Economics Grade 12 Eastern Cape Mock 2013 Memo (English)

Downloaded from hlayiso.com Province of the EASTERN CAPE EDUCATION NATIONAL SENIOR CERTIFICATE GRADE 12 SEPTEMBER 2013 ECONOMICS MEMORANDUM MARKS: 300 This memorandum consists of 17 pages.

Downloaded from hlayiso.com 2 ECONOMICS (SEPTEMBER 2013) SECTION A (Compulsory) QUESTION 1 (LO1 – LO4) 1.1 LO1 1.1.1 A  short term 1.1.2 C  recovery 1.1.3 B  Auditor-General. LO2 1.1.4 B  slopes downwards from left to right. 1.1.5 B  merit 1.1.6 C  Cellphone industry LO3 1.1.7 A  Black Economic Empowerment 1.1.8 A  IDZs 1.1.9 C  World Trade Organisation. LO4 1.1.10 A  CPI 1.1.11 C  indigenous heritage. 1.1.12 B  Conservation (12 x 2) (24) 1.2 1.2.1 Financial  1.2.2 Deregulation  1.2.3 Social security grants  1.2.4 SARB   1.2.5 Oligopoly  (5 x 2) (10) 1.3 1.3.1 H  Shows the relationship between tax rate and tax revenue. 1.3.2 E  To obtain meaningful share or control of a business. 1.3.3 B  To prevent the abuse of economic power e.g. monopoly. 1.3.4 A  These are over consumed in a free market economy. 1.3.5 D  Return of land to those who lost them because of discriminatory laws. 1.3.6 I  Includes air, road, rail and sea transport. 1.3.7 J  Aggregate demand exceeds aggregate supply. 1.3.8 C  Foreign tourists arriving in South Africa. (8 x 2) (16) TOTAL SECTION A: 50 SECTION B (Answer any THREE questions from this section.) QUESTION 2 (LO1 AS1 − AS4) (50 MARKS – 25 MINUTES) 2.1 2.1.1 open  (2) 2.1.2 nationalisation  (2) 2.1.3 main  (2) 2.1.4 depreciation  (2) 2.2  Business cycles   Kitchin cycles   Juggler cycles   Kuznets cycles   Kondratief cycles  (Any 3 x 2) (6)

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 3 2.3 DATA RESPONSE 2.3.1 It is the price of one currency in terms of another one.  (2) 2.3.2 Appreciates/become stronger  (2) 2.3.3  Revaluation   Devaluation  (2 x 2) (4) 2.3.4 South African Reserve Bank/SARB  (2) 2.4 DATA RESPONSE 2.4.1 Eskom  (2) 2.4.2 It is used to describe the change in status of an enterprise from a non-profit to a profit-seeking enterprise.  (2) 2.4.3  SOEs are bureaucratic, inefficient, and unresponsive to the needs of the people.   It will broaden the tax base.   Private sector is able to adapt more easily to changing economic conditions.   It will give more people a share in the economy.   It will make funds available for necessities like housing, education, health care and assistance to the poor.  (Any 2 x 2) (4) 2.4.4 The government will have to support loss-making entities at taxpayer’s expense.  (2) 2.5  Known as producers/manufacturers of goods and services   Buys factors of production from households in the factor market   Use the factors of production to produce goods and services   Sells goods and services in the product market  (8) 2.6  Community goods are non-rival goods.   Consumption by one does not exclude the consumption of another.   These are non-excludable.   Means that consumers cannot be charged a price on the basis of use.  They are not offered by the private sector.   E.g. defence, police, flood control, street lighting, etc.  (4 x 2) (8) [50] QUESTION 3 (LO2 AS1 – AS3) (50 MARKS – 25 MINUTES) 3.1 3.1.1 loss  (2) 3.1.2 advertising  (2) 3.1.3 direct  (2) 3.1.4 collective  (2) 3.2  Non-rivalry   Non-excludability   Social benefits outstrip private benefits   Infinite consumption   Non-rejectability  (Any 3 x 2) (6)

