Economics (HG) (English) June 2012 Memo_hlayiso.com_.pdf

Downloaded from hlayiso.com basic education — Department: Basic Education REPUBLIC OF SOUTH AFRICA SENIOR CERTIFICATE EXAMINATION ECONOMICS HIGHER GRADE 2012 MEMORANDUM FINAL DEPARTMENT OF BASIC : EDUCATION MARKS: 400 2012 -06- 25 PRIVATE BAG X 110 PRETORIA 0004 PUBLIC EXAMINATIONS | This memorandum consists of 24 pages. >" t P fp “Ceectews a Pela, j Plea Copyright reserved over j

Downloaded from hlayiso.com Economics/HG 2 DBE/2012 SCE — Memorandum SECTION A QUESTION 1 (COMPULSORY) 14 QUESTIONS 1.1 MULTIPLE CHOICE 1.2 TRUE OR FALSE Agile) D | size of the population 1.2.1 | FALSE 41.1.2 | C | government 1.2.2 | FALSE 1.1.3 | A | factor cost 1.2.3 | TRUE 1.14 | D| real GDP 7 vhhU 4.1.5 B | price axis Loe geass 1.1.6 | A | maize meal 1.2.6 | FALSE 1.1.7 | A | complementary UA gale 1.1.8 | C| demand will decrease 1.2.8 | TRUE/ALSE oe eee 1.2.9 | TRUE 1.1.10 | A | a lack of skills and capital 1.2.10 | FALSE 1.1.11 |B | scarcity of capital (10 x 2) (20) 1.1.12 | C | Canada a ONE-WORD ITEMS 1.1.13 | D | encourage exports 1.3.1__| national income 1.1.14 | C | supply and demand of foreign 1.3.2 | portfolio investment currencies 1.1.15 | B | natural resources 1.3.3 | developed economies 1.1.16 | C | current 1.3.4 | dumping 1.1.17 | B | production processes function 1.3.5 | economic growth orderly 1.1.18 | C | administrative income 1.3.6 | Labour Relations Act Ce! 1.3.7 _| capital gains tax 1.1.20 | C | supplementary 1.3.8 | PPI (20 x 3) (60) | 1.3.9 | industrial development zone 1.3.10 | inflation (10 x 2) (20) TOTAL SECTION A: 100 j DEPARTMENT O EDUCATION S| PRIVATE BAG PRETORIAGOO!” PUBLIC EXAMINATIONS —} ie A Copyright reserved Please turn over \

Downloaded from hlayiso.com Economics/HG 3 DBE/2012 SCE — Memorandum SECTION B DEPARTMENT OF BASIC QUESTION 2; NATIONAL INCOME EDUCATION : 2.1 21 circular flow Vv *¥OT2 <6. x5 . (2) 2.1.2 under Vv PRIVATE BAG X 110 (2) PRETORIA 0001 yale non Vv PUBLIC EXAMINATIONS (2) 2.1.4 national Vv (2) 2.2 (a) Only goods and services with a market value are included VY (b) Changes in price level present difficulties vv (c) Method of calculation is not entirely accurate Vv (d) illegal and unrecorded income not included vv (e) Leisure time is not regarded as contributing to welfare VW (f} The cost of negative elements are not reflected VV (g) Increased expenditure on defence does not increase the welfare of the population vv (Any 3 x 2) (6) 2.3 DATA RESPONSE 2.3.1 Adjusted for inflationfoased on basic process/adjusted for price increases/nominal vs. real income/expressed i in terms of ihe base year VV Vv (3) 2.3.2 Financial intermediation, insurance real estate and business services VV v (3) 2.3.3 R1 623 853 m Vvvv (3) 2.3.4 Secondary: 335 412v + 82 968 v+ 53 907V = R472 287m Vv Tertiary: 218 607V + 492 937V + 313 616v + 514 194 Vv = R1 539 354mv if a mixture of both | (9) 2.3.5 Agriculture/forestry/mini Accept relevant exa (2) 2.4 Transfer payments and double counting Transfer payments: . When calculating national income, problems arise where goods and services have no prices Vv . This applies to public sector services such as defence, law and order’ V e Transfer payments by the government include all government expenditure which does not involve the purchase of the services of the LL factors of production vv . Transfer payments do not require the compensatory services or goods 4 vv / Copyright reserved Please turn over \

