Q1✓✓
• The demand relationship between substitute products states that when the
price of one product increases the demand for the substitute product will also
increase and ceteris paribus. ✓✓

Complements
• Two products are complements products when you use them together to
satisfy a need or want✓✓
• E.g. complements are cell phone and airtime, bread and butter, tea and
sugar, a motor car and petrol because you need both. ✓
• Complement products are used jointly because the use of one requires the
use of the other to be compete. ✓✓
• When the price increases for one product, the demand will decrease for that
product as well as for the complement product. ✓✓
• E.g. when the price of sugar increases, it will cause the demand for sugar and
tea to decrease✓

The price of sugar

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 • The above graph shows the price of sugar increases due to a decrease in
supply✓✓
• The supply curve S1S1 has shifted to the left to form S1S1✓✓
• The original price of sugar was P1 and now the price is higher at P1✓✓
• Due to the price increase of sugar ,people buy less sugar.The quantity
demanded has decreased from Q to Q1✓✓

The demand for tea

• The demand for sugar’s complement product, tea. ✓✓

• The price increase of sugar will cause a decrease in the demand for
tea. ✓✓
• People buy less sugar, so they need less tea.
• This will cause the demand curve DD to decline to form the med
demand curve D1D1. ✓✓
• Due to this decreased for the complement product, tea, one quantity of
tea demanded will decrease from Q to Q1 and the price will decrease
from P to P1 and the quantity demanded will decrease from Q to Q1✓✓

P a g e 9 | 48
 • When the price of one product increases, the demand for the
complement product will decrease and ceteris paribus✓✓

ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST

P a g e 10 | 48
QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Discuss in detail the supply relationships with the aid of graphs.
(26 marks)
• Why is it important for the product market to consider what is
happening in the factor market? (10 marks)

INTRODUCTION
Supply for a good or service is the quantity that suppliers are able and willing to provide at
as specific price and ata specific time✓✓
Main body
• The law of suppply sayss that the quantity supplied will increase when prices
are higher,if everything remian the same✓✓
• Sellers want to sell more whne the price of a product is higher because they
will make more profit✓✓
• This positive relationships between price and supply causes the positive
gradient of the supply curve✓✓
• The supply curve is aline that upwards from left to right✓✓
Substitutes
• The economic problem is that,there are scarece resources available to satisfy
unlimited needs and wants✓✓
• Producers have to choose what,how and for whom they produce,they base
their decisions on where they can achieve the highest profits✓✓
• When producers use a resource to produce one product,the resource will not
be available to produce another✓✓
• For example when producers use wood to manufacture paper,they cannot
use the same wood to manufacture furniture.paper and furniture compete for
the same resource.When the price of paper increases,the supply for the
substitute,furniture will decrease✓

P a g e 11 | 48
 • An increase in the price of paper due to an increase in demand✓✓
• The demand curve D1D1 has shifted to the right to form D1D1✓✓
• The original price os paper was P1 and now the price is much higher at P2✓✓

• Due to the increase of paper,more suppliers will want to produce paper,because it is

more profitable✓✓
• Producers will allocate resources to the manafacturing of paper not furniture✓✓
• This will cause the supply curve for the substitute SS to decline to form the new
supply curve S1S1. ✓✓
• This decreased supply for the substutute good,furniture is the reason for the price of
furniture increasing from P to P1 and the quantity supplied decreasing from Q to
Q1✓✓
• The supply relationship between substitte products occurs when the price of one
product increases,the supply of the substitute product will decrease✓✓

Complements

P a g e 12 | 48
 • During the production of one product,it sometimes happens that another
product is produced✓✓
• E.g when you slaughter a cow for meat,its hide becomes available for leather
products✓✓
• Complement products are produced jointly because the production of one
leads to the production of the other✓✓
• When the price one product increases,the supply will increase for that product
as well as for its complement product ✓✓
• E,g when the price of meat increases,the supply of leather products will
increase. ✓
The price of meat

• Shows that the price of meat increased due to an increase in demand, ✓✓

• The demand curve DD shifted to the right to form D1D1. ✓✓
• The original price of meat was P but now the price is much higher at P1. ✓✓
• Due to price increase of meat,more suppliers will supply meat. ✓✓
• The quantity supplied for meat increases from Q to Q1✓✓

The supply of leather products

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 • Above graph shows the supply for the complement good,leather products✓✓
• The price of increase of meat will cause an increase in the supply of leather
products✓✓
• This is why the supply cuve S1S1 increases to form new supply curve S2S2✓✓
• The increased supply of complement good,leather products is the reason for the
price of leather products decreasing from P1 to P2 and the quantity supplied
increasing from Q to Q1✓✓
• When the price of one product increases,the supply for the complement product will
increase✓✓
• Each price change will have a domino effect through the market,influencing the
substitute and complement products. ✓✓

ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST

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 •The factor market is a market where factors of production are bought and
sold. ✓✓
• The product market is a market where goods and services are bought and
sold.
• The product market depends on the factor market for the availability of
factors of production. ✓✓
• When the supply of one factor of production changes, it will affect both the
factor market and the product market ✓✓
• A change in supply of skin hide would affect the hide market negatively
because there would be a decrease in the supply of hide. ✓✓
• That would also affect shoe manufacturing and there would be fewer shoes
and bags available in the product market for shoes and bags ✓✓
• When the demand for shoes in the product market increases, the demand for
factors of production in the factor market will also increase. ✓✓ (10)
CONCLUSION
It is important that product and factor markets work closely with one another and
understand each other, because they are interdependent; one cannot exist without
the other. ✓✓
(Accept any correct relevant conclusion.) [40]

