ECS1501 Oct/Nov 2017 exam paper — questions

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  1. Question 1 · Demand, supply and market equilibrium · 3 marks

    Consider the market for rain coats in the Western Cape. Using a demand-and-supply diagram, illustrate what would happen to the equilibrium price and equilibrium quantity of rain coats in that region if the Western Cape were to experience a good (above-average) rainy season. Be sure to label the diagram fully, including the axes, the original and new curves, and the original and new equilibrium points.Show the full question

  2. Question 2 · Demand, supply and market equilibrium · 8 marks

    This question is based on a diagram (not reproduced here) illustrating the market for meat, showing equilibrium price and quantity before any shock occurs. Question 2 (worth 8 marks in total) asks two things about the market for meat. First, using the given supply-and-demand diagram for meat, show and clearly label the effect on the equilibrium price and quantity of meat that results if the main cattle-farming area of a country suffers a severe drought. Second, based on this same drought scenario, explain in words the adjustment process by which the meat market moves from its old equilibrium to its new equilibrium position.Show the full question

  3. Question 3 · Demand, supply and market equilibrium · 5 marks

    In the market for newspapers, two events occur at the same time: firstly, Bafana Bafana wins the African Cup, causing everybody to want to read more about it in the paper; secondly, the paper on which the newspaper is printed becomes more expensive. The increase in demand caused by Bafana Bafana's win is larger in effect than the increase in cost caused by the more expensive paper. Draw a graph of the market for newspapers showing all these changes.Show the full question

  4. Question 4 · Government intervention: price controls, taxes and subsidies · 8 marks

    Using a diagram to support your answer, discuss the effect that would result from setting an effective maximum price control in the market for a hypothetical product, referred to as product A.Show the full question

  5. Question 5.1 · Price and income elasticity · 3 marks

    Imagine you own a spaza shop and have calculated that the price elasticity of demand for bread in your specific market is 0,5. Determine at which price your total revenue would be maximised — R10 or R8 — and provide an explanation for your answer.Show the full question

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