Economics Grade 12 Paper 2 MP Prelim 2023 Memo

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 ECONOMICS P2 SEPTEMBER 2023 MARKING GUIDELINE MARKS: 150 This MARKING GUIDELINE consists of 18 pages.

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline SECTION A: COMPULSARY QUESTION 1 30 MARKS – 20 MINUTES 1.1. MULTIPLE CHOICE 1.1.1 D private  1.1.2 A internal  1.1.3 B can easily enter and exit the market  1.1.4 B through the use of a sin tax  1.1.5 D demand-pull  1.1.6 C outbound  1.1.7 D deflation  1.1.8 C Basel Convention  ( 8x 2) (16) 1.2 MATCHING ITEM 1.2.1 G / goods that improve the welfare of the society  1.2.2 I / a situation where the market does not supply goods that match the needs of the consumers  1.2.3 F / a situation where average costs increase as production increases  1.2.4 H / excludes the prices of goods and services that change frequently  1.2.5 D / the introduction of harmful substances into the environment  1.2.6 A / a variety of plant and animal species found in a particular environment  1.2.7 C / licence for a business to pollute up to a specified limit  1.2.8 E / visiting museums and art galleries  (8 x 1) (8) 1.3 ONE WORD 1.3.1 Explicit cost  1.3.2 Economic profit  1.3.3 Cost-Benefit analysis  1.3.4 Stagflation  1.3.5 Global warming  1.3.6 Indigenous knowledge system  (6 x 1) (6) TOTAL SECTION A: (30) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline SECTION B Answer any TWO of the three questions in this section in the ANSWER BOOK. QUESTION 2: MICROECONOMICS 40 MARKS – 30 MINUTES 2.1 Answer the following questions. 2.1.1 Name any TWO characteristics of public goods.  Non excludable   Non rival   Non-rejectable  (Accept any other correct relevant response) (2 x 1) (2) 2.1.2 Why is the individual firm in a perfect competitive market regarded as a price taker? The individual firm is one of many firms in the market therefore it takes the price from the industry as it has no influence on the market price.  (Accept any other correct relevant response) (1 x 2) (2) 2.2 DATA RESPONSE 2.2.1 Identify ONE firm that represents monopolistic market from the above information.  KFC   Debonairs   Steers  (1) 2.2.2 Name any ONE type of a monopoly.  Natural monopoly   Artificial monopoly   State-owned monopoly  (1)  Legal monopoly  (Accept any other correct relevant response) 2.2.3 Briefly describe the term oligopoly. Oligopoly is a market structure that is dominated by few sellers of a particular product or service.  (Accept any other correct relevant response) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline 2.2.4 How do monopolistic businesses benefit by using non-price competition strategies?  They avoiding competing (price wars) in terms prices.   They are able to increase market share without using prices.  (Accept any other correct relevant response) (2) 2.2.5 Why is entry into the oligopoly market regarded as difficult?  It often requires a large amount of money to enter the market.   The existing firms may be colluding to limit competition by fixing Prices.   Economies of scale enjoyed by the existing firms can give them an advantage.  (2 x 2 ) (4) (Accept any other correct relevant response) 2.3. DATA RESPONSE 2.3.1 Identify the market price from the graph above. P (1) 2.3.2 Name any ONE example of a direct subsidy.  Cash grants   Interest – free loans  (Accept any other correct relevant response) (1) 2.3.3 Briefly describe the term Subsidy A financial assistance by the government to consumers and or producers of goods and services.  (2) (Accept any other correct relevant response) 2.3.4 Explain the benefit of subsidies to producers. Subsidies help reduce the cost of production for the producer and the producer will produce more goods.  (Accept any other correct relevant response) (2) 2.3.5 Use the above graph to show explain the effect of a subsidy on the consumer.  The provision of a subsidy will reduce the price paid by the consumer to decrease from P to P1.   The quantity demanded will increase from Q to Q1.   (4) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline (Accept any other correct relevant response) 2.4 With the aid of a graph, explain the supply curve of a perfectly competitive firm.  Labelling on and of the axis: 1 mark  Correct drawing and labelling of the MC curve: 1 mark Cost/revenue  Correct drawing and labelling of the MC  AVC curve: 1 mark  Indication of shutdown point: 1 mark Max. 4 marks AVC  a P  AR = MR Shut-down point 0 Quantity   The supply of the individual firm in a perfectly competitive market is determined by the intersection of MC and AVC curves   The firm‘s supply curve is the upward sloping part of the Marginal Cost (MC) curve   The individual firm will only produce when the price lies above the minimum point on the AVC curve   If the market price is equal or below Average Variable Costs (AVC), the firm should close /shut down  (Max. 4) (Accept any other correct relevant response) (8) 2.5 Analyse the ways in which government can ensure equitable distribution of income and wealth. The government can:  make use of the progressive income tax system in which higher income group pay higher tax rates than lower income groups.   subsidise goods and services such as housing, education and primary health care to make them more affordable.   