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 QUESTION 5 MICROECONOMICS
• Discuss in deatil the characteristics of perfect markets and monopoly
• Why would a perfect competitor be forced to shut-down the business at
a certain point?
Perfect competition
- A large number of buyers
 One seller will be unable to influence the price by
withholding goods to increase the price. ✓✓
- Homogeneous products
 All products are identical with no trademarks and
no substitutes available.
- Free entry and exit
 There is complete freedom of entry and exit, the
market is fully accessible. Buyers and sellers are
completely free to enter or leave the market. ✓✓
- Perfect knowledge of market conditions
 Buyers and sellers are aware of all information that 
is required for the market to function effectively e.g.
prices, supply and demand. ✓✓
 There is no government intervention that could
affect buyers and sellers e.g. subsidies. ✓✓
 All factors of production are completely mobile.
Labour, capital, and other factors of production can 
move freely from one market to another. ✓✓
 Collusion between sellers does not occur. Each
seller acts independently of others✓✓
 Sellers are price takers. Sellers do not have control
over prices. Prices are determined by demand and
supply. ✓✓
40 MARKS 40 MINUTES
(26 marks)
(10 marks)
Monopoly
 There is no competition as there is only one
supplier. ✓✓
 The products are unique with no close
substitutes. ✓✓
 They are faced with demand curves. They
can decide at what point on the demand
curve they can sell their products. ✓✓
 They have considerable control over the
price of the product. They are price makers.
By reducing the price, monopolists can sell
more units and vice versa. ✓✓
They face substitutes. There are few
products that have no close substitutes. For
example, consumers can substitute landline
telephone by using cell phones or by using
alternative communication such as letters,
e-mail, messengers etc. ✓✓
They are protected by barriers of entry such
as patents, copyrights, licensing etc. ✓✓
 They may enjoy favourable circumstances.
Sometimes an entrepreneur may enjoy
favourable circumstances in a certain
geographic area. For example, there may
only be one supplier of milk in a particular
town. ✓✓
 They may exploit consumers. Because a
monopolist is the only supplier of a product,
there is always a possibility of consumer
exploitation. ✓✓
P a g e 16 | 48
ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
Why would a perfect competitor be forced to shut-down the business at a
certain point?
• A perfect competitor will shut down if it cannot meet its average or total
variable costs. ✓✓
• When AR < AVC or P < AVC the business will be forced to shut down. ✓✓
• The shut-down point is the point where MC intersects with AVC at its lowest
point✓✓
• A firm will sell goods if the price is above the shutdown price level. ✓✓
• Below the shut-down point, a firm will not be able to supply and sell its
products. ✓✓
• Producing a lower output would only add to the financial losses, so a
complete shutdown is required. ✓✓
• If a firm decreased production, it would still acquire variable costs not covered
by revenue as well as fixed costs (costs inevitably incurred). ✓✓
• By stopping production, the firm only loses the fixed costs. ✓✓
(Accept other correct relevant response) (10)
CONCLUSION
Whether a business makes a profit or loss depends on the location of the average
cost curve (AC) in relation to the market price when the business is in equilibrium.
✓✓(Accept the correct relevant conclusion of a higher cognitive level).

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QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Discuss in detail the characteristics of a monopoly. (26 marks)
• How does a monopolistic competitive firm survive competition in the
market? (10 marks)

INTRODUCTION
Monopoly exists when there is only one seller of a product, with no close substitutes
and entry into the market is completely blocked. ✓✓
(Accept any other relevant correct response.) (Maks.2)
MAIN PART
Number of producers ✓
• The monopolist is the only seller in the industry and has full control over the
supply of a product ✓✓
• It represents the total industry, with complete market power e.g. De Beers,
Eskom ✓✓
• This enables the monopolist to exert considerable influence over the buyer
✓✓

Nature of the product ✓

• The product is unique and has no close substitutes ✓✓
• E.g. electricity and retail transport ✓
• Buyers can only buy from the monopoly or go without the product ✓✓

Profit
• The monopoly makes a short-term loss and economic profits both in the short
and long run ✓✓
• It is more likely that the massive market power and high prices will ensure
that it makes supernormal profits ✓✓

Technical superiority ✓
• A monopoly has a technical advantage over potential competitors ✓✓
• Its access to resources and technical superiority makes it difficult for others
to compete ✓✓
• This can keep the monopolist in its position for some time, for example in the
computer software industry ✓✓

Control over prices ✓

• A monopoly has full control over the price of a product or service – but it is
limited by demand to charge excessively high prices ✓✓

P a g e 18 | 48
 • It controls the price by manipulating and restricting output to create a
shortage causing an increase in prices ✓✓
• Monopolies are therefore price makers because they have the power to
determine their own price ✓✓
• A monopoly can only decide at which point on the demand curve it wants to
produce ✓✓

Favourable circumstances ✓
• Sometimes entrepreneurs may enjoy favourable circumstances in a certain
geographical area ✓✓
• E.g. there may be only one supplier of milk, a hardware store or hotel in a
particular town ✓
• There may even be laws that protect the market, e.g. post offices in South
Africa ✓✓

Market information ✓
• A monopoly has full knowledge of all the current market conditions because it
is the only seller available in the market representing the industry as a whole.
✓✓
• New firms that wish to enter the market will not have the same information
available to them and this hampers their ability to enter the market ✓✓
• Monopolies withhold information from consumers as such it is difficult for them
to make informed decisions as they may not be fully aware of the needs of
consumers ✓✓

Exploitation of consumers ✓
• The monopolist may produce fewer products at a higher price compared to
businesses under perfect competition ✓✓
• E.g. De Beers, because the monopolist is the only producer of the product in
the market, there is always the possibility of consumer exploitation. ✓
• Most governments take steps to guard against such practices and new and
existing monopolies are usually well monitored ✓✓

Market entry ✓
• Entry in the market is completely blocked and it is impossible for other
businesses to enter the market ✓✓
• Some monopolies are created by law passed by the government giving one
firm exclusive right to produce a particular product ✓✓
• Government can use patents, licences and copyrights to restrict market entry
preventing undesirable or incompetent firms from entering the market ✓✓
• The barriers prevents other producers from entering the market to supply the
same type of product ✓✓

P a g e 19 | 48
 • High start-up costs include capital investment and research and development
that could be difficult for other firms to afford ✓✓

Economies of scale
• The mere size of the large business gives it a cost advantage over a smaller
rival and this will make it impossible for the smaller business to compete ✓✓

(A maximum of 8 marks for mere listing of facts/examples)