Downloaded from hlayiso.com Economics/HG 4 OBE/2012 SCE — Memorandum ° These items do not contribute to the national output and are thus excluded from national account figures vv ° They are however included under the personal disposable income (income after tax payments) of the national accounts Vv (Max 8 marks) Double counting: ° 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. vv This is because of double counting. VW The outputs for some enterprises are inputs for others. vw 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. VW . The value of intermediate goods does not form part of the national account figures. vv (Max 8 marks) (Accépe any other relevant facts of examples. if listed: max'4 marks) QUESTION 3: PRICE FORMATION 3.1 3.1.1 utility vv (2) 77 ositive vv 2 : [DEPARTMENT OF BASIC} ” 3.1.3 quantity vv BUCATION | (2) 3.14 decrease vv 2012 -06- 25 (2) PRIVATE BA 3.2 Monopoly . PRETORI na a (a) Single / fe producer Vv UBLIC EXAMINATIONS a (b) XN er (c) No close substitute vv - (d) Prices can be manipulated by producer / : (e) Producer may restrict output in order to raise price VY (f) Imperfect knowledge of the market, which is deliberately exploited by advertising vv (g) Barriers restrict rivals from entering the market “WW (h) Discrimination is possible vv (Any 3 x 2) (6) 3.3 DATA RESPONSE 3.3.1 The difference between the price which people are prepared to pay for a product and the actual price that they pay vv v (3) 3.3.2 (3) 3.3.3 (3) 3.3.4 (3) 7 Oa/a vvv (3) (0 3.3.6 Ob/hvvv (3) ie 3.3.7 Yes vv (2) A Copyright reserved Please turn over \y

Economics/HG Downloaded from hlayiso.com 5 SCE — Memorandum 3.4 Markets (L Copyright reserved Markets bring supply and demand together vv e The most important economic function of the market is to bring together buyers and sellers in the same place. vv © The question of what, how and for whom are answered by firms and households linked together in the marketing of goods and services. vv Markets have emerged _as_a method of organising production/ markets allocate resources VV o Through the information transmitted by markets, producers can make decisions about what factors of production to use and consumers decide what to consume. vv The major economic function of the market system is price determination VY o The price of a specific product is determined by the demand (by the consumers) and the supply (by the producers). vv o Any change in the price implies a change in either demand or supply or both. Vv¥ Markets are self-regulating. vv o When prices, profits or wages drift away from their natural levels as determined by cost, the market forces of demand and supply will drive them back to their equilibrium. vv Market __serves__to__co-ordinate___production _and__ consumption decisions Vv o Ina centrally planned economy people cannot tell producers what they want to consume; they must choose from the goods and services available. vv o Inamarket economy consumers determine what must be produced. Vv Markets reduce price fluctuations caused by the seasonal nature of products vv” o Market specialists carry stock of goods in order to prevent price fluctuationsv Vv Establishment of specialised markets vv o Markets allow both producers and consumers to take advantage of the specialised services. V (Any 4 x.4) (Accept any other relevan RIMENT OF Bae Stee EDUCATION ~~ 2012 -06- 25 PRIVATE Bag PRETORIA 000/"° PUBLIC EXAMINATIONS eb DBE/2012 (16) [50] Please turn over EON

Downloaded from hlayiso.com Economics/HG 6 DBE/2012 SCE — Memorandum QUESTION 4: ECONOMIC AND REGIONAL DEVELOPMENT AND URBANISATION 44 4.44 developing vv DEPARTMENT OF BASIC (2) EDUCATION 4.1.2 informal vv ; (2) 4.1.3 rural vv 2012 -06- 25 | (2) PR 4.1.4 development vv PRETORIA 00" | (2) PUBLIC EXAMINATIGNS nent eno en 4.2 THREE development corridors (a) Maputo corridor vv (b) Wild Coast Development Programme and the Fish River vv (c) SDIivv¥ (d) Lubombo Initiative vv” (e) West Coast Investment Initiative vv (f) Platinum SDI vv (g) Phalaborwa Sub-corridor vv (h) Coast-to-coast corridor Vv (Any 3 x 2) (6) 4.3 DATA RESPONSE 4.3.1 Development for only a short period of time / Short-run vv (2) 4.3.2 A. typical characteristic of a depression is retrenching, unemployment and bankruptcies ~vv During a period of depression one will find a very high rate of unemployment vVv (3) 4.3.3 Eskom does not have the capacity to produce enough electricity to supply for the growing demand, it resulted in power cuts/outages/ load shedding. The demand exceeds the supply vv v pt any other televant. (examples) (3) 4.3.4 Creation of employment v vv ion / infrastructure vv v Inward industrialisation vv ¥ Education Vvvv Training VV v Keeping up with modern technology Vv“ Drawing up of population policy vv v Wage subsidies / Yout idy vv v Tax relief to industries VV V Expanded Public Works Programme VV“ (Any 2 x 3) (6) overwhelmingly driven by public-service hiring. vv” In the first quarter state-controlled companies and the public 4 service had added some 158 000 jobs year on year. vv 7 (p 435 The public sector. “~v According to Schissler, job creation is (4) ¥/ Copyright reserved Please turn over