provide social grants such as old age, child support grants to improve the standard of living of the poor.   provide free goods such as free water and electricity to those who are Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline poor.   use laws such as the BBBEE/ BEE whereby the previously disadvantaged members receive first preference in order to improve their participation in the economy.  (4 x 2) (8) (Accept any other correct relevant response) [40] QUESTION 3: CONTEMPORARY ECONOMIC ISSUES 40 MARKS – 30 MINUTES 3.1 Answer the following questions. 3.1.1 Give any TWO causes of cost push inflation  Wages   Key inputs   Exchange rate depreciation   Profit margins   Productivity   Natural disasters  ( 2 x 1) (2) 3.1.2 How can education help to ensure environmental sustainability?  Education can help change people’s attitude towards the environment.  (Accept any other correct relevant response) (1 x 2) (2) 3.2. DATA RESPONSE 3.2.1 Identify the type of pollution depicted in the picture above. Air pollution  (1) 3.2.2 Name any ONE renewable source of energy.  Solar   Wind   Water  (1) (Accept any other correct relevant response) 3.2.3 Briefly describe the term preservation. It refers to keeping resources that are non-renewable intact.  (2) (Accept any other correct relevant response) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline 3.2.4 Explain the effect of carbon dioxide produced by industries on the society.  It can cause chronic respiratory diseases that may reduce the quality of life.   It can kill people in the society as they get sick from breathing contaminated air.  (2) (Accept any other correct relevant response) 3.2.5 Why does the market fail to protect the environment?  The market sees the environment as a common resource.   Businesses sometimes lack the knowledge of how their activities can damage the environment.   Market care less about its harmful practices on the environment and leave future generations to suffer the consequences.  (Accept any other correct relevant response) (2 x 2) (4) 3.3 DATA RESPONSE 3.3.1 Identify the repo rate before the hike (increase). 7%  (1) 3.3.2 Give ONE cause of demand-pull inflation.  Less savings   Reduction in taxes   Easy access to credit   An increase in exports  An increase in government spending  (1) (Accept any other correct relevant response) 3.3.3 Briefly describe the term prime rate. It is the rate at which commercial banks lends money to their best clients  (2) (Accept any other correct relevant response) 3.3.4 Explain the influence of inflationary expectations on businesses. Due to expectations that wages will rise, some businesses will increase prices in advance.  (2) (Accept any other correct relevant response) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline 3.3.5 How can inflation affect people who are investors and savers in the economy?  Assets with fixed nominal values give a fixed return if they are held until maturity.   This means savers can be negatively affected by inflation as their returns often do not grow as inflation increases.   Assets with flexible market values increase more rapidly than increase in the general price level.   This means investors (e.g. property) are favoured by inflation.  (Accept any other correct relevant response) (2 x 2) (4) 3.4 Distinguish between the consumer price index (CPI) and the producer price index (PPI). Consumer Price Index  Pertains to cost of living   Basket comprises of consumer goods and services   Capital and intermediate goods are excluded   Prices include VAT  (Max. 4) Producer Price Index  Pertains to cost of production   Baskets consist of goods only   Capital and intermediate goods are included   Prices exclude VAT  (Max. 4) (Accept any other correct relevant response (4 x 2) (8) 3.5 How successful is the SA government in controlling deforestation? Government is successful because:  people are granted property rights if they agree to preserve the flora.   municipalities have policies that makes people aware of the importance of protecting the environment.  Government is not successful because:  in the rural areas deforestation keep on escalating as people use indigenous trees as firewood.   People continue cutting down trees because there are no stipulated rules and laws that are followed for those who are caught cutting down trees Over time forest are keeping on getting fewer and fewer due to deforestation.  (4 x 2) (8) (Accept any other correct relevant response [40] Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline QUESTION 4: MICROECONOMICS AND CONTEMPORARY ECONOMIC ISSUES 40 MARKS – 30 MINUTES 4.1 Answer the following questions. 4.1.1 Name TWO any TWO types of demerit goods.  Tobacco   Alcohol   Gambling  (2 x 1) (2) (Accept any other correct relevant response) 4.1.2 Explain the effect of a depreciating rand on inbound tourists in South Africa. Inbound tourists will increase because it will become cheaper for them to visit South Africa.  (1 x 2) (2) (Accept any other correct relevant response) 4.2 DATA RESPONSE 4.2.1 Identify the demand curve that represents the private benefit? DD  (1) 4.2.2 Give an example of positive externality.  