Economics Grade 12 NSC June 2013 Memo

Downloaded from hlayiso.com basic education Department: Basic Education REPUBLIC OF SOUTH AFRICA SENIOR CERTIFICATE EXAMINATION “ sECONOMICS © HIGHER GRADE 2013 POSSIBLE ANSWERS MARKS: 400 This memorandum consists of 27 pages. Copyright reserved Please turn over

Downloaded from hlayiso.com Economics/HG 2 DBE/2013 SCE — Memorandum SECTION A QUESTION 1 (COMPULSORY) 1.41 MULTIPLE-CHOICE QUESTIONS 1.1 MULTIPLE CHOICE 1.2 TRUE OR FALSE 1.4.1 C | within the boundaries of a country | 1.2.1. | FALSE 1.1.2 _|D| services 1.2.2 | FALSE 1.1.3 {A|R2000 1.2.3 | TRUE 1.1.4 |Cjnon-durable 1.24 | FALSE 1.1.5 | B | limited intensity 1.2.5 | TRUE 1.1.6 |B | marginal 1.2.6 | TRUE 1.1.7 | A | right 1.2.7 | TRUE | 1.1.8 | A | short-term 1.2.8 | TRUE 1.1.9 | C | standard of living 1.2.9 | FALSE 1.1.10 | B | geographical areas in a country 1.2.10 | FALSE 1.1.14 | A | rural 10 x 2 (20) 4.1.12 | D | Australia 1.3 CHOOSE FROM LIST 1.1.13 | C | the creation of job opportunities 1.3.1 | Real income 1.1.14 | D | portfolio investments 1.3.2 _| Monopoly 1.1.15 | A | customs duty 1.3.3 _| Economic growth 1.1.16 | B | adecrease in exports to 1.3.4 | Economic integration 1.1.17 | A | a huge capital outlay 1.3.5 | Tax 1.1.18 | D | finance 1.3.6 | Wages 1.1.19 | B | 1 April to 31 March 1.3.7 _| Productivity 1.1.20 | B | legal methods used by individuals | 1.3.8 | Wage subsidies to reduce their tax burden 20 x 3 (60)/ 1.3.9 | PPI 1.3.10 | Sasol 10 x 2 (20) | TOTAL SECTION A: 100 | Kopiereg voorbehou Blaai om asseblief A

Economics/HG SECTION B Downloaded from hlayiso.com 3 DBE/2013 SCE — Memorandum Answer any FOUR questions from this section in the ANSWER BOOK. QUESTION 2: NATIONAL INCOME 2.1 Choose the correct word(s) in brackets and write only the word(s) next to the question number (2.1.1—2.1.4). 2.1.1 intermediate ~~ (2) 2.1.2 GNP vv (2) 2.1.3 structural ~~ (2) 2.1.4 macro VV (2) 2.2 List any THREE methods to increase national income. Increase in productivity VY Availability of factors of production ~~ Technological development ~ ~~ Effective government policy ~ ~~ e Investment ~~ No other alternatives (Any3x2) (6) 2.3 DATA RESPONSE: 2.3.1 2.3.2 ee Copyright reserved Identify the following labels from the diagram. A “TM OOD Factors of production v vv if factors are listed, allocate marks as follows: (labour ~/ labour and capital v’) Goods and services “~~ ~~ Factors of production VVv Goods and services VV¥V Income VV¥ Expenditure “~~ (6 x 3) (18) Circular flow model/Economic cycle ~ ~~ (2) Py Please turn over

Downloaded from hlayiso.com Economics/HG 4 DBE/2013 SCE - Memorandum 2.4 Explain how monetary reasons can lead to upswings and downswings in economic activity e Money makes up an integral part of the economy and the availability of sufficient cash and particularly credit will play a role in the extent of economic activities’ VY « Businesses make increasingly use of commercial banks for a supply of credit to finance short term economic activities and an increase in credit will lead to an upswing in the economy” “” e When production increases the demand for bank loans and credit extensions risev” e During the prosperity phase banks grant large volumes of credit because good profits banks make on their loans and servicesY ¥ « To prevent inflationary pressures and bankruptcies, banks begin to restrict and later reduce credit which initiates the downswingY Vv e According to a second theory there is a natural rate of interest where the supply of credit equals the demand for creditv « Whenever the market rate of interest is lower than the natural rate of interest, the demand for loans increases because the interest rate for taking up credit is relatively low” ”. This results in an increase in economic activity leading to an upswing’ ¥ When the market rate of interest exceeds the natural rate, businesses tend to repay their loans because the interest rate for taking up credit is relatively highvv e A third theory explains business cycles in terms of the fact that the bank rate determines the level of interest rates which banks chargeY” e If interest rates rise, businesses tend to reduce their inventories, produce less and place smaller orders, which gives rise to a downswing’ ¥ e As interest rates drop, the cost of carrying inventories decreases and there is renewed demand for raw materials and more inventories are kept which marks an upswingY ¥” e This is known as the under-consumption theory Vv (Accept any other relevant facts) (8 x 2) (16) [50] kt Copyright reserved Please turn over