Downloaded from hlayiso.com 4 ECONOMICS (SEPTEMBER 2013) 3.3 DATA RESPONSE 3.3.1 Normal profit in perfect competition  (2) 3.3.2 The firm will receive economic profit.  (2) 3.3.3 Where MR = MC  (2) 3.3.4  It is the actual expenditure of a business on the purchase or hire of inputs.   It includes wages, interest, leasing of land and buildings and expenditure on raw materials.  (4) 3.4 DATA RESPONSE 3.4.1 These are costs and benefits that convert private costs and benefits into social costs and benefits.  (2) 3.4.2  Private costs plus external cost are equal to social costs.   This is the cost of goods and services to those who produce them and to the community as a whole.   It is also the additional cost of pollution or the cost of treating a sickness caused by the production of a good or service.   No values are given to these external costs because there is no market price for them.  (Any 2 x 2) (4) 3.4.3  Private costs are costs that are incurred by consumers when they buy the goods.   Private benefits are benefits received by those who buy and sell the goods.  (4) 3.5  Oligopolies collude through formal or informal agreement   When they reach a formal agreement, it is called a cartel.   This is to limit competition and maintain high profitability.   There are different forms – overt collusion, tacit collusion, etc.   A good example of collusion is OPEC.  (Any 4 x 2) (8) 3.6  It means the product mix does not reflect consumers taste.   This is because resources are not allocated in the right proportions.   The quantities preferred by the consumers are not available.   It can be improved if producers change products depending on market demand.  (4 x 2) (8) [50]

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 5 QUESTION 4 (LO3 AS1 – AS4) (50 MARKS – 25 MINUTES) 4.1 4.1.1 SARB  (2) 4.1.2 northern  (2) 4.1.3 normal  (2) 4.1.4 GDP  (2) 4.2  Duty free incentives   Small and Medium Enterprise Development Programme (SMEDP)   Skills Support Programme (SSP)   Black Business Supplier Programme (BBSP)   Critical Infrastructure Programme (CIP)   Foreign Investment Grant (FIG)  (Any 3 x 2) (6) 4.3 DATA RESPONSE 4.3.1  GEAR   RDP   AsgiSA  (Any 2 x 2) (4) 4.3.2  Incentives to work and produce   Human and physical capital formation   Satisfying international benchmarks  (Any 2 x 2) (4) 4.3.3 Growth Employment And Redistribution  (2) 4.4 DATA RESPONSE 4.4.1 SETAs (Sector Education and Training Authority)  (2) 4.4.2 Lack of skills and training  (2) 4.4.3  Transport   Communication   Energy  (Any 2 x 2) (4) 4.4.4  skills development   education and training  (Any 1 x 2) (2) 4.5  Incentives  o It will encourage manufacturers to increase their export volumes.  o Include market information, research with regard to new markets, concessions on transport charges, export credit and guarantees, etc.   Subsidies  o This is in the form of cash payments to exporters.  o Includes cash payments like refunds on import tariffs, general tax rebates, tax concessions, employment subsidies, assistance in financing exports.  2 x (Any 2 + 2) (8) 4.6  A higher rate of literacy, knowledge and skills among the population can be achieved through education.   Can be achieved by means of effective education and training.   It improves productivity, national wealth, higher standard of living, etc.   It receives the largest percentage of total expenditure in RSA.   Standard of living and the level of education are closely related.  (Any 4 x 2) (8) [50]

