Economics Grade 11 P2 Eastern Cape November 2022 Memo (Eng)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 11 NOVEMBER 2022 ECONOMICS P2 MARKING GUIDELINE MARKS: 150 This marking guideline consists of 19 pages.

Downloaded from hlayiso.com 2 ECONOMICS P2 (EC/NOVEMBER 2022) SECTION A (COMPULSORY) QUESTION 1 1.1 MULTIPLE-CHOICE QUESTIONS 1.1.1 A – Positive  1.1.2 B – Perfect  1.1.3 D – Short run  1.1.4 A – Fixed  1.1.5 C – Free movement of goods and services between countries  1.1.6 C – Horizontal  1.1.7 D – Multinational  1.1.8 B – United Nations (UN)  (8 x 2) (16) 1.2 MATCHING ITEMS 1.2.1 C – mechanism where buyers and sellers meet to negotiate the prices of goods  1.2.2 E – power to satisfy a want  1.2.3 F – demanded in smaller quantity when income increases  1.2.4 A – production and input increase by the same percentage  1.2.5 D – AR = AVC  1.2.6 G – acquiring ownership of businesses in another country in the form of buildings and capital equipment  1.2.7 H – strong Western economies  1.2.8 B – objective is to achieve the stabilisation of greenhouse gas concentrations in the atmosphere  (8 x 1) (8) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 3 1.3 GIVE ONE TERM 1.3.1 Nominal price  1.3.2 Homogenous  1.3.3 Opportunity cost  1.3.4 Climate change  1.3.5 Import substitution  1.3.6 Externality  (6 x 1) (6) TOTAL SECTION A: 30 Copyright reserved Please turn over

Downloaded from hlayiso.com 4 ECONOMICS P2 (EC/NOVEMBER 2022) SECTION B Answer any TWO of the three questions from this section in your ANSWER BOOK. QUESTION 2: MICROECONOMICS 2.1 Answer the following questions. 2.1.1 Name any TWO examples of variable costs. • Electricity  • Water  • Raw materials  • Wages  (Accept any other relevant correct response.) (Any 2 x 1) (2) 2.1.2 Why is the demand curve of a perfect competitor horizontally sloped? • The demand curve is horizontally sloped because the firm can sell any amount of goods at the prevailing market price, so even a small increase in price will lead to zero demand.  • This indicates that the firm has no control over the price.  (Accept any other correct relevant response.) (Any 1 x 2) (2) 2.2 DATA RESPONSE 2.2.1 Name any ONE example of a pair of substitute goods. • Butter and margarine  • Beef and mutton  • Coffee and tea  • Air conditioner and cooler  (Accept any other correct relevant response.) (1) 2.2.2 How is the relationship between the price and quantity of complementary goods? • Negative/indirectly proportional  (1) 2.2.3 Briefly describe the concept substitute good. • Substitute good is a good that can be used in the place of another.  • Is a good that can easily be replaced with another good by consumers.  (Accept any other correct relevant response.) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 5 2.2.4 Briefly explain relative price in economics. • A relative price is the price of one good compared to another  • Relative price tells how much cheaper or more expensive a good is, compared to another good  • To obtain a relative price of a product, divide the price of one product by another.  (Accept any other correct relevant response.) (2) 2.2.5 Examine the relationship between the product and factor markets. • Product market cannot exist without the factor market  • An increase in goods and services in the product market will lead to an increase in demand for factors of production in the factor market  • Factors of production in the factor market are only valuable when they are needed for production purposes in the product market  (Accept any other correct relevant response.) (4) 2.3 DATA RESPONSE 2.3.1 Name the type of price elasticity of demand depicted in the above graph. Relative elastic demand  (1) 2.3.2 Identify the quantity of goods demanded when the price increases to R80. 50 units  (1) 2.3.3 Briefly describe the concept price elasticity of demand. Price elasticity of demand is the responsiveness of the quantity demanded to the price changes.  (Accept any other relevant correct response.) (2) 2.3.4 Briefly explain durability of the product as a determinant of price elasticity of demand. • The more durable a product is, the more elastic the demand will be  • If the product lasts for a long time, consumers will be influenced by price increases and will be more hesitant to buy the product  • Products that are not durable have an inelastic demand  (Accept any other relevant correct response.) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com 6 ECONOMICS P2 (EC/NOVEMBER 2022) 2.3.5 Calculate the price elasticity of demand from the above graph. Show ALL calculations. % change in quantity demanded Price elasticity of demand = % change in price 50 – 110 %ΔQty = x 100  110 = 55% 80 – 65 %∆P = x 100  65 = 23% = 55%/23% = 2,4%  (4) 2.4 Briefly explain, without the use of a graph, cross elasticity of demand. • Cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the price of related goods  • Cross elasticity of demand focuses on the effect of price increases on another good  • The higher the value of the cross elasticity of demand, the stronger the effect will be on the demand for the related product  • Substitute goods will have a positive cross elasticity of demand, because the demand for one good increases when the price for the substitute good increases  • Items that have strong substitutes have a higher cross elasticity of demand  • Complements will have a negative cross elasticity of demand as the price for one item increases, an item closely associated with that item and necessary for its consumption decreases because the demand for the main good has also dropped  • Cross elasticity of demand is useful to businesses because they utilise it to establish prices for their goods and services  • Governments, businesses, and economists use cross elasticity of demand to determine what the ripple effect of price changes will be on related products  • Governments, economists and businesses will then be more careful about increasing prices or taxes, because this will affect the related product as well  (Accept any other relevant correct response.) (8) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 7 2.5 Examine the benefits of the economies of scale to the producer. • Economies of scale are cost advantages that can occur when a business increases its scale of production and becomes more efficient, resulting in a decreased cost per unit.  • The cost of production (including fixed and variable costs) is spread over more units of production providing bigger businesses with a competitive advantage over smaller ones, because the larger the business the lower its costs per unit.  • Businesses will be able to improve their price competitiveness in global markets.  • Businesses experience increased profits, generate a higher return on capital investment and can grow.  • As a business grows, it solidifies and becomes less vulnerable to external threats, such as hostile takeovers.  (Accept any other relevant correct response.) (8) [40] QUESTION 3: CONTEMPORARY ECONOMIC ISSUES 3.1 3.1.1 Name any TWO types of pollution. • Air pollution  • Water/sea pollution  • Land/environmental pollution  • Noise pollution  (Any 2 x 1) (2) 3.1.2 What is the negative impact of globalisation on the environment? • Renewable resources will be depleted/exhausted due to excessive demand of goods and natural resources as well as the level of development worldwide.  • Water, forests, plants and animal species are used extensively to satisfy ever-increasing needs and wants at the expense of future generations.  (Accept any other relevant correct response.) (Any 1 x 2) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com 8 ECONOMICS P2 (EC/NOVEMBER 2022) 3.2 DATA RESPONSE 3.2.1 Where do companies like Du Pont and IBM operate? Globally/Internationally  (1) 3.2.2 Write the acronym NAFTA in full. • North American Free Trade Agency  (1) 3.2.3 Briefly describe the concept free trade. • Free trade is the policy that allows goods and services to be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.  • Free trade is the policy by which a government does not discriminate against imports or interfere with exports by applying tariffs.  (Accept any other relevant correct response.) (2) 3.2.4 Briefly explain the role of the WTO (World Trade Organisation). • Deals with the global rules of trade, ensuring that international trade flows as smoothly, predictably and freely as possible  • Monitors international trade agreements  (Accept any other relevant correct response.) (2) 3.2.5 How would developed countries benefit from trading with African countries? • They benefit from cheaper labour from African countries  • African countries, in particular South Africa, have an endowment of mineral resources which are scarce in developed countries.  (Accept any other relevant correct response.) (4) 3.3 DATA RESPONSE 3.3.1 List any ONE cause of globalisation. • Development of technology  • Capital liberalisation  • Multinational enterprises  • Standardisation  (1) 3.3.2 Name the main element of globalisation. Trade  (1) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 9 3.3.3 Briefly describe the concept globalisation. Globalisation is the process of interaction among the countries of the world to bring their economies and societies together to develop a global economy.  (Accept any other relevant correct response.) (2) 3.3.4 Briefly explain cultural changes as a consequence of globalisation. • Globalisation has resulted in several cultures coming together  • People of one culture discover shortcomings in their culture when they come into contact with other cultures  • They adopt aspects of other cultures that are more in tune with the times  • Societies have expanded as they have taken in people from other cultures and backgrounds and created a whole new culture of their own  • Cooking styles, languages, music styles, art forms and customs have spread internationally due to globalisation.  (Accept any other relevant correct response.) (2) 3.3.5 How do countries in the South benefit from foreign direct investment? Countries in the South benefit through: • Increased employment and income growth  • Improved economic growth and development  • Expansion of industries within the country  • Expansion of the tax base resulting in more revenue to the government  (Accept any other relevant correct response.) (Any 2 x 2) (4) 3.4 Tabulate any TWO differences to illustrate the North-South divide. NORTH SOUTH Highly developed infrastructure  Weak infrastructure  High levels of production and Low levels of production and consumption  consumption  Industrialised countries  Non-industrialised  Average incomes are very high  Average incomes are low  (Accept any other correct relevant response.) (Any 2 x 2 + Any 2 x 2) (8) Copyright reserved Please turn over

Downloaded from hlayiso.com 10 ECONOMICS P2 (EC/NOVEMBER 2022) 3.5 Examine the negative impact of deforestation. • When forests are being cleared, vegetation which acts as soil cover is removed and as rainwater flows through it, nutrients are washed out as well as other organic materials.  • The soil in a lot of deforested regions is similarly not suitable for maintaining annual crop products.  • As soon as trees are gone, big amounts of water may result into flash floods, a lot of which caused disasters in parts around the globe.  • This may result in the negative effects in the economic viability of several businesses and significant fatalities in the wildlife habitat.  • Deforestation results in the loss of significant amount of biodiversity, the extinction and destruction of a lot of animal and plant species, a lot of whom remain unknown and whose benefits will be left undisclosed.  • The loss of trees and other vegetation can cause climate change, desertification, soil erosion, fewer crops, flooding, increased greenhouse gases in the atmosphere, and a host of problems for indigenous people.  • The removal of forests has increased soil erosion and endangered the draining of water into the rivers and lakes.  • Deforestation results in less water in the air to be returned to the soil, then causing dryer soil and inability to grow crops.  (Accept any other correct relevant response.) (8) [40] QUESTION 4: MICROECONOMICS AND CONTEMPORARY ECONOMIC ISSUES 4.1 4.1.1 Name any TWO factors that affect the demand for goods and services. • Price of the product  • Income of consumers  • Availability of substitutes  • Tastes and preferences of consumers  • Fashion trends  (Accept any other relevant correct response.) (Any 2 x 1) (2) 4.1.2 Why is it important to protect biodiversity? It is important to protect biodiversity because: • Biodiversity refers not just to species but also to ecosystem and differences in genes within a single species  • A healthy ecosystem provides clean water, purified air, regulate climate, provides food etc.  • Humans also rely on healthy ecosystem to provide medicines, fuel and energy, oxygen to breathe etc.  (Accept any other relevant correct response.) (Any 1 x 2) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 11 4.2 DATA RESPONSE 4.2.1 Name the degree of price elasticity of supply that is equal to 1. Unitary price elasticity of supply  (1) 4.2.2 Give the formula used to calculate price elasticity of supply. %Δ in quantity supplied PES =  %Δ in price (1) 4.2.3 Briefly describe the concept supply. Supply is the amount of a good or service that is available at a specific price to consumers  (Accept any other relevant correct response.) (2) 4.2.4 Briefly explain unrelated products. • Unrelated products have zero cross elasticity of demand value  • They exist independently  • Product A has nothing to do with product B.  (2) 4.2.5 Why is price elasticity of supply important? • It measures how much the supplied quantity of a good or service responds to a change in price.  • It is necessary for a firm to know how quickly and effectively it can respond to changing market conditions, especially price changes.  (Accept any other relevant correct response.) (4) 4.3 DATA RESPONSE 4.3.1 Identify ONE effect of global warming from the extract. Melting of glaciers  (1) 4.3.2 Mention the main cause of global warming. Human activities  (1) Copyright reserved Please turn over