Downloaded from hlayiso.com Economics/HG 5 DBE/2013 SCE — Memorandum QUESTION 3: PRICE FORMATION 3.1 Choose the correct word in brackets and write only the word next to the question number (3.1.1 - 3.1.4). 3.1.1 opportunity cost Vv (2) 3.1.2 reserve Vv (2) 3.1.3 diamonds Vv (2) 3.1.4 economic Vv (2) 3.2 State any THREE characteristics of a monopoly Single producer vv No close substitute vv Prices can be manipulated by producer Vv” Producer may restrict output in order to raise price VW Imperfect knowledge of the market, which is deliberate exploited by advertising Vv Barriers restrict rivals from entering the market VW e Discrimination is possible VW (Any 3x2) (6) e t “4 Copyright reserved Please turn over

Downloaded from hlayiso.com Economics/HG 6 DBE/2013 SCE - Memorandum 3.3 DATA RESPONSE: 3.3.1 OPP} “v~vw 3.3.2 0QJQ.“~v~ 3.3.3 D,D; / Dy ¥~Y When the quantity of books demanded decreased the demand curve DD shifted to the left to D};D) VW” 3.3.4 Supply decreases when price decreases VY Y W and producers supply less /smaller quantity. Supply curve will shift to left. When supply decease price may increase.v VV 3.3.5 The price at which the quantity demanded and quantity supplied are equal/demand and supply are equal /D = S vv 3.4 Explain relatively elastic and relatively inelastic demand curves. Use graphs to illustrate your answer. Relatively elastic demand Horizontal axis 1 Max 4 marks for graph PRICE D 100 Vertical axis 1 t 20% 80 D Curve and slope 2 80 — 100 180 QUANTITY e In this demand situation, the percentage change in quantity is greater than the percentage change in price. vv” e A price rise from R80 to R100 eS) leads to a drop in the quantity demanded from 180 to 100 (80) units. v¥ (Accept an inverse discussion) * The demand is therefore very Tesponsivelsensttve to price changes VV e Formula: Ed = %change in quantity demanded e Answer = e Any relevant example: e.g. fuel vv eZ Copyright reserved Ychange in price Q2-Q) ‘Paps >1 (3.2) VY Max 4 marks for explanation £ Please turn over (3) (3) (6) (6) (2) I is

Downloaded from hlayiso.com Economics/HG 7 DBE/2013 SCE —- Memorandum Relatively inelastic demand PRICE DB Vertical axis 1 100 Horizontal axis 1 { Curve and slope 2 50: D _¢— 100 120 QUANTITY Max 4 marks for graph « The quantity demanded changes by a smaller percentage than the percentage change in the price.vv” e Eg. the quantity demanded decreases from 120 to 100 (20) units if the price Increases from R50 to R100 (R50).“” e _ The demand is therefore not very responsive (sensitive) to price changes.v e Formula: Ed = “echarte in quantity demanded ie in price v = pa AT poll wh | Seg Se! Page Answer <1 (0.2) Vv“ Any relevant example e.g. luxury articles vv The demand is therefore less responsive/sensitive to a price change (16) vv Max 4 marks for explanation [50] D if, Copyright reserved Please turn over

Downloaded from hlayiso.com Economics/HG 8 DBE/2013 SCE — Memorandum QUESTION 4: ECONOMIC AND REGIONAL DEVELOPMENT AND URBANISATION 4.1 Choose the correct word in brackets and write only the word next to the question number (4.1.1-4.1.4). 4.1.1 GEAR VV (2) 4.1.2 IDT vv (2) 4.1.3 Exports vv (2) 4.1.4 Consumption vv (2) 4.2 List any THREE development corridors within South Africa. Maputo corridor VW Wild Coast Development programme and the Fish River SDI ““ Lubombo Initiative ~ ~~ West Coast AND Saldanha Investment Initiative Vv” Platinum SDI vw” Phalaborwa Sub-corridor VY” Coast-to-coast corridor” ~~ (Any 3x 2) (6) eoovoeeveeve 4.3 DATA RESPONSE: 4.3.1 Informal sector/Second economy V”” (3) 4.3.2 Small scale production vVvv Only source of income VV¥ Mainly labour-intensive Vv “Vv Capital is scarce VVV Low level of training Vv“ Little protection of workers V“¥Y Working conditions are poor VV v Many illegal practices VV Vv Survival is only motive VVvv Usually work long hours vvv Uses own capital Vv (Accept relevant facts) (Any3x3) (9) 4.3.3 e Serves as a safety net for the unemployed vv” e Generates an income and combats poverty vvv e Gives potential entrepreneurs experience vv“ e Contributes to the GDP V”Y (Accept relevant facts) (Any 2 x 3) (6) hawkers’ etc. (Accept any other informal sector activity) i Copyright reserved Please turn over (0 4.3.4 Taverns YY taxis Y hair salon Y panel beating V“” f ; (2) x