Downloaded from hlayiso.com 6 ECONOMICS (SEPTEMBER 2013) QUESTION 5 (LO4 AS1 − 3) (50 MARKS – 25 MINUTES) 5.1 5.1.1 labour  (2) 5.1.2 cost-push  (2) 5.1.3 ecotourism  (2) 5.1.4 renewable  (2) 5.2  There should be a purpose for the visit.   No remuneration should be earned   The minimum stay should be on night and the maximum should be less than one year.   The travelling distance should be more than 160 km.  (Any 3 x 2) (6) 5.3 DATA RESPONSE 5.3.1 It excludes items from the CPI basket that have highly volatile prices and items with prices that are affected by government intervention.  (2) 5.3.2 Semi-durable goods  (2) 5.3.3  It is caused by an increase in the price of administered goods and services.   These are the prices of goods and services that are set or controlled by the government.  (4) 5.3.4 Goods that can be used only once/goods that are consumed during use, e.g. food stuffs  (2) 5.4 DATA RESPONSE 5.4.1  It is the introduction of chemical, physical or biological materials into fresh water sources   It degrades the quality of water and negatively affects the organisms that live in it and people who use them.  (4) 5.4.2 Oil spill  (2) 5.4.3  Preservation is the maintenance and protection of the environment and its resources in their present condition.   Conservation is the sustainable management and use of natural resources.  (4) 5.5  It brings development to the poor in rural areas.   Many of the prime tourism attractions are located in the rural areas.   It allows rural people to share the benefits of tourism development.   It allows people continue a rural family existence.  (4 x 2) (8)

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 7 5.6  The environment is a common resource  o Most services do not have a price.  o There is no economic incentive to economise on their use.   Externalities  o The cost of pollution on the environment is borne by others.  o Because no one owns the environment.   Lack of knowledge  o People cause damage to the environment without realising it.  o In many instances, people do not have the knowledge to do things in an environmentally friendly way.   Carelessness  o People are generally prepared to continue with various harmful practices.  o They leave it to future generations to worry about the consequences.  Any 2 x(2 + 2) (8) [50] QUESTION 6 (LO1 AND LO2) (50 MARKS – 25 MINUTES) 6.1 6.1.1 variable  (2) 6.1.2 trough  (2) 6.1.3 makers  (2) 6.1.4 consume  (2) 6.2  Investment   Government expenditure   Export income  (3 x 2) (6) 6.3 DATA RESPONSE 6.3.1  Decline in the economic growth in RSA’s trading partners.   Domestic supply constraints.   Appreciation of the external value of the rand   Contraction in export proceeds.   Increase in the value of merchandise imports.  (Any 2 x 2) (4) 6.3.2  Euro area   United Kingdom   China  (Any 1 x 2) (2) 6.3.3  Merchandise   Net gold exports   Services   Income   Current transfers  (Any 2 x 2) (4)

Downloaded from hlayiso.com 8 ECONOMICS (SEPTEMBER 2013) 6.4 DATA RESPONSE 6.4.1 Long-term equilibrium of a monopoly/monopolistic competition  (2) 6.4.2 Economic profit  (2) 6.4.3 A = AC/Average Cost Curve  B = MC/Marginal Cost curve  (4) 6.4.4 It is the increase in total revenue by selling an additional unit.  (2) 6.5  It means that goods and services are not provided in the desired quantity or quality.   Public goods are efficiently provided only if pareto efficiency is achieved.   Bureaucracy  – following official rules and procedures may cause inefficiency.   Incompetence  – lack of skill, improper qualifications, lack of training, experience, etc. can lead to inefficiency.   Corruption  – the exploitation of a person’s position for private gain such as taking bribes, nepotism, fraud, etc. can also lead to inefficiency.  (Any 4 x 2) (8) 6.6  It is where total revenue is exactly equal to total costs.   It appears that the entrepreneur is not making any profit.   But total costs include normal profit.   It is the amount the entrepreneur pays him-/herself.   Normal profit is the minimum earnings required to prevent the entrepreneur from leaving the business.  (Any 4 x 2) (8) [50] TOTAL SECTION B: 150