(Accept any other correct relevant response.)
ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
Monopolistic competitive firm survives by using non-price competition through:
• Offering differentiated products that makes it less price elastic ✓✓
• Competing based on non-price factors ✓✓
• Using branding to indicate differences when competing with other suppliers in
the market ✓✓
• Aggressive advertising campaigns that can be launched to attract customers
• Extending shopping hours which will be more convenient for customers to
make use of their services, e.g. 24-hour service ✓✓
• Providing free deliveries within a certain range of business ensuring a hedge
over other competition ✓✓

CONCLUSION
There is no space for monopoly firms in a mixed economy such as in South
Africa, as this leads to consumer exploitation, unfair competition and excessively
high prices ✓✓
(Accept any other high order conclusion.) (Max. 2)

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QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Discuss in detail the characteristics of a perfect market. (26)
• Examine the positive impact of competition on markets. (10)

INTRODUCTION
A perfect market is a hypothetical model of a market where there is no single
consumer or producer that has an impact on the market price.
Buyers and sellers have no preference where to buy or sell the product because the
products are the same. ✓✓
(Accept any other correct response.) (2)
MAIN PART
Number of buyers and sellers ✓
• The number of buyers and sellers is so large that individual market
participants are insignificant in relation to the market as a whole. ✓✓
• No individual buyer or seller has an influence on the market price in that
everyone is a price-taker. ✓✓

Nature of the product ✓

• All products sold in the specific market are homogenous. ✓✓
• They are the same in all respects regarding quality, appearance, and any
distinctive characteristic. ✓✓
• It makes no difference to the buyer where or from whom to buy the product.
✓✓

Freedom of entry and exit ✓

• There are no factors limiting the producer’s decisions to enter or leave the
market. ✓✓
• Enterprises are free to enter the market where there are opportunities of
making profits and free to withdraw where losses are occurring. ✓✓
• The market is totally accessible, there are no legal, financial nor technological
barriers that can hinder entry and exit. ✓✓

Mobility of factors of production ✓

• All factors of production are totally mobile as they can freely move between
markets without any limitations. ✓✓
• Labour can move between jobs at any time. ✓✓
• Producers have access to production technology and resources, no producer
pays more for a factor of production than the other. ✓✓

Perfect knowledge ✓
P a g e 21 | 48
 • Buyers have complete knowledge about the prices, quality and availability of
goods and services. ✓✓
• Sellers have complete knowledge about production costs and market
opportunities. ✓✓
• If one business ventures to raise its price above the market price, buyers will
immediately become aware of it and would switch their purchases to
businesses still charging the lower market price. ✓✓

No collusion ✓
• Collusion does not occur in a perfect market because sellers act
independently of the others. ✓✓

Unregulated market ✓
• Buyers and sellers are not influenced by government intervention. ✓✓

(Allocate a maximum of 8 marks for listing of facts and examples.)

(Accept any other relevant correct response.) (26)
ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
Competition has a positive impact on the markets because:
• Promoting competition yields the best allocation of resources, lowest prices,
highest quality and the greatest material progress. ✓✓
• Competition improves productivity and international competitiveness of
markets and promotes dynamic markets and economic growth. ✓✓
• Markets faced with vigorous competition are continually forced to become
more efficient and more productive. ✓✓
• They know that their competitors are constantly seeking ways to reduce costs
in order to increase profits. ✓✓

P a g e 22 | 48
 • Competition results in markets being innovative because innovation is crucial
to success. Innovation leads to new products and new production
technologies being developed. ✓✓
• Competition allows new firms to enter into the market usually dominated by
few firms. ✓✓
• Competition forces decisions to be based on market factors such as demand,
costs, technologies rather than incomplete information. ✓✓

(Accept any other relevant correct response.)

CONCLUSION
Perfect markets are really rare to find, and they serve as a benchmark for the
imperfect markets.
(Accept any other relevant high order conclusion.)

P a g e 23 | 48
QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Examine, with the aid of THREE separate graphs, the following short-run
equilibrium positions in a perfect market:
- Economic profit (10 marks)
- Economic loss (8 marks)
- Normal profit (8 marks)
(26 marks)
• Why would a perfect competitor be forced to shut-down the business at
a certain point? (10 marks) [40]

INTRODUCTION

There are several profit or loss possibilities for a perfect competition in the short
run. ✓✓
(Accept other correct and relevant introduction) (2)

BODY: MAIN PART

Short run equilibrium positions of a perfect competitor:

Economic profit

• Economic profit refers to profit that is made in addition to normal

profit.
• It takes place when average revenue (AR) is greater than average cost
(AC) the firm makes an economic profit.
• Profit is maximized at point E3, where MR = MC at quantity of Q3 and
market price of P3.
• Economic profit attracts other businesses to enter the market.
• Economic profit is represented by the shaded area.
(Accept other correct relevant response) Max.4

Labelling of the axes = 1 mark

Labelling on the axes = 1 mark
Correct position of AC = 1 mark
Correct position of MC = 1 mark
Correct position of MR/AR = 1 mark
Max.4

(10)

P a g e 24 | 48
Normal profit

Labelling of the axis = 1 mark

Labelling on the axis = 1 mark
Profit maximisation point = 1 mark
Correct position of AC = 1 mark
Correct position of MC = 1 mark
Correct position of MR/AR = 1 mark
Max. 4 marks

• Normal profit occurs when AC = AR

• It is the amount that the business must make in order to keep its doors
open.
• It is the minimum earnings required to prevent an entrepreneur from leaving
the industry.
• Once all costs such as the running costs and fixed costs are covered the
business can keep its doors open.
• Profit is maximized at point e, where MR = MC at quantity of Q1 and market
price of P1.
(Accept other correct relevant response) Max. 4
(8)
Economic loss

• Economic loss takes place when total costs are greater than total revenue
(TC > TR)/When average revenue is lower than average cost the firm
makes an economic loss (AR < AC)
• Economic loss is a signal to exit/leave the market.
• Point E3 represent loss minimization point where MR = MC at quantity of
Q3 and market price of P3.
(Accept other correct relevant response) Max.4

Labelling of the axis = 1 mark

Labelling on the axis = 1 mark
Profit maximisation point = 1 mark
Shaded area (economic loss) = 1 mark
Correct position of AC = 1 mark
Correct position of MC = 1 mark
Correct position of MR/AR = 1 mark

P a g e 25 | 48
 Max. 4 marks

(8)

BODY: ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These types of
questions test critical thinking, where candidates should be able to apply
their knowledge, through logical reasoning and also have an awareness of
their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
Why would a perfect competitor be forced to shut-down the business at a certain point?