Education  Vaccination  (1) (Accept any other correct relevant response) 4.2.3 Briefly describe the term social benefit. The benefit gained by the society from the use of a good or service.  (2) (Accept any other correct relevant response) 4.2.4 Why is social optimal output (Q1) more beneficial to the community? It indicates an increase in the consumption of goods positive effects to the society education and health.  (2) (Accept any other correct relevant response) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline 4.2.5 Use the graph above to explain how the market has failed to allocate resources efficiently.  If the market is left to its own devices, a quantity Q will be produced at price P.   There would be social inefficiency in the market since not enough of the product is being demanded.   However, if social benefits are acknowledged, a quantity Q will be produced at price P.   More of the product would be demanded; this will lead to social efficiency.   The shaded angle represents the positive externality (the welfare gain) to society.  (4) (Accept any other correct relevant response) 4.3 DATA RESPONSE 4.3.1 Identify the environmental problem in the extract above. Climate change  (1) 4.3.2 Name any ONE effect of drought.  Food insecurity   Water shortages  (1) (Accept any other correct relevant response) 4.3.3 Briefly describe the term environmental sustainability. Environmental sustainability is the ability of the environment to survive its use for economic activity.  (2) (Accept any other correct relevant response) 4.3.4 Explain the positive impact of levying green tax on environment. It reduces production of goods that pollute the environment leading to less pollution in the environment.  (2) (Accept any other correct relevant response) 4.3.5 How can floods affect the South African economy?  Supply chains are disrupted which lead to scarcity of goods in the country and price hikes.   There is less production of goods and services which decreased economic growth.   Some people lose their jobs since their workplaces are destroyed Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline by floods, leading to increase in unemployment.  (2 x 2) (4) (Accept any other correct relevant response) 4.4 Describe the aims/objectives of the competition policy.  Prevent the abuse of economic power, e.g. by a monopolist.   Regulate the growth of market power by means of takeovers and mergers   Prevent restrictive practices, especially by oligopolies, such as fixing of selling prices, collusion in respect of tenders or price discrimination.  Contribute to the developmental objectives of the state   To improve efficiency of markets through legislation   Improve equity in markets e.g. Employment Equity Act   Protect the consumer against unfair prices and inferior products e.g. Competition Act   Prevent price fixing usually practiced by oligopolistic firm (4 x 2) (8) 4.5 Evaluate the success of inflation targeting. Inflation targeting has been successful because;  South Africa’s prices have been fairly stable since the introduction of the inflation targeting in 2000   The policy helps consumers and businesses to make economic plans without much worry about high inflation   Interest rates are increased when CPI reach upper limit of 6%  Inflation targeting has not been successful because;  Some inflationary pressures are from outside the economy such as Ukraine-Russia war which affected oil prices   The depreciating rand increases prices for key inputs leading to cost push inflation   South Africa’s annual inflation rate was 7.2% in December of 2022, down from 7.4% in the prior month, as expected, but still above the upper limit of the South African Reserve Bank’s target of 3-6%  (Accept any other correct relevant response (4 x 2) (8) [40] TOTAL SECTION B: (80) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline SECTION C Answer any ONE of the two questions in this section. QUESTION 5: MICROECONOMICS 40 ARKS – 40 MINUTES  Compare and contrast the perfect market and the monopoly in detail. (26)  How would the continued stages of load shedding negatively impact the market participants? (10) INTRODUCTION Market structure refers to how the market is organised/A market is a place where buyers and sellers of goods and services meet to exchange goods and services  (Accept any other correct relevant introduction) (Max. 2) BODY MAIN PART Characteristics/ Perfect Monopoly Criteria Competition Number of  So many that no  ONE Seller and many Firms / single business can buyers  Businesses  influence the  The seller ‘s supply  market price  represents the market supply  Nature of  Products sold on the  Products / services are product  market are unique with no close homogeneous, e.g. substitutes  maize  Entrance   Entry into the market  Entry is completely is completely free restricted or blocked  Barriers to entry may be economic in nature such as large capital outlay needed   Non-economic factors such as patents can also serve as a barrier to entry Market  Both buyers and  Buyers and Information  sellers have full Sellers do have (complete) knowledge of all the full Knowledge of all the prevailing market prevailing market conditions  conditions  Collusion   Impossible. Sellers  There is no collusion in a Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline act independently monopoly market since from each other.  