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 9 SECTION C (Answer any TWO questions from this section.) MARK ALLOCATION FOR ESSAY RESPONSES STRUCTURE OF THE ESSAY Mark Allocation Introduction Max 3 Body  Main part: For example discuss/explain/detailed Max 30 essay/analyse/evaluate  Additional part: For example draw a graph or Max 10 diagram/refer/indicate Conclusion Max 2 Interpretation Max 5 TOTAL 50 QUESTION 7 (LO1 AS1) ESSAY RESPONSE Fully explain the following business cycle indicators used in forecasting – Leading, Lagging, Co-incident, Length and Amplitude. In addition draw a fully labelled “business cycle”. INTRODUCTION  An economic indicator suggests how the economy is performing or is likely to perform.  Basic forecasting is done by studying the changes in the numerical values of indicators.   (Accept any appropriate introduction.) (Any 1 x 3) (3) BODY A. Leading economic indicators  These indicators will change before the economy changes   They peak before the aggregate economic activity reaches the peak.   They reach trough before the economic activity reaches trough.   They are important because they give advance warning of changes in aggregate economic activity.   E.g. Number of new vehicles sold  (Any ONE example) (Any 4 x 2) (8) B. Co-incident economic indicators  They indicate the actual state of the economy.   They move at the same time as the economy moves.   Co-incident indicators coincide with the turning points.   If co-incident economic indicators are improving, it means the economy is improving and vice versa.   E.g. Real GDP.  (Any ONE example) (Any 4 x 2) (8)

Downloaded from hlayiso.com 10 ECONOMICS (SEPTEMBER 2013) C. Lagging economic indicators  They do not change direction until after the business cycle has changed direction.   It confirms the behaviour of co-incident indicators.   If they do not confirm an upswing or downswing, they are weak or likely to end at an early stage.   E.g. number of commercial vehicles sold.  (Any ONE example) (Any 3 x 2) (6) D. Length  It is the time taken to complete one cycle.   It is the time between two successive peaks or troughs.   Longer cycles show the strength of the economy.  (Any 2 x 2) (4) E. Amplitude  It is the difference between the total output between peak and trough.   Measured by the distance between the peak and the trough.   Large amplitude indicates strong underlying forces and can lead to longer cycles.  (Any 2 x 2) (4) Peak  Trend line  Economic activities Amplitude  Recession   Prosperity  Recovery  Depression  Trough  Length  Time  max (10) CONCLUSION Even though we try to predict the future of the economy with all the available techniques, accurate prediction of the future of the economy is beyond us.  (Any appropriate conclusion can be credited) (2) Use the following assessment grid together with the above to assess the discussion. MARKS INTERPRETATION OF TOPIC 0 Candidate has shown no understanding of the topic. Candidate has shown some understanding of topic but missed 1 important aspects of topic. (1 – 15 marks) Candidate has interpreted topic correctly but has not linked facts to 3 topic. (16 – 30 marks) Candidate has interpreted topic correctly and has linked facts to topic. 5 (31 – 45 marks) (5) [50]

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 11 QUESTION 8 (LO2 AS1) ESSAY RESPONSE Write a detailed essay on the characteristics of perfect competition. Make use of a PPC (graph) to indicate the following points. Inefficient productivity (A) Efficient productivity (B) Impossible productivity (C) INTRODUCTION  A perfect competitive market is a market structure with a large number of participants who are price-takers.   It is a market condition where none of the participants can influence the market.   (Any appropriate introduction can be credited.) (Any 1 x 3) (3) BODY  Large number of buyers  o The number of buyers in the market is so large that an individual buyer is insignificant to influence the market conditions.  o There are so many buyers in the market that a single buyer cannot influence market price.   Large number of sellers  o The number of sellers in the market is so large that an individual seller cannot influence the market price.  o Sellers in the perfect competitive market are price takers.   Products are homogenous  o Products sold in this market are homogenous.  o Products are identical in quality and appearance.  o It makes no difference to a buyer from where he buys the product.   Freedom of entry and exit  o The market is fully accessible as there is complete freedom of entry and exit.  o Participants are free to enter and leave the market.  o There are no restrictions with regard to entry or exit.   Factors of productions are completely mobile  o All factors of productions can move freely between markets.   Perfect information  o All participants have full knowledge of all the market conditions.  o If one seller decides to raise the price, sellers will leave him for other sellers.  o The business charging higher prices will not be able to sell its products.   No collusion  o There is no collusion between sellers.  o Each seller acts independently of the others.   No government intervention  o No government intervention that could affect buyers/sellers. 