Economics/HG 4.3.6 Downloaded from hlayiso.com 7 SCE — Memorandum ing ages (15/6 The number of people betu 44 FOUR disadvantages of urbanisation. i Copyright reserved Unbalanced urbanisation vv o South African cities are spread unevenly across the country and unbalanced in respect of their size VW o Example: The over-concentration in the Gauteng area.vV Problems of road and services/Environmental disadvantage VV o Roads and services are often inadequate for the high concentration of the population and water is polluted Vv o Uncontrolled urban growth has resulted in people having to travel far from their homes to their work places VW” o High percentage of motor vehicles in proportion to the population Vv Inadequate facilities/Lack of services VV o 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 Vv Misuse of agricultural soil VW o The best agricultural soil is often utilised for urban needs ¥vv Rapid development of cities/Increased unemployment vv o Lack of job opportunities for the unskilled in cities because of the fast development of cities VV Residential density vv o Large number of people lives too close to one another and often there is neither privacy nor security where they stay Vv o There is wide spread squatting and informal settlements vv” Social problems vv o There is an increased rate of crime, high rate of divorce, drug abuse and alcohol, high rate of violence, and mental disorders Vv (Accept any relevant facts. if lis arks maximum.) (Any 4 x 4) “DEPARTMENT OF BASIC — EDUCATION PRIVATE BAG X 110 PRETORIA 0004 PUBLIC EXAMINATIONS j | 2012 -06- 25 j DBE/2012 (16) [50] & Please turn over \

Downloaded from hlayiso.com Economics/HG 8 DBE/2012 SCE — Memorandum QUESTION 5: INTERNATIONAL ECONOMICS DEPARTMENT OF BASIC EDUCATION 5.1 5.1.1 ad valorem vv (2) 5.1.2 depreciation vv 2012 -08- 25 (2) MPRETORIADOOT 5.1.3 Southern Africa vv Lacnssemmaccin gis no 004 f (2) PUBLIC EXAMINATIONS 5.1.4 exchange rate vv i“ (2) 5.2 THREE differences between national and international trade. (a) Different monetary systems or currency Vv (b) Countries’ laws, rules, customs differ vv (c) Trade relations ‘Titade resteictic (d) No free movement of capital or labour vw (e) — Granting of credit difficult vv (f) Cultural, social and political differences vv (g) Transport costs Vv (Any 3 x 2) (6) 5.3 DATA RESPONSE 5.3.1 Fvvv (3) 5.3.2 0Q,/Q;4¥vv (3) 5.3.3 increased demand for dollars vvv PG (3) 5.3.4 Price of dollar in terms of rand terms will decrease Vv v (3) 5.3.5 e Exports decrease Vv Vv e Investments in SA decrease VV ¥ e Export companies close down/decrease production Vv Vv « Increased unemployment Vv“ (Any 2 x 3) (6) 5.3.6 Pula vv (2) 5.4 Natural resources and climatic conditions e Natural resources include resources from the land, such _as minerals, forests, fuels, fish from the sea, etc. vv ° Natural resources vary from country to country, as they are not evenly distributed across the world. vw ° Some countries have, for example, large oil resources. VW . 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.v . 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” . 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 (Any 4 x 2) (8) Copyright reserved Please turn over LY

Downloaded from hlayiso.com Economics/HG 9 DBE/2012 SCE — Memorandum Climatic conditions differ: ° Weather conditions are not the same across the world.~v There are virtually dry areas while other areas enjoy rainy weather. Vv” ° Certain products can be grown only in areas where there is a lot of rainfall. vv ° 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. vv . Drought compels South Africa to import yellow or white maize from abroad, should local production not meet the domestic demand. Vv” . Differences in climate between countries cause certain products to be produced only in seasons. YY Because the need for such products is not seasonal and the goods are perishable and cannot be stored indefinitely such products are imported. VW (Any 4 x 2) (Accept any other relevant fact / examples) (8) [16] [50] r BEBSSF ARTME) oe QUESTION 6: THE STATE EDUCATION ST 6.1 6.1.1 indirect vv era, (2) 2012 ~06- 25 6.1.2 Minister of Finance vv PRIVATE BAG X14 (2) PRETORIA 0001 6.1.3 progressive Vv _ PUBLIC EXAMINATIONS 2) IONS 6.1.4 privatisation vv (2) 6.2 THREE reasons why the state acts as an entrepreneur. e Where a large capital outlay is required vv ° Where services are of a vital nature vv . Market value of services is undervalued Vv” . Where political and social issues necessitate state involvement e.g. yment— goverhr structure programme v Y . Long waiting periods before a business can make profit vv (3 x 2) (6) (Accept felevant examples) 6.3 DATA RESPONSE 6.3.1 education vvv (3) 6.3.2 Schools vv” Health/clinics, hospitals Vvv Housing vvv Welfare service / grants VVV (Accept examples max 3 marks) (Any 2 x 3) (6) 4 6.3.3 Taxes VVV¥ (3) Copyright reserved Please turn over VY