Downloaded from hlayiso.com Economics/HG 9 DBE/2013 SCE — Memorandum 4.4 Discuss any FOUR disadvantages of urbanisation. Unbalanced urbanisation VY e South African cities are spread unevenly across the country and unbalanced in respect of their size. Vv” e Example: The over-concentration in the Gauteng area.vV Problems of road and services/ Environmental disadvantagev V e Roads and services are often inadequate for the high concentration of the population and water is polluted.” ” e Uncontrolled urban growth has resulted in people having to travel far from their homes to their work places.v” e High percentage of motor vehicles in proportion to the population” VW Inadequate facilities / Lack of servicesVY e Modern cities are unplanned and inadequate facilities for the removal of refuse and sewage, poor and inadequate housing, insufficient water supplies for a large number of people and industries.” ” Misuse of agricultural soilvv e The best agricultural soil is often utilised for urban needs.v Vv Rapid development of cities / increased unemploymentyY VY e Lack of job opportunities in cities because of the fast development of Cities vv Residential density” Y ¢ Large number of people lives too close to one another and often there is neither privacy nor security where they stay.v Vv e There is wide spread squatting and informal settlements.vv Social problems VY e There is an increased rate of crime, high rate of divorce, drug abuse and alcohol, high rate of violence, and mental disorders.” ” (Accept any relevant facts) (Any 4x4) (16) [50] U Lk A Copyright reserved , Please turn over

a Copyright reserved Downloaded from hlayiso.com Economics/HG 10 DBE/2013 SCE — Memorandum QUESTION 5: INTERNATIONAL ECONOMICS 5.1 5.3 5.4 Choose the correct word(s) in brackets and write only the word(s) next to the question number (5.1.1 - 5.1.4). 5.1.1 Balance of payments VW” §.1.2 Revaluation vv 5.1.3 Substitution vv 5.1.4 Dumping Vv 5.2 List any THREE differences between national and international trade. Different monetary systems or currency. Vv Countries’ laws, rules, customs differ.vV Trade restrictions. Vv No free movement of capital or labour.” ” Granting of credit difficult.“ Cultural, social and political differences. Vv ¥ e Transport costs.” Accept if given in tabular form. Accept any relevant fact (Any 3x2) DATA RESPONSE: 5.3.1 Oct/Nov or Jan/Feb VvVvv §.3.2 DeciJan vVvv 5.3.3 Euro VVv¥ 5.3.4 R7 120 V¥Vv 5.3.5 Exchange rate vv 5.3.6 Foreign exchange market VV Vv a7 The value of the rand increases/dollar decreases VV V (Accept any other relevant example/explanation) © 6 6 © @ 6 Explain any FOUR forms of economic integration. Free trade area YY e Trade takes place without or at special tariffs. VW” Custom Union V” e Member countries trade freely but levy a uniform tariff on non-member countries. “” Common markets VY e Factors of production are allowed to move freely between member countries VW Economic Union “YY” e Member countries follow united economic policies. VY Monetary Union’ ¥ y e Member countries make use of a common monetary unit or currency. ” (Accept any examples) (Any 4x yz (2) (2) (2) (2) (6) (3) (3) (3) (2) (3) (3) (16) [50] Please turn over i

Economics/HG 11 DBE/2013 Downloaded from hlayiso.com SCE - Memorandum QUESTION 6: THE STATE 6.1 6.2 6.3 6.4 L Copyright reserved Choose the correct word(s) in brackets and write only the word(s) next to the question number (6.1.1-6.1.4). 6.1.1 Monetary Vv 6.1.2 Nationalisation VY” 6.1.3 Authorisation VW 6.1.4 Direct VY Name the THREE categories in the which state expenditure can be classified . Functional vv . Administrative Vv ° Financialv ¥ (3x2) DATA RESPONSE: 6.3.1 189.5+146.9+1 12.6+121.9+130.5+90.94+38.4+144.3 VvVVv =975 Vvv 3 marks for calculations and 3 marks for correct answer 6.3.2 Social grants VV e.g.: old age pension (Accept any other relevant social grant) 6.3.3 Education VVV 6.3.4 Defence VVv 6.3.5 Expected revenue/income and expenditure for government for a financial year VV“ 6.3.6 Department of Finance Vv Discuss ‘impartial’ and ‘convenient’ as two requirements of a good tax system. Impartial e Taxation is impartial if it is spread proportionally among all groups. V” e Taxpayers in the same financial or economic position should pay the same tax. e Factors such as the possession of capital, income, family responsibilities and medical expenses must be taken into account. Vv e A system of taxation is impartial if everybody makes a similar A progressive system of taxation can be regarded as impartial. vv The income tax system in South Africa is impartial.” (Any 4 x 2) sacrifice. vv Please turn over (2) (2) (2) (2) (6) (6) (3) (3) (3) (3) (2) A

