ECS1500 MEMORANDUM ASSIGNMENT 03 SEMESTER 01 2023

Question 1 (5 marks) Maximum word count: 100 words

Due to an increased advertising effort about the positive effect of activated charcoal in beauty products,
consumers in South Africa are eager to buy beauty products that contain this ingredient. Explain how this will
affect the market for activated charcoal. You are allowed to use a diagram to explain your answer, but you will
only be allocated marks for the correct verbal explanation.

Memorandum Question 1

Since consumers want to buy products that contain activated charcoal, suppliers have to include this
ingredient in the beauty products they produce (explanation). Therefore the demand for activated
charcoal will increase .

This results in an increase in the price of activated charcoal,

and an increase in the equilibrium quantity of activated charcoal sold in the market.

1 Please turn over.

Question 2 (5 marks) No words allowed, only a diagram with annotations

The wage rate of workers in the wine industry in Country B has increased due to negotiations between the
labour unions and the employers. Explain how this will affect the market for wine in Country B. Clearly indicate
how the equilibrium price and equilibrium quantity of wine will change in Country B. The direction of any
changes should be clearly indicated using arrows.

Memorandum Question 2

The diagram should look as follows, with the marks allocated as indicated:

• Axes and origin correctly annotated 

• Original equilibrium correctly shown and
annotated (i.e. a demand and supply
curve with original equilibrium
indicated) 
• Supply curve shifts to the left correctly
shown and annotated 
• Quantity decreases, correctly shown and
annotated 
• Price increases, correctly shown and
annotated 

2
Question 3 (10 marks) Maximum word count: 250 words

Less strict regulation results in many more companies obtaining the right to mine coal in Mpumalanga. At the
same time, alternative energy solutions result in a decrease in the demand for coal-generated electricity. Explain
how the market for coal will be affected by these changes. Clearly indicate how the equilibrium price and
equilibrium quantity of coal will be affected by these changes. Make use of a combination of diagrams and
verbal explanation to explain your answer.

Memorandum Question 3

Axis correctly annotated 

Original demand curve correctly annotated +
Original supply curve correctly annotated +
Original equilibrium correctly annotated 
Less strict regulation resulting in more
companies obtaining the right to mine coal,
results in an increase in supply of coal  .
Rightward shift of supply curve in diagram .
Alternative energy solutions result in a
decrease in the demand for coal-generated
electricity and thus a decrease in demand for
coal. Leftward shift of demand curve in
diagram 
This results in a decrease in the price level (
and in diagram )
The effect of the change in quantity is
indeterminate and will depend on the relative
sizes of the changes in demand and supply
()

Allocate marks as follows:

OR The points indicated in red can only be awarded
in the diagram.
The points indicated in green have to be correct
in both the diagram and the description. If only
correct or mentioned in one of the two, award
one mark and use a cross to show where it is
incorrect
The points indicated in blue can only be
mentioned in the text, or if students draw
different diagrams to indicate this and
explained it in the text, the marks can also be
awarded.

NB: The diagram provided by the student

should indicate that supply increases and

3
 demand decreases, but the relative sizes of the
OR change may differ. Therefore the quantity may
increase, decrease or stay the same in the
diagram. It is also acceptable if students use
two or more diagrams to indicate the different
scenarios.