Downloaded from hlayiso.com 12 ECONOMICS (SEPTEMBER 2013)  Unregulated markets  o There is no government intervention that could affect the participants.   No preferential treatment  o There is no discrimination and nobody is treated differently.   Efficient transport and communication  o There is efficient transport and communication to and from the market.  (Any 15 x 2) (30) CONCLUSION  There are only very few examples of a perfectly competitive market in the real world.   E.g. JSE, South African maize market are examples  (Any 1 x 2) (2) B  C Product A  A   (shape) 0 Product B (10) Use the following assessment grid together with the above to assess the discussion. MARKS INTERPRETATION OF TOPIC 0 Candidate has shown no understanding of the topic. Candidate has shown some understanding of topic but missed 1 important aspects of topic. (1 – 15 marks) Candidate has interpreted topic correctly but has not linked facts to 3 topic. (16 – 30 marks) Candidate has interpreted topic correctly and has linked facts to topic. 5 (31 – 45 marks) (5) [50]

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 13 QUESTION 9 (LO3 AS3) ESSAY RESPONSE Write a detailed essay on the methods of import substitution. Also refer to the arguments in favour of free trade. INTRODUCTION  Import substitution occurs when a country introduces policies to encourage the local production of imported goods and services.  It is when goods that were previously imported are replaced with locally manufactured goods.   (Accept any appropriate introduction.) (Any 1 x 3) (3) BODY METHODS OF IMPORT SUBSTITUTION  Tariffs  o It is also known as customs duties  o These are taxes imposed on imported goods.  o Ad valorem taxes  are levied as a percentage of the value of imported goods.  o Specific tariffs  are levied on goods per unit, mass or size.  o Tariffs will increase the price of imported goods and discourage local consumption.  o It also leads to an increased consumption of locally manufactured goods.   Quotas  o This is to limit the importation of goods.  o It is to reduce the supply of imported goods in the local market.  o Limited supply will increase the price of imported goods.   Subsidies  o Subsidies to domestic enterprises may be used as an indirect way of protecting them.  o It will help domestic producers to lower their costs and prices.  o It also helps domestic producers to undercut foreign enterprises in the domestic market.   Exchange controls  o It is to reduce imports by limiting the amount of foreign exchange available to importers.  o It will decrease the supply of imported goods and leads to increased demand for local goods.   Physical control  o Usually in the form of a complete ban on the import of certain goods 

Downloaded from hlayiso.com 14 ECONOMICS (SEPTEMBER 2013)  Diverting Trade  o Various methods are used to make it difficult for importing goods from abroad.  o Import deposits  – government may require importers to deposit a certain sum of money before they can import goods.  o Time consuming customs procedures  – to discourage importing.  o High quality standards  – are set by government which foreign producers may find it difficult to meet.  (Any 15 x 2) (30) ARGUMENTS IN FAVOUR OF FREE TRADE  Specialisation  o The theory of comparative advantage shows that output can be increased using specialisation  o World trade and consumption can be maximised if countries specialise in what they can best produce.   Economies of scale  o It allows economies of scale to be maximised and unit costs to be reduced.  o Economies of scale lead to comparative advantage.   Choice  o It allows consumers the choice of goods and service.  o Consumer’s welfare can be improved because of the choice of goods available to them.   Innovation  o It leads to competition which provides incentive to innovate.  o Innovation leads to the production of new goods and services.  o It can also reduce costs and improve the quality and reliability of goods.  (Any 5 x 2) (10) CONCLUSION Even though many people are sceptical of import substitution, it has many positive effects on the economy.  (Any appropriate conclusion can be credited.) (2) Use the following assessment grid together with the above to assess the discussion. MARKS INTERPRETATION OF TOPIC 0 Candidate has shown no understanding of the topic. Candidate has shown some understanding of topic but missed 1 important aspects of topic. (1 – 15 marks) Candidate has interpreted topic correctly but has not linked facts to 3 topic. (16 – 30 marks) Candidate has interpreted topic correctly and has linked facts to topic. 5 (31 – 45 marks) (5) [50]