Downloaded from hlayiso.com Economics/HG 12 DBE/2013 SCE — Memorandum Convenient The taxpayer must know the time, place and method of payment. vv It must be convenient for him/her at that time and place. Vv Payment of tax in one lump sum is inconvenient to the tax payer. V“” The incom 1g fax system in South Africa is convenient to the state and the tax payer The state pa el are @ tggular flow of funds and the taxpayer makes small pa lle at a tin e PAYE system“ (Accept any other relevant fact) (Any 4 x 2) (16) [50] QUESTION 7 CHOICE MODULES (IMPORTANT SOUTH AFRICAN ECONOMIC TOPICS) Choose only TWO of the following topics as part of your choice of four questions in Section B. Make use of clear headings to indicate the topics of your choice. 7.41 LABOUR RELATIONS 7.1.1 Choose the correct word(s) in brackets and write only the word(s) next to the question number (a—b). ° (a) 65vv (2) (b) shortage” ” (2) 7.12 List any TWO factors that determine the supply of labour in South Africa. Labour force participation rate VV Population growth v¥ Total population VY Work hours “¥% Migration VY Level of skill VW (Any 2x 2) (4) coeeeeve 7.1.3 DATA RESPONSE: (a) Strike/protests/demonstrations VV“ (3) (b) The process of collective bargaining VY“ (3) (c) Congress of South African Trade Unions Aes (3) Uf Lig Copyright reserved Please turn over

Downloaded from hlayiso.com Economics/HG 13 DBE/2013 SCE —- Memorandum 7.14 Explain the limitations of labour unions. ¢ Must abide by all laws of the country “YY” ¢ May not affiliate to any political party VV” * They may not instigate strikes Vv” e If they are party to an industrial council agreement, they cannot strike during that period YY e Industrial action can only be taken after one year of official publication of such agreements Y” e Disputes have to be firstly settled through the industrial councils set up for the specific industry V“ (Accept any relevant facts) (Any 4x 2) (8) [25] ANDIOR 7.2 PRODUCTIVITY AND UNEMPLOYMENT 7.21 Choose the correct word in brackets and write only the word next to the question number (a—b): (a) increase YY (2) (b) elastic vv (2) 7.2.2 List any TWO consequences of unemployment. Personal pride and dignity are affected vv Increase in crime rate VW” Expensive skills and potential abilities are lost VV Affect social stabilityY Y Negative effect on perception of the success of the market economy “¥ (Accept any relevant facts) (Any2x2) (4) 7.2.3 DATA RESPONSE (a) Unemployment (joblessness)/unproductive vv ¥ (3) (b) Industrial development/skills development/job creation/self employment “VY (3) (c) Productivity= Quantity of output Quantity of input (g OR Output: Input [ (3) Copyright reserved Please turn over A

Economics/HG 7.2.4 Downloaded from hlayiso.com 14 DBE/2013 SCE — Memorandum Briefly discuss ‘structural unemployment’ e Occurs where certain structural changes take place within the economy.” ¥ e Structural means a skills mismatch between supply and demand. vv e This is related to modernisation of economic process, technological renewal and changing production techniques. VV e Because of the important part played by technological change in the economy, this form of unemployment is referred to as technological unemployment. vv e Structural unemployment particularly affects people with low levels of skills and who are unable to adapt to changed labour practice. Vv e In developing countries it is usually because the labour force grows so rapidly because of rapid population growth YY (Accept any other relevant facts) (Any 4 x 2) AND/OR 7.3 INFLATION 7.3.1 7.3.2 7.3.3 Copyright reserved Choose the correct word(s) in brackets and write only the word(s) next to the question number (a-b). (a) cost-push VY (b) stagflation Vv List any TWO characteristics of demand-pulll inflation. e Demand for goods and services rise more rapidly than production vv e Consumers are not the only victims of demand inflation VY e Foreigners contribute to demand inflation Vv” e A relative increase indemand VY Accept any relevant facts (Any 2 x 2) DATA RESPONSE , (a) Price increases of products in the consumer's basket. VV“ (b) Poor people “vv (Cc) 3%-6% Vv¥v L Please turn over (8) [25] (2) (2) (4) (3) (3) (3) if