• A perfect competitor will shut down if it cannot meet its average or total
variable costs.
• When AR < AVC or P < AVC the business will be forced to shut down. 
• The shut-down point is the point where MC intersects with AVC at its lowest
point
• A firm will sell goods if the price is above the shutdown price level.
• Below the shut-down point, a firm will not be able to supply and sell its
products.
• Producing a lower output would only add to the financial losses, so a
complete shutdown is required. 
• If a firm decreased production, it would still acquire variable costs not covered
by revenue as well as fixed costs (costs inevitably incurred). 
• By stopping production, the firm only loses the fixed costs.
(Accept other correct relevant response) (10)

P a g e 26 | 48
CONCLUSION

Whether a business makes a profit or loss depends on the location of the average
cost curve (AC) in relation to the market price when the business is in
equilibrium.
(Accept the correct relevant conclusion of a higher cognitive level).

QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES

• With the aid of graphs, discuss how economic profit and loss are
determined in a monopoly market (26 marks)
• Why does the performance of natural monopolies contradict (deny) the
long-run equilibrium position of a monopoly? (10 marks)
[40]
INTRODUCTION
A monopoly is a market structure where only one seller operates. Entry is blocked and the
product has no close substitutes ✓✓
(Accept any other relevant introduction) Max (2)

BODY: MAIN PART

• Monopoly is subject to same technological and cost constraints as other

market structures √√
• The cost structure of the monopoly is the same than that of competitive
businesses where the monopolist will try to maximize both short and long-
term profit √√
• Location of SAC in relation to market price determines profit or loss √√
• The MR curve lies below the AR curve, halfway between the AR and the
origin √√
• The MC curve intersects the AC curve at its minimum point √√
• Determine point where SMC = MR – point where production cost of last
unit is equal to revenue it earns (point e) – profit-maximising production
quantity of Q on horizontal axis √√

P a g e 27 | 48
• The monopolist will produce at the output (Q[10]) where MR=MC, because
it can maximise profit at this level √√
• Point a represents the average revenue at selling price (P[10]) while point
b represents the average cost at the cost price (C[6]) √√
• When the average revenue is more than the average cost, it results in an
economic profit for the business / When the TR is more than TC it will
result in an economic profit for the business √√
• The monopoly makes economic profit when AC curve is below market
price (AR√√
• The monopoly blocks new entries so that competing businesses cannot
reduce short run economic profit
• Total income = Price x Quantity = OP(10) x OQ(10) = OPaQ
(100) √√
Total cost = Cost x Quantity = Oc(6) x OQ(10) = OCbQ (60)
Economics profit = Income – Cost = 100 – 60 = CPab (40)
√√ (Max 10)

• The minimum point of SAC is higher than market price √√

• A monopoly makes an economic loss when its revenue is less than its
costs √√
• The monopoly will produce at the output level where MR=MC, because it
can minimise losses at this level √√
• Point g represents the average revenue at selling price (P[7]) while point f
represents the average cost at the cost price (C[10]) √√
• The average cost is more than the average revenue, resulting in an
economic loss for the business / When the TC is more than TR it will result
in an economic loss for the business √√
• The shaded area PCef shows the economic loss √√

P a g e 28 | 48
 • The monopoly suffers an economic loss in the short run when the AC
curve is above the market price (g) √√
• Total income = Price x Quantity
= OP(7) x OQ(5)
= OPgQ (35)
Total cost = Cost x Quantity
= OC(10) x OQ(5) = OCfQ (50) √√
Economic loss =
(PCfg)15√√

ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These types of
questions test critical thinking, where candidates should be able to apply
their knowledge, through logical reasoning and also have an awareness of
their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
Why does the performance of natural monopolies contradict the long-run equilibrium
position of a monopoly? (10 marks)

Natural monopolies' performances are not always in line with the long-run equilibrium
position of a monopoly because:
• compared to a typical monopoly where economic profit always prevails over
the long run, natural monopolies do not enjoy the benefits experienced by other
monopolies
• natural monopolies require high development cost which prevent others from
entering the market √√
• natural monopolies supply goods and services to the nation as a whole and
therefore it is difficult to set very high prices √√
• Eskom is subjected to the National Energy Regulator in South Africa (NERSA)
that determines the selling price of electricity in South Africa √√
• a natural monopoly has experienced high maintenance cost compared to
artificial monopolies, that compromises profits √√
• natural monopolies cannot manipulate its quantities to increase prices √√
• revenue seems to be less than cost due to corruption, non-payment by a large
number of electricity users √√
• under normal circumstances, a monopoly will shut down if average cost
exceeds average revenue in the long run, but natural monopolies like SAA are
often bailed out by the government due to its strategic position in the country
√√

P a g e 29 | 48
 • the internal (private cost) structure of natural monopolies have increased, but
the private benefits (revenue of sales) stagnated due to poor maintenance of
infrastructure √√
(Accept any other correct relevant response)

CONCLUSION
The monopoly can continue to earn economic profit for as long as the demand for its
product continues and its production costs stay the same √√
(Accept any other higher order conclusion)

P a g e 30 | 48
TOPIC 7 : PRICE ELASTICITY
QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Discuss in detail the price elasticity of demand without the aid of
graphs. (26 marks)
• Why are relative prices important in the economy? (10 marks)

Introduction
The price elasticity of demand can be defined as the percentage change in quantity
demanded if the price of a product changes or price elasticity is a measure of how
responsive demand is to a change in price✓✓
Body
Unitary elasticity ✓