Downloaded from hlayiso.com Economics/HG 10 DBE/2012 SCE — Memorandum 6.3.4 Public borrowing / public debt / loans / loan levies / issuing government bonds / inéréased faxes vv Vv (Any1x3) (3) 6.3.5 5 — 154,8 = R24,3 bn VV/-R24,3bn (M648 x 100/1= VY 81% vv (max) (5) 6.4 Aims/objectives of the state's economic policy Price stability Vv“ ° Prices rise when the demand exceeds the supply of goods and prices decreases when the supply exceeds the demand VY ° It is, however, abnormal for prices to increase year after year and when this happens, we say that inflation exists and this is a continuous increase of price over an extended period vv . Continued inflation is disadvantageous to a country and therefore it is necessary for the government to take action vv Full employment vv . Full employment means that all persons who would like to work, who are fit to work and who are seeking work should be able to find work VW ° Full employment is possible only if production is stimulated and increased Vv . Measures to stimulate production are required e.g. promotion of labour intensive enterprises, subsidies, tax concessions and _ increased consumption VW Economic growth vv . Economic growth means an increase in total production or an increase in the real GDP. vv ° Tax relief will stimulate consumption and production vv Balance of payments equilibrium’ Vv It refers to a position where a favourable ratio exists between the various economic variables (imports, exports, capital flows.) VW Economic equity vv . The market mechanism often creates an unequal distribution of income. Vv ° A more equal distribution of income can be achieved through a progressive tax system and free services to poor. Vv” exists between the various S are necessary {6 festore i . 4x 2 = 8 for discussion) ATIO Vy ay ax) (16) 2012 -06- 25 PRIVATE BAG X 140 [50] PRETORIA 0001 Copyright reserved i PUBLIC EXAMINATIONS : Please turn over \

Downloaded from hlayiso.com Economics/HG 11 DBE/2012 SCE - Memorandum DEPARTMENT OF BASIC” QUESTION 7: (CHOICE MODULES) ; EDUCATION IMPORTANT SOUTH AFRICAN ECONOMIC TOPICS Tou LABOUR RELATIONS Uecl 7.1.2 7.1.3 7.14 Copyright reserved 2012 -06- 25 | F PRIVATE BAG X 110 PRETORIA 0001 f (a) Labour Court vv PUBLIC EXAMINATIONS (2) (b) affirmative vv —""(2) To attend to the interest of their membersv Y To negotiate with employers for better conditions of worky Vv Institute and improve pension schemes Vv ¥ Obtain medical aid schemes VV To research matters relevant to the industry or sectorY Vv Bargain for wage increases vv Ensure that the Jength of the working periods is favourable to the workers Vv e Influence management decisions that could benefit the workers vv (Any 2 x 2) (4) oe 6 8 6 © 6 ¢ DATA RESPONSE (a) Obstacles in the way of expansion and economic growthY vv Discourage domestic and foreign direct investmentsv Vv“ Leads to labour inefficienciesv VV (Any 2 x 3) (6) (b) Unfair dismissalsv VV (3) Bargaining Council ° They help to set_minimum conditions without_government intervention.v ¥ They assist in the settlement of disputes. VV They help to standardize the conditions of employment for the industry concerned thus eliminating competition on the basis of labour costsv” They promote labour peace’ Vv They remove wage conflict from the shop floor. vv Help in the provision of pension providentv Vv Strive to attain a balance between the rights of employers and the rights of employees . Attends to the provisioning of certain social security and medical aid schemes (Any4x2) (8) AND/OR 4 Please tum over AV