there is only one seller  Control over  Price taker - no  Is regarded as a price price  control cover maker as it has some price  control over price   The market  Prices not determined by determines the price market forces of supply for the individual and demand but by the firm business itself   Considerable control over the price of the product, but limited by the market demand and the goal of profit maximisation  Output demand  The demand  Demand curve slopes curve for firms’ / curve for the perfect downward from the left to businesses competitor is right and it equals to the product  horizontal - (Perfectly market demand curve  elastic)  Economic  The perfect  The monopolist realise profit  competitor can only economic profits both in the realise economic short term and profits in the short long-term  term   The monopolist will not  Abnormal profits will produce at the lowest point attract new entrants of the LAC, like the perfect into the market for competitor, the output will both structures  be less than the perfect  The price for the competitor.  product for both  The monopolist's market structures production will be less than equals the average the ideal production cost.  quantity where LAC is the  The perfect minimum and has surplus competitor does capacity.  produce the ideal production quantity and has no surplus capacity.  Allocative  Efficient - Goods are  Inefficient - Average costs Efficiency  produced at lowest of production are high.  cost possible.  Productive  Efficient - quantities  Inefficient - Produces Efficiency  required by lower quantities than consumers are what the consumers available.  wishes for.  Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline Decision  Each firm make  There is only one firm in making  independent the market therefore decisions.  decision making lies on the monopoly on its own.  (Accept any other correct relevant response) (Max. 26) Allocate a maximum of 8 marks for headings/examples ADDITIONAL PART  Load shedding disrupts the production of goods and services resulting in less goods and service produced by firms.   Producers will lose revenue and profits due to a decrease in sales.  Producers may increase the prices of their products in order to recover for their loss of profits.   The producers may retrench some workers   Consumers will demand less goods and services due to low income Levels.   Consumer’s standard of living may decrease as they cannot satisfy their needs and wants due to higher prices that they may have to pay for goods and services.   Consumers may not have choices as limited quantity of goods is supplied.  (Accept any other correct relevant response) (Max. 10) Allocate a maximum of 2 marks for mere listing of facts/examples) CONCLUSION By controlling the supply of the product service in the market, the monopoly aims to keep prices and profits high.  (Accept any other correct relevant high order conclusion). (Max. 2) (40) Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline QUESTION 6: CONTEMPORARY ECONOMIC ISSUES 40 MARKS – 40 MINUTES  Examine in detail the effects of tourism. (26)  How can South Africa improve the marketing of its tourist attractions in its less popular destinations? (10) INTRODUCTION Tourism is the activities of people travelling to and staying in places outside their usual environment for no more than one consecutive year for leisure, business and other purposes.  (Max. 2) (Accept any other correct relevant introduction) BODY: MAIN PART GDP   Tourism is the fourth-largest industry in South Africa and supports about 700 hotels, 2 800 guesthouses and bed-and-breakfast establishments and 10 000 restaurants.   Tourism has the potential of bringing the economy out of a slump, although it dropped by 5% before 2010, it increased by 5% thereafter.   Tourism has direct as well as indirect impacts on the GDP.  Direct impact  Tourism contributed 3% of the GDP in 2018.   Internal spending on travel and tourism by residents and non-residents for business and leisure.  Indirect impact  Tourism contributed 9% in 2018.   Government and private sector.   spending such as purchase of new aircrafts and construction of new hotels.  Employment  Tourism:  industry employs about 7% of the South African workforce, and is potentially regarded as the largest provider of jobs and earner of foreign exchange.   industry has employed more than 1,2 million people.   is ideal for providing employment in areas that offer few employment opportunities.   is labour intensive although it has the lowest ratio of investment to employment creation.   uses different skills, from accountants to hairdressers.   has the potential to create jobs and offer opportunities for small entrepreneurs.   provides immediate employment like live entertainment at holiday resorts  provides entrepreneurial opportunities in the informal sector such as fruit Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline vendors.  Poverty   The income the tourism industry earns contributes to the country's growth and development.   Tourism can affect the lives of the poor in many ways;  The Department of Tourism is involved in poverty relief projects that promote community owned tourism products and services.   