• Unitary elasticity occurs when a specific change in price causes the same
change in quantity demanded. ✓✓
• . For example, when price increases by 20%, the quantity demanded will
decrease by 20% ✓✓
• Price elasticity of demand is equal to one (PED = 1) ✓✓
• When producers face a unit elastic demand curve there is no reason for them
to change the price of their product. ✓✓
• Their sales income will remain constant as the quantity will decrease by
exactly the same percentage as the increase in the price of the product. ✓✓

Relative inelastic demand ✓

• Relative inelastic demand occurs when a change in price will cause a

smaller percentage change in quantity demanded. ✓✓
• Basic, necessary foodstuffs that have no close substitutes, such as
maize meal are examples of a product that tends to be inelastic. ✓✓
• Other examples include goods and services which requires a small portion of
the consumer’s income such as matches, salt etc.and habit-forming products
such as cigarettes and alcohol. ✓✓
• Price elasticity of demand will be less than one (PED < 1) . ✓✓
• A relatively inelastic demand encourages producers to increase the price of
their products as they will be able to increase their sales income. ✓✓
• A relative inelastic demand curve can be represented by a steep curve ✓✓
Max 2x2 (4)

Perfectly inelastic demand

• A perfectly inelastic demand refers to a demand that shows no response at all
to price changes. ✓✓
• The price elasticity of demand in this situation is zero (PED = 0) . ✓✓

P a g e 31 | 48
 • It implies that a change in price will cause no change in the quantity that
consumers demand. ✓✓
• The demand curve will be a vertical line, parallel to the price axis. The graph
shows that consumers plan to buy a fixed quantity of the product at a specific
price. ✓✓
• Producers can increase their income by increasing the price of their product
as the quantity demanded will not change✓✓

Relative elastic demand ✓

• Relative elastic demand occurs when a change in price will cause a greater
percentage in quantity demanded. ✓✓
• The smallest change in price will cause a large change in quantity demanded.
• This happens to products which have close substitutes. ✓✓
• A price increase will cause most consumers not to buy the original product,
but rather buy the substitute e.g. hot dogs and hamburgers. ✓✓
• The price elasticity will be greater than one (PED > 1) . ✓✓
• Producers will be encouraged to decrease the prices of their products as the
decrease in the price will lead to a larger than proportionate increase in the
quantity demanded of the product. ✓✓
• A relatively elastic demand curve can be illustrated by a relatively flat
demand curve. ✓✓

Perfectly elastic demand✓

• The smallest change in price will cause an infinitely large change in quantity
demanded. ✓✓
• The quantity demanded will drop to zero. PED = ∞.✓✓
• A perfectly elastic demand curve can be shown with a horizontal straight
line. ✓✓
• The curve illustrates that consumers are willing to buy any quantity of a
product at a certain price level. ✓✓
• However, if the price increases only fractionally, there will be no demand for
the product. ✓✓

P a g e 32 | 48
 ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
• The government and the Reserve Bank use it to decide on the correct
fiscal and monetary policies to implement. ✓✓
• Consumers and producers make their decisions according to it. ✓✓
• It is used to determine whether the economic situation is worsening or
improving. ✓✓
• It shows inflation, economic growth and economic development in a
country ✓✓
• Economists can use them to assess the performance of the economy. ✓✓
• Relative prices form the centre of the dynamics of markets, because the
decisions the policy-makers, buyers and suppliers make are all based on
relative prices✓✓
(Accept any relevant correct explanation.)
Conclusion
Price elasticity of demand help economists producers and the government to make
valuable predictions about what will happen when the price of a product increases or
decreases

P a g e 33 | 48
QUESTION 5 MICROECONOMICS 40 MARKS 40 MINUTES
• Discuss in detail the price elasticity of demand (PED) with the aid of
graphs (26 marks)
• What reasons would you give for the reaction of consumers to price
changes? (10 marks)

INTRODUCTION
The price elasticity of demand can be defined as the percentage change in quantity
demanded if the price of a product changes or price elasticity is a measure of how
responsive demand is to a change in price. ✓✓
BODY: MAIN PART
unitary elasticity.

• Unitary elasticity occurs when a specific change in price causes the same change in
quantity demanded. ✓✓
• For example, when price increases by 20%, the quantity demanded will decrease by
20%. Price elasticity of demand is equal to one (PED = 1). ✓✓
• When producers face a unit elastic demand curve there is no reason for them to
change the price of their product. ✓✓
• Their sales income will remain constant as the quantity will decrease by exactly the
same percentage as the increase in the price of the product. ✓✓

relative inelastic demand . ✓

P a g e 34 | 48
 • Relative inelastic demand occurs when a change in price will cause a smaller
percentage change in quantity demanded. ✓✓
• Basic, necessary foodstuffs that have no close substitutes, such as maize meal are
examples of a product that tends to be inelastic. ✓✓
• Other examples include goods and services which requires a small portion of the
consumer’s income such as matches, salt etc. and habit-forming products such as
cigarettes and alcohol. Price elasticity of demand will be less than one (PED <
1). ✓✓
• A relatively inelastic demand encourages producers to increase the price of their
products as they will be able to increase their sales income. ✓✓
• A relative inelastic demand curve can be represented by a steep curve. ✓✓

a perfectly inelastic demand.

• A perfectly inelastic demand refers to a demand that shows no response at all to

price changes. ✓✓

P a g e 35 | 48
 • The price elasticity of demand in this situation is zero (PED = 0). ✓✓
• It implies that a change in price will cause no change in the quantity that consumers
demand. ✓✓
• The demannd curve will be a vertical line, parallel to the price axis. ✓✓
• The graph shows that consumers plan to buy a fixed quantity of the product at a
specific price. ✓✓
• Producers can increase their income by increasing the price of their product as the
quantity demanded will not change. ✓✓

Relative elastic demand.