Downloaded from hlayiso.com Economics/HG 12 DBE/2012 SCE — Memorandum 7.2 PRODUCTIVITY AND UNEMPLOYMENT 7.2.1 (a) unskilled vv (2) (b) real output vv (2) 7.2.2 e Seasonal fluctuations vv « Minimum wages vv e Increased mechanisation VW e Unexpected natural disasters VW Accept examples or relevant explanations (Any 2 x 2) (4) 7.2.3 DATA RESPONSE (a) e¢ Lower costs VVvv * Higher profits Vvvv (6) (b) Quantity of output/Quantity of input VWV Quantity of output: Quantity an vVv (3) 7.2.4 Consequences of unemployment An unemployed person's personal pride and dignity are affected adversely vv "Standard of living declines Unemployment can increase in crime rate, due to frustrations experienced in a climate of uncertainty and disorder. vv e Expensive skills and potential abilities are lost because they are unused. Vv ¥ Unemployment can harm our new democracy. Vv « it can also affect social stability adversely through a lowered confidence, mutual respect and tolerance. Vv « Negative effect on perceptions of the success of the market economy. Vv ~ ¢ The country cannot realise its full potential in the production of goods and services.vV” (Accept any other relevant arguments) (Any 4 x 2) (8) AND/OR “BEPARTMENT OF BASIC EDUCATION LP 2012 -06- 25 PRIVATE BAG X 110 PRETORIA 0001 PUBLIC EXAMINATIONS 4 Copyright reserved Please turn over A.V

Downloaded from hlayiso.com Economics/HG 13 DBE/2012 SCE-Memoranduk DEPARTMENT OF BASIC EDUCATION 7.3 INFLATION 7.3.1 (a) Inflation Vv 2012 -06- 25 (2) (b) Stagflation vv PRIVATE BAG X 110 (2) PRETORIA 0001 7.3.2 e Creditors Vv PUBLIC EXAMINATIONS e Investorsv Vv « Fixed income earners e.g. pensioners Vv” « Consumers e.g. students Vv (If specified, accept examples) (Any 2 x 2) (4) 7.3.3 DATA RESPONSE (a) Decrease in interest rates Vv Increase in GDP VvVvv Increase in productivity Vv v Appreciation of the rand vv” Oil prices stabilised VV Vv Efforts of monetary authorities Vv Vv (Any1x3) = (3) (b) 3%-6%VVV (3) (c) Consumer Price Index / Method of calculating the inflation rate VV Vv (3) 7.3.4 Causes of cost-push inflation e Also known as supply-side inflation as it is caused by producers increasing prices Vv e Imported inflation caused by unfavourable exchange rates or increasing prices of imported components. Vv” « On the domestic front, can be caused by trade unions asking Ss of production v e (Accept any other relevant arguments) (Any 4 x 2) (8) (- AND/OR 4 f Copyright reserved Please turn over YV

Downloaded from hlayiso.com Economics/HG 14 DBE/2012 SCE -— Memorandum 7A STRATEGIC RESOURCES 7.41 (a) SASOL Vv (2) (b) Strategic vv (2) 74.2 e Use of solar energy in residential homes, on farms and in rural areas VV ¢ The promotion of gas as alternative to electricity vv * Motor vehicles operating on batteries or other alternative fuel sources Vv . Hydro-electricity gene * Wind energy v~ ept any other télevant ir J (Any 2 x 2) (4) 7.4.3 DATA RESPONSE (a) Developing country — most people use river or stream water (38%) vvv (3) (b) River / Stream water Vv v (Any 1 x 3) (3) (c) Department of Water Affairs / and Forestry Vvv (3) TAA Importance of water to primary industries in South Africa. Food production for population, e.g. maize vv” Stock feed for animals e.g. Lucerne VW” Provide for livestock which in turn provides for meat, etc. Vv Industries which process raw materials e.g. canning Vv Provides employment to those working in agriculture and mining vv e Agricultural surpluses can be exported and thus eam foreign exchange VV e Prevent depopulation of rural areas by finding alternative sources of water. Vv e Exploitation of minerals VW e Greater industrialisation VW (If listed agriculture, mining and quarrying, forestry and fishing max.4 marks) (Any 4 x 2) (8) [50} DEPARTMENT OF BASIC TOTAL SECTION B: 200 EDUCATION 2012 -06- 25 PRIVATE BAG X 110 L PRETORIA 0001 > PUBLIC EXAMINATIONS 4 Copyright reserved Please turn oven) /