Economics/HG 7.3.4 Downloaded from hlayiso.com 15 DBE/2013 SCE — Memorandum Discuss the key aspects of the definition of inflation. It describes inflation as a process and a_ sustained condition.” “” If prices do not continue to rise, there is no inflation “™Y” e e The rise in price must be considerable. Vv Small increases of between 1 and 3 percent in the general price level could be accepted as normal and would not be regarded as inflation. YY e An increase in certain isolated prices of products or in the prices of individual articles or services, without a rise in the general price level, do not indicate inflation. “YW e All the factors which affect the general price increase must be evident in monetary terms.v” e As the general price level increases, the buying power of money decreases.v V Accept any relevant fact (Any 4x 2) AND/OR 74 STRATEGIC RESOURCES TAA 74.2 7A3 g Copyright reserved Choose the correct word in brackets and write only the word next to the question number (a-b). (a) (b) Nuclear ¥¥ Agriculture V% Name any two renewable energy sources that can be used to generate electricity. Sun /solar YY” Wind VY Water/hydro ¥¥ Tida/waves V” Biomass VY (Accept any other relevant source) (Any 2 x 2) DATA RESPONSE: (a) State any TWO governmental initiatives to save energy. (b) Distributing energy-saving light bulbs VV” e ¢ Insulator blanket for geysers V“” e Ripple relay switches to geysers VV“ e Incentives to buy solar heaters vv” Any relevant fact (Any 2 x 3) Accept any other relevant fact (8) [25] (2) (2) (4) (6) Disinvestments/Decreased production/Job losses VV“ l (3) " Please turn over

Economics/HG 14.4 Downloaded from hlayiso.com 16 DBE/2013 SCE - Memorandum Briefly discuss the importance of water conservation in the secondary sector of South Africa. Industrial development would be impossible without water VV The farsighted policy of the department of water affairs and other bodies controlling water supply has laid the foundation for the sound development of industries in South Africa’ “ Large, capital intensive industries such as basic metals and paper manufacturers use more water than smaller, labour - intensive industriesVV Without sufficient water the industries cannot contribute significantly to the national economyY ” The establishment and development of industries lead to the increase in production and create more employment opportunities V ” Accept any other relevant fact (Any 4 x 2) (8) [50] TOTAL SECTION B: 200 PLEASE NOTE: Current relevant resource material is acceptable. p Copyright reserved Please turn ow t

Downloaded from hlayiso.com Economics/HG 17 DBE/2013 SCE — Memorandum SECTION C Answer any TWO questions from this section in the ANSWER BOOK. Essays must be well structured and presented in a systematic format. Responses must have an introduction, body and conclusion QUESTION 8 (NATIONAL INCOME) Discuss the problems in determining national income figures. INTRODUCTION: e Although national income is the best available measure of aggregate in the economy, it is not without problems. There are general loopholes/problems in the tools used to measure national income figures. VV” ” (Accept any relevant introduction) (Max 3) BODY Transfer payments: ~~ e When calculating national income, problems arise where goods and services have no prices. “% This applies to public sector services such as defence, law and order” ¥ Transfer payments by the government include all government expenditure which does not involve the purchase of the services of the factors of production. YY Transfer payments do not require the compensatory services or goods. V ¥ These items do not contribute to the national output and are thus excluded from national account figures. V” « They are however included under the personal disposable income (income after tax payments) of the national accounts. VY Ye gg Copyright reserved Please turn over L t

Downloaded from hlayiso.com Economics/HG 18 DBE/2013 SCE — Memorandum Double counting: V” When we add the values of the total outputs of all the business enterprises in the economy, this will give an aggregate which is many times greater than the value of the national output. V“” This is because of double counting. ““” The outputs for some enterprises are inputs for others. ““ National output can either be measured by adding the values of final products, or by totalling the values which are added at each stage in the production process. YY” The value of intermediate goods does not form part of the national account figures. ¥% Nominal and real domestic output: “” The nominal value or money value of domestic output is caiculated by multiplying the volume of the final goods and services by their prices. YY This becomes a serious problem when value of money or price changes. “” When measuring domestic output we need to know which part is due to growth in the quantity of output and which part is due to price changes. YY” The value of output in real terms is the nominal value of national product adjusted for price increases. VV This is done by calculating the Consumer Price Index (CPI) or inflation rate increases for the same period. ““ Real Gross Domestic Product = CP] Basic Year/CP] Measured Year X Nominal Gross domestic Product VW Excluded services: VY” eS National accounting statistics excluded the value of self -provided services. VV For example, farmers consumption of their own output. VW There is also a lot of DIY (Do -It -Yourself) services which are not accounted for in national statistics. Vv Many house wives do their own house chores that are not included. VW In such cases the value of output cannot be measured as the product is not sold in the open market. vv” When comparable goods and services are in a market, it is possible to give self- provided goods and services an imputed value. Vv” In other words a value can be assigned to self- provided goods and services but the problem is that these are not reported. VW Furthermore illegal activities, such as smuggling, are never reported. VW Some output from the informal sector is never reported. vv Copyright reserved &