• Relative elastic demand occurs when a change in price will cause a greater
percentage in quantity demanded. ✓✓
• The smallest change in price will cause a large change in quantity demanded. This
happens to products which have close substitutes. ✓✓
• A price increase will cause most consumers not to buy the original product, but
rather buy the substitute e.g. hot dogs and hamburgers. ✓✓
• The price elasticity will be greater than one (PED > 1). ✓✓
• Producers will be encouraged to decrease the prices of their products as the
decrease in the price will lead to a larger than proportionate increase in the quantity
demanded of the product. ✓✓
• A relatively elastic demand curve can be illustrated by a relatively flat demand
curve. ✓✓

P a g e 36 | 48
 • The smallest change in price will cause an infinitely large change in quantity
demanded. ✓✓
• The quantity demanded will drop to zero. PED = ∞. ✓✓
• A perfectly elastic demand curve can be shown with a horizontal straight line. ✓✓
• The curve illustrates that consumers are willing to buy any quantity of a product at a
certain price level. ✓✓
• However, if the price increases only fractionally, there will be no demand for the
product. ✓✓
ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
What reasons would you give for the reaction of consumers to price changes?
• The availability of close substitutes: if a close substitute is available the
demand of a product will be very elastic, because consumers will choose to
buy the substitute product. 
• The demand for essential product such as basic food stuff, medicine,
electricity are price inelastic because they are necessary for survival. 
P a g e 37 | 48
 • Consumers respond easily to increase in prices for durable goods, because
durable goods last for a long period of time, expenditure can be delayed. 
• If prices decrease, consumers rush to buy the product because they see it is
bargain. 
• Changes in price of habit forming products will not have an influence on
quantity demanded. 
• Consumers are sensitive to price changes if a product lasts for a longer
period of time. 
• If a product has only one possible use, consumers will be sensitive to its price
increase. 
(Accept any other correct relevant response) (10)
CONCLUSION
It is important for producers to study the buying patterns of consumers so as to plan
accordingly. 
(Accept any relevant conclusion) (2) [40]

P a g e 38 | 48
TOPIC 11 : GLOBALISATION
QUESTION 6: CONTEMPORARY ECONOMIC ISSUES 40 MARKS 40 MINUTES
• Examine in detail the causes of globalisation.
• Evaluate the negative impact of globalisation on the environment.

INTRODUCTION
Globalisation is the process of interaction among the countries of the world to bring
their economies and societies together to develop the global economy. ✓✓
(Accept any other relevant correct response.)(2)
BODY: MAIN PART
Development of technology ✓
• Globalisation has been made possible, in part by technological innovation.
Over the past two decades, improvement happened in computer technology
and the application of computers. This application of computers, utilising all
their abilities, is known as information technology. ✓✓

Information Technology (IT) ✓

• IT is based on communication technologies (concerned with the transmission
of information, e.g. by mail or telephone) and computer technologies
(concerned with the processing and storing of information, e.g. typing and
paper records). ✓✓
• Both of these now happen with the aid of computers. The information can be
retrieved, studied, changed, distributed and stored again. ✓✓

New production processes

• IT is transforming the technologies of production and processes. It brought
about new systems of production based on extensive communication and
transport networks at lower costs. ✓✓ For example, components of
motorcars are made in different parts of the world and then assembled in
other parts of the world). IT permits services to be disconnected from
production and traded or performed remotely (they are outsources, e.g.
bookkeeping). ✓✓

Transportation and communication

• Globalisation is very dependent on communication and transportation.
Transportation systems are the means by which materials, products and other
tangible things including people are transported from place to place. ✓✓
• Communications systems are the means by which information is transmitted
from place to place in the form of messages, ideas, instructions, images,
drawings etc. ✓✓
P a g e 39 | 48
 • Developments in transport and communication have transformed our world,
permitting unprecedented mobility of materials and products and a massive
geographical expansion of markets. ✓✓
• IT is transforming both the technologies of transformation and
communication. ✓✓

Trade liberalisation✓

• Trade liberalisation is the removal or reduction of trade barriers between

countries, e.g. import duties. ✓✓
• The purpose of trade liberalisation was to stimulate international trade
• It started after World War II with the establishment of GATT by the United
Nations. ✓✓
• GATT members negotiated for the removal of trade restrictions and barriers
as well as to find methods of increasing international trade. ✓✓
• This role was taken over by the WTO in 1994. ✓✓
• The WTO ensures that trade agreements between countries are honoured
and acts as a mediator in trade disputes. ✓✓
• Removal of trade restrictions are aimed at encouraging foreign direct
investment to further develop industries and increase consumers’ purchasing
power. ✓✓
• The outflow of these actions was the formation of export processing zones
(EPZs) by many countries in which no trade tariffs were levied. ✓✓
• Through trade liberalisation, some countries formed free trade areas (FTA),
where agreements were reached whereby participating countries remove all
trade barriers among themselves on goods/services traded. ✓✓
• The effect of an FTA is that the total volume of trade has increased because
countries can specialise in the products they produce the cheapest. ✓✓

Capital liberalization

• The financial markets were also liberated. As exchange and investment

controls were removed, capital was allowed to be traded in international
markets. ✓✓
• This allowed capital to move where it earned the highest returns. Investors
can move capital directly for portfolio investment and foreign direct
investment, without the intermediation of banks or monetary authorities. ✓✓
• Capital account liberalization in developing countries reduces the cost of
capital, temporarily increases investment, and permanently raises the level of
GDP per capita✓✓

Multinational enterprises

• Multinational enterprises are companies that establish manufacturing,

servicing and trading businesses in several countries. ✓✓

P a g e 40 | 48
 • When they produce goods/services in another country, they do not have to
export to that country, so they save in transportation costs. ✓✓
• They facilitate FDI as well as the migration of specialised labour when it is not
available in the foreign market. ✓✓
• They also play a major role in distributing and implementing new
technologies. ✓✓
• MNEs are companies that deliver products and services in at least two
countries. ✓✓
• They produce products in several countries where the costs of production is
the lowest and then distribute the products globally. ✓✓
• MNEs expose countries to international products which promotes
globalisation through international trade. ✓✓