Downloaded from hlayiso.com Economics/HG 15 DBE/2012 SCE - Memorandum SECTION C ACCEPT ANY RELEVANT FACT THAT MIGHT APPEAR IN ANY OFFICIALLY APPROVED TEXTBOOK QUESTION 8: NATIONAL INCOME Upswings and downswings are regarded as essential features of the market economy. Discuss the statement by referring to the nature and causes of business cycles. Introduction Cyclical changes refer to the phenomenon of successive periods of increasing economic activities It influences the level of economic welfare of a country. There are various causes of these upswings and downswings Vv“ (Accept any logical/original introduction) (3) Body (Max 45) Cyclical trends Vv e A period of increasing prosperity is referred to as an upswing in the economy while a period of decreasing prosperity is referred to as downswing VY e These cyclical trends are referred to as business cycles vv Business cycle may be represented graphically as follows: Economic Activities Vv Trend line ¥ 0 Time ¥ {ONE mark per label - Max 8 marks for the diagram) “DEPARTMENT OF BASIC EDUCATION | Va 2012 -06- 25 | | PRIVATE BAG X 110 PRETORIA 0001 | PUBLIC EXAMINATIONS / Copyright reserved Please turn ovenh/

Downloaded from hlayiso.com DEPARTMENT OF BASIC Economics/HG 16 EDUCATION DBE/2012 SCE — Memorandjim CAUSES OF BUSINESS CYCLE 2012 -06- 25 PRIVATE BAG X 110 Real/Actual causes VV PRETORIA 0001 ° An increase_in_ investment leads to growth iT "SEG RORICE ac taS aes 1s associated with the upswing of the economy vv ° A decrease in investment leads to_a decline in the economy and the following downturn vv . Actual causes also found in the relationship between savings, investment_and consumer spending vv . With indirect production there is a division between both time and space between provision of raw materials, manufacturing of the means of production, and the eventual use of the products which leads to periodic firming which results in cyclical waves of upswings and downturns Vv e The reciprocal effect between the total market forces, e.g. total demand and supply is also a cause . Also favourable or unfavourable agricultural conditions e.g. droughts and floods vv . {n the USA/democratic countries there may also be a parallel ‘political cycle’ where the economy is stimulated about a year before the presidential elections by increased purchases by the government sector. VV ° An increase in the money supply which puts the economy in an upswing and after elections the economy moves into a downswing Vv ° The design of new profitable production processes leads to stimulation of demand and a new upswing phase is created VV ° The discovery and implementation of new technology and machinery vv The creation and exploitation of new markets Vv e The discovery of new resources, e.g. minerals and metals Vv Monetary causes ° 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 vv ° Businesses increasingly use 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 Vv . When production increases the demand for bank loans and credit extensions rise Vv . During the prosperity phase banks grant large volumes of credit because of the good profits banks make on their loans and services VV . To prevent inflationary pressures and bankruptcies, banks begin to restrict_and later reduce credit which initiates the downswing VW ° According to a second theory there is a natural rate of interest where the supply of credit equals the demand for credit Vv“ . 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 Vv This results in an increase in economic activity leading to an upswing VY 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 high 4 vv ( Copyright reserved Please turn a

Downloaded from hlayiso.com Economics/HG 17 SCE ~ Memorandum A third theory explains business cycles in terms of the fact that the bank rate determines the level of interest rates which banks charge VW” If interest rates rise, businesses tend to reduce their inventories, produce less and place smaller orders, which gives rise to a downswing VW 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 upswing Vv ~ This is known as the under-consumption theory vw Psychological causes Vv People's perceptions of a country's economy can be an important psychological cause of business cycles Vv Waves of optimism/ pessimism and economic climate. - Positive expectations create the upswings while negative outlooks cause the downswing in the economy.v ¥ Expectations of business leaders have an important influence in Link devel of investment / Business confidence. VV Conclusion The business cycle is the result of human decisions and actions. “VW Both private and public sectors must plan their economic activities accordingly. (Accept any logical/original conclusion) (2) AND/OR ic ARINENT OF BAS OPA DUCATION : oni2 -06- 25 RIVATE BAG X 110 i. SRETORIAC 0004 | PUBLIC EXAMINATIONS , Pus. eer coon gonna Ve Copyright reserved DBE/2012 [50] 4 Please turn om /