Downloaded from hlayiso.com 12 ECONOMICS P2 (EC/NOVEMBER 2022) 4.3.3 Briefly describe the concept global warming. Global warming is the gradual increase in the overall temperature of the earth’s atmosphere generally attributed to the greenhouse effect caused by increased levels of carbon dioxide and other pollutants /Global warming is the long-term heating of the earth’s climate system due to human activities, primarily fossil fuel burning, which increases heat-trapping greenhouse gas levels in the earth’s atmosphere.  (Accept any other relevant correct response.) (2) 4.3.4 Briefly explain the importance of environmental sustainability. Sustainability is important because: • People have to live within the limits of the environment  • It improves the quality of people’s lives, protects the ecosystem and preserves natural resources for future generations.  (Accept any other relevant correct response.) (2) 4.3.5 Examine the negative impact of hazardous waste. Hazardous waste can: • Pose a threat to human health and environment  • Spread and contaminate air, water and land  • Affect productivity by polluting ground water resources and endangers plant and animal life  (Accept any other correct relevant response.) (4) 4.4 With the aid of graphs compare economic and normal profits in a perfect market. Mark allocation Correct drawing and labelling of cost curves in each graph = 1 mark Correct drawing and labelling of revenue curves in each graph = 1 mark Economic profit area = 2 marks Normal profit area = 2 marks Labelling of the axis in each graph = 1 mark Maximum = 8 marks (8) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 13 4.5 Evaluate the benefits of the South African economy integrating with other countries. • Economic integration often leads to a reduction in the cost of trade  • There will be improved availability of goods and services and gains in efficiency that lead to greater purchasing power  • Employment opportunities tend to improve because trade liberalisation leads to market expansion, technology sharing and cross-border investment  • Political cooperation between countries can also improve because of stronger economic ties, which provide an incentive to resolve conflicts peacefully and lead to greater stability  • South Africa will benefit from improved foreign direct investment  (Accept any other correct relevant response.) (8) [40] TOTAL SECTION B: 80 Copyright reserved Please turn over

Downloaded from hlayiso.com 14 ECONOMICS P2 (EC/NOVEMBER 2022) SECTION C Answer ONE of the two questions from this section in the ANSWER BOOK. QUESTION 5: MICROECONOMICS • Discuss in detail the characteristics of a monopoly. (26 marks) • How does a monopolistic competitive firm survive competition in the market? (10 marks) INTRODUCTION Monopoly exists when there is only one seller of a product, with no close substitutes and entry into the market is completely blocked.  (Accept any other relevant correct response.) (Maks.2) MAIN PART Number of producers  • The monopolist is the only seller in the industry and has full control over the supply of a product  • It represents the total industry, with complete market power  e.g. De Beers, Eskom  • This enables the monopolist to exert considerable influence over the buyer  Nature of the product  • The product is unique and has no close substitutes  • E.g. electricity and retail transport  • Buyers can only buy from the monopoly or go without the product  Profit  • The monopoly makes a short-term loss and economic profits both in the short and long run  • It is more likely that the massive market power and high prices will ensure that it makes supernormal profits  Technical superiority  • A monopoly has a technical advantage over potential competitors  • Its access to resources and technical superiority makes it difficult for others to compete  • This can keep the monopolist in its position for some time, for example in the computer software industry  Control over prices  • A monopoly has full control over the price of a product or service – but it is limited by demand to charge excessively high prices  • It controls the price by manipulating and restricting output to create a shortage causing an increase in prices  • Monopolies are therefore price makers because they have the power to determine their own price  • A monopoly can only decide at which point on the demand curve it wants to produce  Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 15 Favourable circumstances  • Sometimes entrepreneurs may enjoy favourable circumstances in a certain geographical area  • E.g. there may be only one supplier of milk, a hardware store or hotel in a particular town  • There may even be laws that protect the market, e.g. post offices in South Africa  Market information  • A monopoly has full knowledge of all the current market conditions because it is the only seller available in the market representing the industry as a whole.  • New firms that wish to enter the market will not have the same information available to them and this hampers their ability to enter the market  • Monopolies withhold information from consumers as such it is difficult for them to make informed decisions as they may not be fully aware of the needs of consumers  Exploitation of consumers  • The monopolist may produce fewer products at a higher price compared to businesses under perfect competition  • E.g. De Beers, because the monopolist is the only producer of the product in the market, there is always the possibility of consumer exploitation. • Most governments take steps to guard against such practices and new and existing monopolies are usually well monitored  Market entry  • Entry in the market is completely blocked and it is impossible for other businesses to enter the market  • Some monopolies are created by law passed by the government giving one firm exclusive right to produce a particular product  • Government can use patents, licences and copyrights to restrict market entry preventing undesirable or incompetent firms from entering the market  • The barriers prevents other producers from entering the market to supply the same type of product  • High start-up costs include capital investment and research and development that could be difficult for other firms to afford  Economies of scale  • The mere size of the large business gives it a cost advantage over a smaller rival and this will make it impossible for the smaller business to compete  (A maximum of 8 marks for mere listing of facts/examples) (Accept any other correct relevant response.) (Max. 26) Copyright reserved Please turn over

Downloaded from hlayiso.com 16 ECONOMICS P2 (EC/NOVEMBER 2022) ADDITIONAL PART Monopolistic competitive firm survives by using non-price competition through: • Offering differentiated products that makes it less price elastic  • Competing based on non-price factors  • Using branding to indicate differences when competing with other suppliers in the market  • Aggressive advertising campaigns that can be launched to attract customers  • Extending shopping hours which will be more convenient for customers to make use of their services, e.g. 24-hour service  • Providing free deliveries within a certain range of business ensuring a hedge over other competition  (A maximum of 2 marks for mere listing of facts and examples.) (Accept any other correct relevant response.) (Max. 10) CONCLUSION Producers need to choose and employ the limited resources wisely in order to produce more goods at the highest possible price because not all opportunities yield the same reward  There is no space for monopoly firms in a mixed economy such as in South Africa, as this leads to consumer exploitation, unfair competition and excessively high prices  A monopoly has a tendency to exploit consumers, so it is very important that they are a parastatal or be monitored by the government.  (Accept any other high order conclusion.) (Max. 2) [40] Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 17 QUESTION 6: CONTEMPORARY ECONOMIC ISSUES • Discuss in detail, measures used by the government to ensure sustainable development. (26 marks) • How can consumers contribute in reducing environmental deterioration? (10 marks) INTRODUCTION Environmental sustainability involves developments to meet the needs of the current generation without compromising the capacity of future generation to meet their needs  It is the ability of the environment to survive its use for future economic activity  (Accept any other relevant correct response.) (Max. 2) MAIN PART Granting property rights  • Property rights are titles to the ownership of fixed property enforced by law  • They have a conservation effect as they ensure that people take good care of the resources that belong to them and will do anything to protect them from degradation  • People are awarded property rights to prevent fauna and flora from becoming extinct and this has little cost to the taxpayer  • Property rights may be expanded to common goods like clean air where the victims could charge the polluters for the right to pollute  • Property rights empower owners to negotiate contracts with businesses who wish to exploit the area’s resources  Command and control  • The government at times takes direct control to sustain the environment  • This involves the government setting minimum acceptable levels of environmental quality and maximum permitted levels of emissions or resource usage  • Inspectors monitor the activities and impose fines if there is non-adherence to the set levels  • There are three approaches to devising command and control systems: o Quantity standards which focus on amounts of pollution caused, e.g. gas emissions  o Quality standards focusing on environmental impact, for example standards are set for air and water purity  o Social impact standards focusing on the negative effect on people  Copyright reserved Please turn over