Standardisation

• Refers to making rules the same all over the world, making it easier for
countries and businesses to trade and invest internationally. ✓✓
• Those who are subjected to the rules behave in a similar manner which
promotes globalisation. ✓✓
• Globalisation was promoted by a number of facilitating rules, procedures and
norms that were laid down by international institutions. ✓✓
• Examples of such rules include, trade relations, investments, health matters,
labour and environment. ✓✓

Foreign direct investment

• Foreign direct investment (FDI) is the category of international investment that

reflects the objective of obtaining a lasting interest by an investor in one
economy in an enterprise resident in another economy. ✓✓
• FDI differs from portfolio investments because it is made with the purpose of
having control, or an effective voice, in the management of the enterprise
concerned and a lasting interest in the enterprise. ✓✓
• Direct investment not only includes the initial acquisition of equity capital, but
also subsequent capital transactions between the foreign investor and
domestic and affiliated enterprises. ✓✓
• An increase of the ratio of FDI and GDP implies a greater share of FDI thus
increase of the level of globalization. ✓✓
• FDI flows (inward and outward) as a percentage of GDP indicate the degree
of global investment activities of the economy for a given time period and
reflects the changes between two period✓✓

Free trade Zone

P a g e 41 | 48
 • this is a form of trade integration in which a number of countries remove all
trade barriers (tariffs, quotas, levies) among themselves on goods and
services traded. ✓✓
• Free trade zones frequently entice global corporations to set up shop by
providing them with generous tax breaks. ✓✓
• The resulting lower costs of manufacturing more than compensate for the
tariffs that will ultimately have to be paid when the goods reach their final
destination. ✓✓
• They can open new markets, increase gross domestic product (GDP), and
invite new investments. ✓✓
• FTAs can open up a country to degradation of natural resources, loss of
traditional livelihoods, and local employment issues✓✓

The AfCFTA is the continent’s most ambitious integration initiative. The main
objectives of the AfCFTA are:
• create a single continental market for goods and services, with free
movement of businesspersons and investments✓✓
• expand intra-Africa trade across the regional economic communities and the
continent in general✓✓
• enhance competitiveness and support economic transformation.
✓✓ (Accept any other relevant correct response.)

ADDITIONAL PART
SET YOUR OWN ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST

CONCLUSION
(Accept any correct relevant response)

P a g e 42 | 48
QUESTION 6 CONTEMPORARY ECONOMIC ISSUES 40 MARKS 40 MINUTES
• Discuss consequences of globalisation
• How can charging the use of the environment and emission charges ensure
environmental sustainability?
INTRODUCTION

Globalisation is the increasing economic integration and interdependence of

national, regional, and local economies across the world through an intensification of
cross-border movement of goods, services, technologies and capital. ✓✓
(Accept any correct relevant introduction)

BODY

• Globalisation changed the proportions which the different sectors contribute to

the GDP. ✓✓
• The most eminent change was to decrease the contribution of primary sector
especially agriculture and to increase the contribution of the service
sector. ✓✓
• Globalisation has helped many countries to grow more quickly than they
would otherwise have done. International trade helps economic development
when a country’s exports drive its economic growth. ✓✓
• Because of globalisation the standard living of many people in the world
improved dramatically. ✓✓
• It has given many people in developing countries access to knowledge which
would have been well beyond reach of even the wealthiest in any country a
century ago. ✓✓

Economic growth
• Since the 1980’s the world saw a tremendous increase in globalisation which
led to a decade of increased wealth✓✓
• The world’s total economy grew, benefiting from new technology, and the
liberalisation and growth of trade. ✓✓
• Globalisation had a positive impact on the South African economy
• It is estimated that approximately 98% of the increase in world GDP can be
linked to globalisation. ✓✓

Changing patterns of trade

• Globalisation resulted into enormous growth in international trade✓✓
• Countries like China, India and Brazil took the lead in this process by
exporting more and their dependence on export has grown continuously✓✓
• In South Africa six prominent announcements aligned to globalisation were
made in recent years:
• Local assurance companies, pension funds and unit trusts were allowed to
undertake foreign portfolio investments✓✓
• Most controls on the current account transactions were abolished✓✓
• Foreign travel allowances for individuals were increased and businesses
could invest more money abroad and raise foreign funds✓✓
• Further relaxation of exchange control for individuals and businesses were
announced. ✓✓
P a g e 43 | 48
 • Companies were allowed to use local cash holding to finance new foreign
assets and to repay foreign debt. ✓✓
• South African firms were allowed to increase the limit on their FDI abroad
from R50 million in Africa and R500 million in the rest of the world. ✓✓

Changes in employment conditions

• MNEs like Microsoft have the potential to create many jobs all over the
world✓✓
• It is estimated that they employ between 17 and 26 million people in such
jobs✓✓
• Employment in services increased far more rapidly than employment in
manufacturing✓✓
• The shift to service jobs has increased the participation of women in the
labour force. ✓✓

Environmental degeneration
• There is a growing concern that globalisation is damaging the planet✓✓
• The state of our environment is continuously declining and various renewable
resources such as fresh water, forests, plant, and animal species are being
exhausted. ✓✓
• The consumption patterns of richer countries are the main source of
environmental destruction and leads to global warming✓✓

Labour practices becomes universal

• As functional integration in the world becomes for intense, the contents of jobs
and labour practices become more similar✓✓
• Many professional qualifications are internationally accredited✓✓
• This allows qualified professional people to work where the quality of life is
better, and their earnings are potential higher✓✓
• Within free trade areas, economic unions and monetary unions work permits
are no longer required✓✓

Cultural change
• The availability of some consumer goods, such as soft drinks, hamburgers
and music are visible signs of globalisation✓✓
• Producers such as Nike and Sony promote a lifestyle that flow from rich
countries to poor countries✓✓
• The dominance of the English language is another example of globalisation
• This is leading to one global culture✓✓ max 26
(Accept any correct relevant response)

P a g e 44 | 48
ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST

Changing for use of the environment

• The pricing of the environment is one method used by government to impose
environmental charges. ✓✓
• Government levies a fee on consumers and producers for the waste (solid,
liquid, gas) they dump in the environment✓✓
• Best results are obtained when these charges are proportional to the waste
they produce. ✓✓
Emission charges
• Government can set a price per unit of pollution✓✓
• The pollution fee is changed based on the quantity of pollutants released into
the atmosphere✓✓
• The more pollution the firm creates the more it pays. ✓✓ max 10
(Accept any correct relevant response)