Downloaded from hlayiso.com Economics/HG 18 DBE/2012 SCE ~ Memorandum (3) o a ra QUESTION 9: PRICE FORMATION Fe 4 Se Fa Bo os xB Explain how certain factors can influence the price elasticity of deman is EB eb gs = q Arf oO cantits) ne Introduction 2 Fe EN} gh ER It is important, especially for the supplier, the manufacturer and the governmgnty R FA12 to have a fair understanding of the determinants of the price elasticity of denindvvv > [iq Ma (3) = Body heen The following determinants of the price elasticity of demand can be identified: A necessity VV ° The demand is inelastic because a minimum quantity will be bought no matter what the price may bev” For example, a fall in the price of bread would not increase consumption (demand). Vv” A luxuryYY . The demand is elastic because people can do without the article if they consider the price to be too high” V, e.g. Jacuzzi. vv A substitutev Vv ° A slight price rise may cause people to substitute a particular good for an alternative product. Vv e This explains why the prices of substitutes tend to increase or decrease simultaneously, Vv e.g. a rise in the price of butter would cause the demand for margarine to increase, leading to a rise in the price of margarine. vv Alternate uses VV The demand is elastic. For example a slight fall in the price of rubber would cause rubber to be used for other purposes which were previously considered to be too expensive, instance, for belting, for floor-covering, shoe soles and household utensils. vv Income Vv . Changes in income can also affect the quantity demanded for a particular good or service. VV . Quantity demanded thus changes as the income of people who buy a certain good changes. vv” ° When demand elasticity is measured in terms of income changes, it is referred to as the income elasticity of demand (rather than the price elasticity of demand.) Income elasticity of demand is affected by the following factors: ° People with a low income have to spend the greater part of their income on necessities, such as bread; as a result, they have little money with which they can purchase other goods. Vv . Their demand for necessities is therefore, income inelastic, but their demand for other goods is elastic, depending on the amount of money they are able to spend on other goods. Vv e People with a moderate income have a greater surplus with which to purchase goods other than necessities. As income rises, therefore, the demand for goods 4 WZ and services other than necessities tends to become more income elastic. VY Copyright reserved Please turn one /

Downloaded from hlayiso.com Economics/HG 19 DBE/2012 SCE — Memorandum Time vv Demand for articles that last longer periods after there has been a change is more elastic. vv Consumers’ habits do not change immediately. Demand for articles that they are familiar with using may be maintained even if the price has changed. VV . Technological problems also affect demand for articles that consumers use. A change in price of those articles may result in inelastic demand because of difficulty in adapting usage patterns to price changes. Vv” Habit-forming articles VV ° Demand is usually relatively inelastic. For example, tobacco and alcohol. Vv . The quantity demanded seldom.changes if there are small price fluctuations. VV (Give credit for use of graphs where appropriate. 2 marks for each graph) Content/Body = (45) Conclusion Knowledge of price elasticity of demand enables producers to adjust prices; adjust the scale of production, and attract more customers. (2) [50] CBEPARTNENT OF BASIC EDUCATION 2012 -06- 25 PRIVATE BAG.X 110 PRETORIA 0001 'BOBLIC EXAMINATIONS _PUBLIC EXAMINATION L 4 Copyright reserved Please turn ove /

Downloaded from hlayiso com DEF AT DUCATION.__| Economics/HG 20 DBE/2012 SCE — Memorandum gni2 -06- 25 QUESTION 10: ECONOMIC DEVELOPMENT, REGIONAL DEVEL ORMERT AND ! URBANISATION PUBLIC EXAMINATIONS A comparison between the developed countries and the developing countries indicates a development gap. Discuss the characteristics of developing countries with reference to the above statement. 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, etc. . The dominant characteristic of developing countries is widespread poverty. . Alleviating this poverty requires an understanding of the broad economic and social characteristics that these economies share. Vv ¥ (Accept any logical/original introduction) (3) Body Low standard of living VY” . 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. vv Low productivity Vv” 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. VW e The lack of adequate monetary capital for the development of human capital is a serious defect. VW . 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 dependants vv e 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 who cannot support themselves and who are financially dependent on 4, their parents. Vv Copyright reserved Please turn over’ iL