Poverty relief programme manages and administer poverty relief proposals and spin-off projects in the tourism and environment sectors.   Their focus is on infrastructure investment (e.g. information centres, tourist ablution facilities, walkways) and product development (e.g. heritage sites, rock art and conservation).   Through this programme, the DEAT is seeking to provide long-term sustainable work opportunities for the members of South Africa's poorest communities in rural areas.   Tourism is an effective mechanism for distributing resources to rural areas to develop them as tourist sites.  Externalities   Tourism activities may result in benefits or costs to third parties who are not part of the buyer-seller market.  Negative externalities   Aircraft noise disturbing residents near airports.   Other examples/costs: Traffic and congestion, extra policing due to crime, increased health service and sanitation, destruction of flora and fauna, spoiling views of the landscape, increased maintenance of Infrastructure.   Tourism can cause inflation, which makes some goods unaffordable to locals.  Positive Externalities:  Tourism strategies will maximize external benefits and minimize external costs of various externalities.   Such benefits are normally measured in terms of an impact or cost- benefit analysis.   Attracts large amounts of revenue, but cause undue environmental damage and pollution.   Rapid growth aimed at short-term benefits   Global tourism will grow due to increased population and increased living standards.   Potential: attract revenue to country, alleviate poverty, conserve cultural and natural assets – needs conscious planning.   Needs to achieve ethical and sustainable tourism. We must respect Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline tradition and customs of area, plough back earnings into local community – area must be protected as attractive tourist resort  The environment   The influx of tourism and vehicles into conservation areas damages grass cover affecting plant and animal species.   Tourism involves transport and transport is a major 'source of pollution.   Policy should be in place to ensure tourists are transported in the most environmentally friendly way e.g. Rickshaw at the beachfront, horse-riding, cycling.   The use of the Gautrain is more environmentally friendly as it decreases carbon emissions.   The rapid degradation of the environment poses a major threat to the tourism industry.   The environment is divided in four main categories: permanent environmental restructuring like airports.   Direct environmental stress caused by tourist activities.   Effects on population dynamic.  Investment/ infrastructure   Tourism leads to increased demand, which makes business more willing to invest in capital goods and labour.   Government expenditure on infrastructure is encouraged because it can generate income.   With regard to travel and tourism, infrastructure includes fixed passenger transportation investment, destination services such as power, water and sewerage, cleaning and health, fixed communications investments.   South Africa has a first-world infrastructure; however, there is a lack of infrastructure in the rural areas, which limits the participation of the rural communities in the tourism industry.   The absence of adequate transportation services also prevents rural communities from participating in the tourism industry, both as potential suppliers of products, and as tourists themselves.   Energy infrastructure like electricity needed by tourists at tourist sites.   Tourists need basic services like clean water and refuse removal.  (Accept any other relevant response) (Max. 26) ADDITIONAL PART South Africa can improve the marketing of its tourist attractions in its less popular destinations by:  advertising the tourists' attractions in a variety of media including social media and internet which may reach both local and international potential tourists.   focusing on a clear message that concentrates on the strength of the attraction/ uniqueness of the destination.   using the indigenous knowledge systems of that particular area where Copyright reserved Please turn over

Downloaded from hlayiso.com MDE/September 2023 NSC-Marking Guideline possible.   describing the service offered in the best possible way to catch the interest of the likely tourist e.g. the use of slogans.   charging a price that is competitive and money well spent for the service offered.   helping the tourist to view the entire service as value for money – deliver a world-class visitor experience.   highlighting other places of interest in the vicinity of the attraction as part of a package.   focusing on proudly South African products/services / Sho’ t Left campaign help disadvantaged South Africans to benefit from tourist attractions in the less popular destinations.  (Accept any other correct relevant response) (Max. 10) Allocate a maximum of 2 marks for mere listing of facts/examples) CONCLUSION Marketing of tourism products to both domestic and international markets is important for achieving the full growth potential of the sector in South Africa.  (Accept any other correct relevant higher order conclusion) (Max. 2) (10) 40 TOTAL SECTION C: [40] GRAND TOTAL: 150 Copyright reserved Please turn over