CONCLUSION
The dynamic structure of the global economy because of globalisation has
influenced the macroeconomic policies in the world towards the realisation of even
greater globalisation benefits ✓✓
(Accept any correct relevant response)

P a g e 45 | 48
Topic 12: ENVIRINMENTAL DETERIORATION
QUESTION 6: CONTEMPORARY ECONOMIC ISSUES 40 MARKS 40 MINUTES
• Examine in detail the state of the environment. (26 marks)
Examine in detail problems threating the environment
• Argue in favour of protecting the environment. (10 marks)

INTRODUCTION

Growth is damaging the planet. The state of the environment is continuously

declining and various renewable resources e.g. fresh water, forests, plants and
animals are species are being exhausted ✓✓

BODY

Human claims on the environment are approximately 50% more than what the
natural environment can provide continuously on a long-term basis. These claims
originate because of 2 reasons:
• Excessive consumption. Caloric food intake by people in developed
countries is 35% higher than the amount that nature can provide on a
sustainable basis. ✓✓
• Increasing population numbers. The world’s population grows mostly as a
result of the high fertility rates in developing countries ✓✓

The excessive claims of humans n nature impact in three areas, namely: non-
renewable resources, renewable resources and economic waste.

Non-renewable resources✓
• From past evidence it is possible to extrapolate what may happen in future.
✓✓

Depletion of finite resources. ✓

• There can be no doubt that some resources will be depleted in time ✓✓
• Examples are minerals and fossil fuels like oil, gas and coal ✓✓
• Their exhaustion is inevitable if their reserves are finite. ✓✓
• The only question is the time scale over such exhaustion will occur.
• However, it is possible that with new technologies of exploration, new
reserves may be discovered. ✓✓

Land consumption and destruction

Two elements are involved:
Land consumption
• This means that increasing numbers of ecosystems are destroyed to create
space for urban, industrial and farming developments ✓✓
• In addition, some productive land is “consumes” by more roads and railway
lines. ✓✓
• The biodiversity that that is destroyed by these developments can never be
reclaimed. ✓✓

P a g e 46 | 48
 • The effects of these losses on other animal and plants are not known yet, but
for our purposes the loss of species represents a loss of economic potential
and is thus not in the interest of development ✓✓
Soil erosion
• There is no known way that we can replace our soil. ✓✓
• In South Africa annual soil losses are estimated at 300-400 million tons,
nearly three tons per hectare. ✓✓
• If the world’s soil resources are being so rapidly depleted, clearly the ability of
the world to feed itself is also being affected. ✓✓

Renewable resources✓
• Renewable resources are natural resources such as land for natural habitat
and wildlife areas, land for various agricultural uses, fauna and flora, crop
products, farm animals, game, sea and fresh water fish and underground
water. ✓✓
• These are resources which over time and with good management can be
replenished ✓✓
• Nevertheless most so-called renewable resources may become exhausted if
they are not managed in a sustainable manner. ✓✓

Economic waste
• Waste occurs in the economy because of simple natural law: the total mass of
inputs to a transformation process is equal to the total mass of outputs.
• If inputs do not emerge as desired products, they must therefore appear as
unwanted by-products or waste ✓✓
Solid waste
• In sold form, waste presents itself as chemical liquids and concrete things, for
example used tyres and plastic bags. ✓✓
• These are synthetic things that do not occur in nature, and nature does not
have a way to decompose them. ✓✓
Gas waste
• Gas waste refers to the pollution of the atmosphere and has two major forms,
namely chlorofluorocarbons and carbon dioxide (CO2) ✓✓
• The result is than the rate of emissions in recent decades has been far
greater than the rate of absorption. ✓✓

• Pollution to the atmosphere is harmful to human health and agriculture – it

results in poor quality or lower yields. ✓✓
• It is harmful to buildings, causing corrosion of stone and metal and timber.
• To amenities, causing damage to fish, fauna and flora, to the life of the whole
planet through the greenhouse effect. ✓✓
max 26

P a g e 47 | 48
ADDITIONAL PART

TYPICAL EXAM QUESTION: THESE HIGHER ORDER

QUESTIONS REQUIRE THE LEARNERS TO USE HER/ HIS
CRITICAL THINIKING SKILLS.
Higher order questions are grounded in the content. These
types of questions test critical thinking, where candidates should be able to
apply their knowledge, through logical reasoning and also have an
awareness of their current economic climate. Content (covered by
discuss/examine/describe/analyse/explain/evaluate/compare/assess/justify/
construct/calculate) can be assessed as higher-order questions. Answers will
not necessarily be found in textbooks.
ADDITIONAL PART CHANGE ON EACH AND EVERY EXAMINATION OR
TEST
• Our environment is what houses and helps our ecosystem grow and thrive.
Without protecting and taking care of our environment we are putting many
lives at danger such as animals, plants and crops and consequently our own.
✓✓
• All of the ecosystems that make up our environment are deeply connected.
✓✓
• Once change to an ecosystem could completely change the dynamic that has
been created. ✓✓
• Forests help give us timber, wood, rubber, essential oils and provide
employment. ✓✓
• We need to ensure the long-term maintenance of the different parts of our
ecosystem so that it functions well for future generations and to ensure that it
is diverse and productive. ✓✓
• A strong environment can provide support to businesses by providing raw
resources. ✓✓
• A strong environment can provide employment, for example in the tourism
industry✓✓
• The environment is able to provide support to businesses by providing raw
resources. ✓✓
• For economic development to be sustainable, the environment must be
careful managed. ✓✓
• Healthy ecosystems clean our water, purify our air, maintain our soil, regulate
the climate, recycle nutrients and provide us with food. ✓✓
CONCLUSION
Protecting the environment against global warming is a very selfless and noble act. It
is very important so that future generations can also enjoy the environmental space
that we are enjoying now and even better. ✓✓ max 2

END

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