Downloaded from hlayiso.com Economics HG 19 DBE/2013 SCE — Memorandum Accuracy of national accounts: VV Although national accounts are generally fairly accurate, inaccuracies do accrue for the following reasons: e The value of some transactions are not known e.g. self provided services — gardeners and housewivesv ¥ e The value of output of some informal sector members is omitted. VW e Some services, e.g. those rendered by the government are not sold in a market. Vv e They are therefore included at raw cost and not at a market value. VW e Original estimates are always subject to substantial revisions — national output data is revised every four years. VW” e In some instances estimates and approximations are used to calculate national account figures. vv” e Accuracy is often sacrificed due to time constraints. VW (Accept any other relevant arguments) (Max 45) CONCLUSION: * The national income accounts fairly represent the affairs of the country. Vv Accept any relevant conclusion (Max 2) ib [50] fh, Copyright reserved Please turn the page £

Downloaded from hlayiso.com Economics HG 20 DBE/2013 SCE - Memorandum QUESTION 9 (PRICE FORMATION) Explain the conditions for a perfect market. INTRODUCTION e¢ Amarket refers to all sale and purchase transactions that affect the price of a commodity — any place or circumstances that allows buyers and sellers to meet and to bargain for prices. Y“Vv / e A perfect market is the market situation, which could occur, in ideal circumstances. VVvv / e Since reality does not reflect these ideal market conditions, the perfect market is hardly ever encountered in practice. Vv Vv (Max 3) BODY The product to be marketed should be homogeneousvY” e Each seller markets an identical commodity and the buyer cannot tum to substitutes. vv e All articles must be highly standardized, easy to grade or describe, identical in every respect to make trademarks unnecessaryv v’. e It should be immaterial to the buyer which seller he buys from. VV There should be a large number of sellers offering a particular commodity”V e A seller who acts alone should be unable to affect the market price by varying the quantities he offers for sale. VW e Price is influenced not by a producer but by the market as a whole. Vv * No supplier sells enough to create scarcity by withholding supplyY “. There should be a large number of buyers that do not mind which seller to buy fromvV¥ Only a lower price should induce a buyer to prefer one seller to another. VW Buyers do not form alliances easily and it is difficult to persuade them to cooperate because each is pursuing its interests. Vv e No consumer buys enough to affect the market price by buying more. or by buying less. Vv Free competition is necessary” V e Anyone who wants to sell goods must be free to offer any article in any quantity. vv There should be no state interference and no price control. Vv” e Buyers and sellers should have free access to the market and no forceful measures should be applied. VW Perfect competition requires mobility of resources or production factors. VW A resource such as a specific category of labour can enter the market or withdraw Copyright reserved Please turn the page f

Downloaded from hlayiso.com Economics HG 21 DBE/2013 SCE — Memorandum from the market at any time. Vv“ No preferential treatment or discrimination’Y Buyers and sellers base their actions solely on price. VW No preference is shown for buying or selling to any particular person. VW Any slight fall in the price in one place will attract all buyers. Vv“ Similarly, if a seller raises prices, buyers will be reluctant to purchase from that supplier. VW e Unless the seller reduces the price to that asked by other sellers, sales will fall to zero. VV Efficient transport and communication systemv¥ e Buyers and sellers should be able to communicate easily with one another in order to complete the transactions within the shortest possible time. “VW e The publication of prices should keep buyers and sellers informed of market conditions elsewhere. VY e In this way an increased demand or a changed supply on one part of the market will affect the price across the whole marketv’v. e Suitable transport must be available to convey goods speedily from one place to another. Vv” e In this way suppliers can meet changes in demand promptly. vv All participants (competitors) on the market must have perfect knowledge of market conditionsv¥Y e Buyers and sellers must be familiar with the prices of suppliers, price quotations, conditions of demand, the economic climate and anything which may be important to the functioning of the market. Vv e All buyers and sellers should be immediately aware of what is happening in any part of the market. Vv” e In this way an increased supply or change in demand in one part of the market will affect prices throughout the market. vv (Max 45) CONCLUSION e Although the perfect market has a limited application in practice, vv e {tis a useful instrument to illustrate the way the market mechanism works. Vv~ (Max2) —_‘[50) AND/OR g Copyright reserved Please turn the page L ;