Downloaded from hlayiso.com 18 ECONOMICS P2 (EC/NOVEMBER 2022) Levy environmental tax  • This is tax charged by the government to protect the environment from people and businesses  • It could be imposed on the output or consumption of a good wherever external environmental costs are generated  • These are also known as green taxes, e.g. tax on tyres  • This will serve as an incentive for producers to reduce pollution  • The aim of green tax is to ensure that polluters bear the costs  • Environmental taxes (green tax) can be added to the cost of goods and services for the negative impact they have on the environment  • Taxes can be imposed on petrol, paper, emission of gases etc.  • In 2003 the government legislated the use of biodegradable plastic bags which consumers had to pay for  • The hope is that they will use fewer bags and ensure a litter free environment  Pay environmental subsidies  • Subsidies can be awarded to businesses that are willing to reduce pollution and waste, encouraging them to use environment friendly ways of production  • Subsidies could be for the development of new technology or equipment (e.g. solar energy, reduce smoke), environmental friendly substitutes (e.g. lead free petrol) recycling of waste (e.g. bottles, cans, cardboard etc.)  • Emission gases from factories can be reduced using new technology  Issue marketable permits  • The government first determines the amount of pollution each firm in the area is allowed to create  • Then the government may wish to charge for the pollution and could raise a tax to pay for it  • Marketable permits/licenses are sold to the businesses which allow them to pollute to a certain degree  • If a firm wants to pollute more than it is allocated, it can buy some permits from those firms in the area that are using less than their allocations  • The permits are sold at prices determined by demand and supply on the market  • The aim of marketable permits is to encourage firms to find technologies that reduce pollution  • Emission charge is based on the quantity and/or content of pollutants released into the environment  • The more pollution the firm creates the more it pays in emission charges  Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2022) ECONOMICS P2 19 Education  • The government should have educational campaigns to create awareness about environmental degradation and its consequences  • Incorporating topics about environmental sustainability into the school curriculum fosters awareness  • Education makes people aware of the impacts of their actions on the environment  • Greening the Nation programme is a programme aimed at creating awareness among learners and community members of the need to plant trees to help against global warming  Voluntary agreements  • These are agreements between government and businesses voluntarily to address negative environmental impacts of industries  • Businesses prefer most negotiations so that they can tailor their specific needs and include it into their planning  • Agreements can be formal, which is legally binding contract or informal  • Government and businesses come together and make formal agreements  to reduce pollution without using drastic measure such as imposing laws and regulations  • Businesses prefer voluntary agreements because they suit their circumstances  (Accept any other correct relevant response.) (Max. 26) ADDITIONAL PART Consumers can contribute by: • recycling waste materials to reduce pollution and climate change  • avoiding burning of fossil fuel and veld fires  • using unleaded petrol  • avoiding littering, instead make use of bins for waste material  • being involved in cleaning campaigns in their communities  • using environmentally friendly and energy saving goods, e.g. fluorescent bulbs, solar geysers  (Accept any other correct relevant response.) (Maximum 2 marks for mere listing of facts and examples.) (Max. 10) CONCLUSION Despite measures taken by the government to sustain the environment, it is important for all participants in the economy to join hands and take measures on a moral basis to reduce environmental pollution and degradation  (Accept any other relevant correct response.) (Max. 2) [40] TOTAL SECTION C: 40 GRAND TOTAL: 150 Copyright reserved Please turn over