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 15 QUESTION 10 (LO4 AS1) ESSAY RESPONSE Analyse the causes of cost-push inflation. In addition indicate any five consequences of inflation. INTRODUCTION  It occurs where the interaction of demand and supply is disturbed by cost factors.  It is an increase in the cost price of a product that leads to an increase in the selling price of a product.  (Any 1 x 3) (3) BODY CAUSES OF COST PUSH INFLATION  Higher demand for wages/Wages  o Workers often demand higher wages than their productivity.  o Employers are usually forced by trade unions to pay higher wages.  o Employers recover the higher cost on labour by increasing the prices of goods and services.  o It is the most important single cost-item.   Vicious circle of wages  o Higher prices of goods lead to a vicious circle of higher prices and demand for higher wages.  o Workers demand higher wages because of higher cost of living.   Drop in productivity/Productivity  o There is a drop in productivity while employment and wages remain high.  o Gradually production will decrease and prices will increase.  o Cost per unit output will rise if productivity decreases and remuneration remains unchanged.   Sudden strikes and stayaways  o This will reduce production output and causes a drop in supply.  o Decrease in supply will push prices up.   Direct taxation  o Producers will try to adjust their incomes when government increases direct taxation.  o Producers will increase their prices to compensate for the higher taxes.   Increase in the price of imported goods  o Producers will increase prices according to the increased costs.  o Because of higher production costs, producers will adjust their prices.   Increase in the price of administered goods  o When these prices go up, trade unions demand higher wages.  o Producers will add the increase in prices of administered goods on their products as well.  o E.g. increase in the price of petrol, postage, electricity, water, etc.   Indirect taxation  o Increase in indirect taxation also increases cost of production.  o E.g. Increase in VAT, customs and excise duties 

Downloaded from hlayiso.com 16 ECONOMICS (SEPTEMBER 2013)  Higher profit margins/Profit margins  o Some price increases are intended to increase the profit margins of businesses.   Shrinkage  o Shoplifting and loses caused by employees will also increase cost of production.  o These amounts are also added to the price of products.  o As more money is spent on security, prices of consumer goods will increase.   High prices of agricultural goods  o This is because of the high cost of inputs such as diesel and fertilisers.  o Higher input cost leads to higher food prices.   Interest rates  o High rate of interest is a cost item for many businesses.  o Interest is also included in the price goods.   Key-inputs  o Production costs increase with an increase in the prices of the key-inputs, e.g. oil.   Exchange Rate depreciation  o If the rand depreciates, all import goods become more expensive.   Natural disasters  o Droughts, floods, etc. causes the production costs and prices to increase.  (Any 15 x 2) (30) CONSEQUENCES OF INFLATION  An increase in the price leads to a decrease in the purchasing power of money.  It causes a redistribution of income and wealth.   It reduces the real value of savings.   It affects export earnings and affects balance of payments negatively.   Decreasing exports and increasing imports result in the depreciation of the currency.   It also leads to a redistribution of income from taxpayers to the government because of an increase in the average tax rate.   It also leads to wage bargaining which often leads to industrial and social unrest.  (Any 5 x 2) (10) CONCLUSION  There are many causes of inflation and they all have a close relationship with the functioning of the market system.  When the market system does not function properly, inflation is the price we pay.   (Any appropriate conclusion can be credited.) (Any 1 x 2) (2)

Downloaded from hlayiso.com (SEPTEMBER 2013) ECONOMICS 17 Use the following assessment grid together with the above to assess the discussion. MARKS INTERPRETATION OF TOPIC 0 Candidate has shown no understanding of the topic. Candidate has shown some understanding of topic but missed 1 important aspects of topic. (1 – 15 marks) Candidate has interpreted topic correctly but has not linked facts to 3 topic. (16 – 30 marks) Candidate has interpreted topic correctly and has linked facts to topic. 5 (31 – 45 marks) (5) [50] TOTAL SECTION C: 100 GRAND TOTAL: 300