Downloaded from hlayiso.com Economics HG 22 DBE/2013 SCE - Memorandum QUESTION 10: (Economic development, regional development and urbanisation) Discuss the characteristics of developing countries. INTRODUCTION A comparison between the developed countries and developing countries indicates a development gap in respect of aspects such as standards of living, productivity, population growth, formation of capital, distribution of income, economic structure, Vv etc. The dominant characteristic of developing countries is widespread poverty. VY Alleviating this poverty requires an understanding of the broad economic and social characteristics that these economies share. VV (Accept any logical/original introduction) (Max 3) BODY Low standard of livingyY This is generally in the form of low incomes, resulting in poverty, inadequate housing, poor health, limited education and training, high infant mortality, low life expectancy and limited expectation of employment. vv The per capita gross national product or national income, as an index of the welfare of a country, is relatively low. VW” There is widespread poverty, which can be ascribed to low average income and an imbalance in the distribution of income in the country. Vv” Since incomes are low and people have to spend their income in order to survive, savings are low and insufficient to finance the investment (capital formation) needed for economic growth and development. VW” Low productivity’ V The productivity of labour, measured by the output per worker is very low. This can be ascribed to poor physical health, inadequate or poor nutrition, low standards of personal hygiene, etc. VV Another factor contributing to low productivity is the lack of capital goods, managerial expertise, and motivation. Vv“ The lack of adequate monetary capital for the development of human capital is a serious defect. VV Too little money is spent to develop human capital in the form of more efficient workers, managerial competence, entrepreneurship, etc. vv” High population growth and the burden of dependantsv Vv Copyright reserved Please turn the pag: In developing countries the population growth, as measured by the number of births, is very high. vv Although the death rates are also high in developing countries, they are declining because of the growing availability of modern medicine. vv High population growth rates imply that there are a large number of young children A £

Downloaded from hlayiso.com Economics HG 23 DBE/2013 SCE - Memorandum who cannot support themselves and who are financially dependent on their parents. VW . « Children aged under 15 and people over 65 years of age are non-productive members of society and must be financially supported by the labour force and other limited resources. VV e The number of children below the age of 15 years makes up about 40% of the total population, in comparison with less than 20% in highly developed countries. VW e The natural growth rate for developing countries can vary from 2% to as high as 5%, in contrast to highly developed countries where it is as low as 1% and may even be nil. vv” Unemployment and underemploymentv ¥ e The essential reason for the poverty in developing countries is that there are not enough productive jobs for the labour forcev v. e Unemployment occurs where people who are willing and able to work cannot obtain work. vv e Underemployment occurs where people do less work than they are capable of doing, e.g. labourers who work shorter hours, seasonal workers and people who are not as economically active as their full potential allowsv Vv’. e About 30% of the work force in third world countries is not fully utilised, as a result of unemployment and underemployment. Vv” Defective economic structure/contribution of agriculture to GDP is high/ sectoral distribution of production/dependence on agriculturev Vv e The majority of the population are dependent upon the agricultural sector. Vv e According to figures provided by the World Bank, in the low-income countries agriculture provides an average of 32% and manufacturing 14% of the gross domestic product (GDP). Vv” e In the industrialised countries, the agricultural contribution is usually less than 4% and that of the manufacturing sector is more than 20%.vv e Agricultural productivity is generally low, because there are large numbers of people in relation to the amount of land availablevY e Other limiting factors are elementary technology, poor organisational techniques, and a lack of physical and human capitalv v. e A further weakness of the economic structure of developing economies is dependence on the export of primary products. Vv” e The export commodities of poorer countries usually comprise basic food substances and raw materials that usually fetch relatively low prices on the international markets. Vv” e Lack of capital has resulted in third world countries running up huge sums in foreign debt. VY The redemption of foreign debt commitments further contributes to a poor Copyright reserved Please turn the page ih economic structure.v ”

Downloaded from hlayiso.com Economics HG 24 DBE/2013 SCE — Memorandum Weaker position in international relations VV” ° The distribution of political and economic power between the developed and the developing countries is very unbalanced. Vv” « The wealthier countries control the pattern of international trade and influence the ability to convey technology, development aid, and capital to the poorer countries. Vv (Max 45) Climate and terrain restrictions VV e Although it is not applicable to all developing countries, climate and terrain are limiting some countries regarding development and prosperity VV e A lack of efficient rainfall, mountainous areas, deserts in certain countries might be a reason for the lack of economic development Vv“ e A lack of correct usage of natural resources like overgrazing and deforestation of natural forests can also contribute to the lack of economic development vv” (Max 45) CONCLUSION e Although certain common features can be identified, significant differences exist between developing countries. Within the category of developing countries” the level of development varies, e.g. a developing country such as Brazil has a much more advanced economy than Somalia VW (Max 2) (Accept any logical/original conclusion) AND/OR ig [50] Copyright reserved Please turn the sam