Downloaded from hlayiso.com Economics/HG 21 i DBE/2092 SCE - Memorandum ed ea a t o {2 . Children aged under 15 and people over 60/65 years of age are non-produetive es & members of society and must be financially supported by the labour fo oe = other limited resources. Vv” 5 Bacd 3 e The number of children below the age of 15 years makes up about 40% He a total population, in comparison with less than 20% in highly developed co ezig Vv i a ju . The natural growth rate for developing countries can vary from 2% to as 3 5%, in contrast to highly developed countries where it is as low as 1% a i even be nil. “W _ — oo Unemployment and underemployment vv ° The essential reason for the poverty in developing countries is that there are not enough productive jobs for the labour forceY v’. ° Unemployment occurs where people who are willing and able to work cannot obtain work, vv ° 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 v. ° About 30% of the work force in third world countries is not fully utilised, as a result of unemployment and underemployment. v~ Defective economic structure/contribution of agriculture to GDP is high sectoral distribution of production/dependence on agriculture vv . The majority of the population are dependent upon the agricultural sector. Vv ° 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 . Agricultural productivity is generally low, because there are large numbers of people in relation to the amount of land available’ Vv ° Other limiting factors are elementary technology, poor organisational techniques, and a lack of physical and human capitalv v. . A further weakness of the economic structure of developing economies is dependence on the export of primary products. vv . 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 ° Secondary products, of which there is a shortage in third world countries, must be imported at very high cost. vv . Lack of capital has resulted in third world countries running up huge sums in foreign debt. vv ° The redemption of foreign debt commitments further contributes to a poor economic structure. Vv Weaker position in international relations Vv e The distribution of political and economic power between the developed and the developing countries is very unbalanced. VY . The wealthier countries control the pattern of international trade and influence the ability to convey technology, development aid, and capital to the poorer (L countries. vv (Where statistical data is used, except current relevant figures. Max. (45) 4, Copyright reserved Please turn oe

Downloaded from hlayiso.com Economics/HG 22 DBE/2012 SCE — Memorandum Conclusion 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 Somaliav ¥ (2) (Accept any logical/original conclusion) [50] AND/OR 4 f Copyright reserved a Please turn overhf

Downloaded from hlayiso.com = Me ic Economics/HG 23 Eee TRATION. Z BE/2012 SCE - Memorandum -06- 25 QUESTION 11: THE STATE ate Nate Ea us 10 4 PRET! Discuss the requirements of a good system of taxation PUBLIC EXAMINATIONS Introduction Taxation is a compulsory contribution levied by the state on its citizens for the purpose of financing services of a public interest. vv“ (3) (Accept any other relevant introduction) Body Eair {impartial )yy Tax must be spread proportionally amona different income groups. Vv” ° Impartiality implies a progressive tax scale where higher income groups pay a higher tax rate’ . Taxpayers under same financial and economic circumstances must pay the same tax rate, but not necessarily the same amount. vv ° The government must take into account factors such as possession_of capital, income, family responsibilitiesv ° For example an unfair tax system, e.g. Regressive tax system Vv Productive (Efficient vv The tax system must provide sufficient_revenue to finance government expenditure. vv ° The productivity of the system depends on factors such as kinds of tax, rates of tax, exemptions and allowancev Vv . Administration must be efficient to avoid tax evasion. VV” . Tax scales should not be too high because it affects productivity negatively. vv Simple VV ° It must be simple for the tax collector and taxpayer to understand easily. vv e For the government the system must be easy to apply and adapt to changes. vv . When a system of taxation is simple, the administration is usually more efficient. vv ° The co-operation of the tax payer can be obtained more readily if he understands the tax system easily. vv Elastic VV ° It should be easy to increase or decrease the revenue from taxes without disrupting the economy. I.e. the system must be flexible. VW” ° Circumstances which may warrant changes in taxation are: national disasters, modern warfare, etc. Vv Economical (Streamlined) Vv Collection of tax revenue must incur little costs as possible to the tax collector and taxpayery Vv . The cost of tax collection should not be more than 2% of total tax revenue. Vv ° The collection procedure should be smooth and cause little disruption to the (L normal running of the community. “ Copyright reserved Please turn ovell ‘ 4

Downloaded from hlayiso.com Economics/HG 24 DBE/2012 SCE — Memorandum Convenient Vv ° For the taxpayer the time, place and method of payment must be convenient e.g. monthly deductions. Vv” . For the state, a convenient system of taxation means regular flow of revenue to the treasury. VV Certain (reliable) ° All taxes levied must be collected. It must be impossible for the taxpayer to evade atax VV . The taxpayer must know exactly how much to pay and where to pay. VV ° The method of calculation must be known. Vv” Maximise the national income . The system must promote productivity of labour and per capita income. vv ° High taxation discourages investment, which in turn stagnates economic growth. vv ° High taxation de-motivates employers and employees. VV . A moderate tax rate will stimulate foreign investment. vv Content/Body = (45) Conclusion Tax evaders affect nearly all governments; therefore the government needs to improve its productivity to so that it can reduce the tax rate. Through the Asset Forfeiture Unit, South Africa has managed to limit the impact of tax evaders. (2) [50] TOTAL SECTIONC: 100 GRAND TOTAL: 400 T “DEPARTMENT OF BASIC | EDUCATION 2012 ~06- 25 PRIVATE BAG X 110 PRETORIA 0001 | PUBLIC EXAMINATIONS: ; i) - 9614 Qo7 Copyright reserved SN