iL Downloaded from hlayiso.com Economics HG 25 DBE/2013 SCE - Memorandum QUESTION 11 (INTERNATIONAL ECONOMICS) Explain the causes/reasons for International Trade INTRODUCTION e Countries trade with each other for the same reasons individuals trade with each other. ¢ The ultimate aim of all economic activity is to satisfy human wants. Countries can share in the unevenly distributed resources of the world and can better satisfy the wants of their people through international trade. No country can afford to live in isolation. For any meaningful growth and development countries need to trade with one another for their maximum benefit. “vv : (Max 3) (Accept any other relevant introduction) BODY Natural Resources: Vv e Natural resources include resources from the land, such as minerals, forests, fuels, fish from the sea, etc. Vv e Natural resources vary from country to country, as they are not evenly distributed across the worid. vv Some countries have, for example, large oil resources. VV South Africa on the other hand, has few oil resources and therefore has to import from other countries. However, South Africa has a large variety of mineral resources. VV e By exporting minerals e.g. gold and diamond, South Africa can earn foreign exchange, which can be used to pay for essential imports of goods and services such as oil. vv e The unequal distribution of natural resources causes countries to be mutually dependent. vv” e They must therefore trade with one another to increase prosperity and living standard. Vv“ Climate conditions differ: VV e Weather conditions are not the same across the world. There are virtually dry areas while other areas enjoy rainy weathers. vv Certain products can be grown only in areas where there is a lot of rainfall. VW Because of its irregular rainfall, South Africa will never be able to develop into a great agricultural country. Nevertheless it can still satisfy its own needs by importing a few agricultural products from other countries. VW e Drought compels South Africa to import yellow or white maize from abroad, should focal production not meet the domestic demand. Vv” e Differences in climate between countries cause certain products to be produced only in seasons. Because the need for such products is not seasonal and the goods are perishable and cannot be stored indefinitely such products are imported. vv Copyright reserved Please turn the page Zz 4,

Downloaded from hlayiso.com Economics HG 26 DBE/2013 SCE —- Memorandum Topography and soil: Vv Topography refers to the natural features of the land. VW” This may differ greatly between regions and countries and determine what will be planted. Vv e The soil of the savannah veldt is poor and is used for animal farming. Mountainous areas are used for growing timber and rich lime soils are used for growing vegetables. vv e South Africa imports wood pulp from the Scandinavian countries and exports meat to Europe. Vv Specialisation: Vv « Labour specialisation usually follows product specialisation. Once product specialisation has been established, the skills of a country's labour force will also become specialised in order to produce the products in question. VW” e For example the Swiss are well known for their watches, the Italians and the Japanese for their cameras. VY e Other countries then import the specialised products of these countries. Vv” Development: VY The development level of a country determines what will be exported. vv” Developed countries export manufactured goods, usually aiming at surplus production and automation. VY e Accumulated wealth and high levels of income in developed countries make it possible for them to engage on a large scale in international trade than developing countries. vv e Developing countries export primary goods and generally do not have the resources to produce surpluses. Vv“ Preferences and tastes/Effective wants: VV e Differences in preferences and tastes are an important cause of international trade. vv e For example, Africans prefer maize and Europeans prefer wheat. Italians like silk and South Africans prefer cotton clothing. Americans prefer big cars and Japanese prefer small cars. VW e Countries will thus import goods and services according to their preferences and tastes. VV e As a result of international trade, demand is mainly a function of tastes and is dependent on income. Vv e Contact between countries (tourism, migration, trade commissions and exhibitions etc.) stimulate people's minds, creates a need for new and foreign goods and opens doors for trade. Vv Copyright reserved Please turn the page

Downloaded from hlayiso.com Economics HG 27 DBE/2013 SCE — Memorandum Mass production: VV e Mass production coupled with scale differences offers an advantage to certain countries in specific goods because of specialisation, division of labour, mechanisation and automation. Vv e As more goods are produced than can be absorbed by the local market ways have to be found to dispose of surplus stock. Vv” International migration: Vv International migration helps to establish ties. vv Immigrants bring foreign goods with them and often urge merchants to import such goods from their countries of origin. vv” « Immigrants often retain for a long time preference for their former habits and for some of the goods of their mother country. VW” e This stimulated demand leads to imports. Capital: vv Capital cannot be secured as easily in some countries as in others. VW « Long-established countries enjoy an advantage over less established countries. Owing to the lack of capital, some countries cannot produce all the goods that they require. They must import such goods from other established countries. vv ¢ Capital is exported from countries with large savings to developing countries. It is usually invested in subsidiary companies. VV e Such investments call for the importation of experienced organisers and technicians when new firms are set up. Foreign trade will result from such factor movements (labour and capital). vv e Advanced industrial and technologically superior countries export industrial goods, capital and technology in exchange for intermediate goods and raw materials. Vv (Accept any other relevant arguments) (Max 45) CONCLUSION By engaging in international trade, people's standard of living improves. This is because international trade results in a wider variety of goods and services from which to choose. e The prices of imported goods and services are lower than what they would have been, had the country produced these goods and services domestically. vv (Accept any other logical conclusion) (Max 2) [50] TOTAL SECTIONC: 100 GRAND TOTAL: 400 PLEASE NOTE: Current relevant resource material is acceptable. Copyright reserved Please turn the page es