1 GRAAD 12

NATIONAL
SENIOR CERTIFICATE

GRADE 12

ECONOMICS
NOVEMBER 2010
MEMORANDUM

MARKS: 300

This memorandum consists of 31 pages.

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SECTION A (COMPULSORY)
QUESTION 1 LO1 – LO4
1.1

Various options are provided as answers to the following questions.
1.1.1
1.1.2
1.1.3
1.1.4
1.1.5
1.1.6
1.1.7
1.1.8
1.1.9
1.1.10
1.1.11
1.1.12

1.2

(24)

Give ONE term for each of the following descriptions by choosing a term from
the list.
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5

1.3

B – amplitude 33
C – three 33
A – consume 33
B – few 33
C – marginal cost 33
A – Organisation of Petroleum Exporting Countries (OPEC) 33
C - African Union (AU) 33
B - structurally 33
A - standard of living 33
B – decreased 33
A – tourism 33
C – air 33
(12 x 2)

Gross Domestic Product (GDP) 33
Depression 33
Unregulated market 33
Black Economic Empowerment (BEE) 33
A good infrastructure 33

(5 x 2)

(10)

Choose a description from COLUMN B that matches an item in COLUMN A.
1.3.1
1.3.2
1.3.3
1.3.4
1.3.5
1.3.6
1.3.7
1.3.8

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D - The objectives of government to improve the livelihoods of the
poor. 33
A - Produces given goods at a lower input cost than other
countries 33
G - At a price less than average variable cost (AVC) 33
E - Cost incurred when production increases by an additional
unit 33
I - A country where a developed component co-exists with
a developing component. 33
H - The monetary authority in South Africa. 33
F - Dumping of waste material. 33
C - An indicator of inflation. 33
(8 x 2)

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SECTION B
Answer any THREE of the five questions from this section in the ANSWER BOOK.
QUESTION 2
2.1

2.2

Choose the correct word from those given in brackets:
2.1.1

Multiplier 33

2.1.2

Expansionary 33

2.1.3

Privatisation 33

2.1.4

International Monetary Fund (IMF) 33

(8)

List the THREE economic indicators used in forecasting of business
cycles.
•
•
•

2.3

(4 x 2)

Leading 33
Lagging 33
Coincident 33

(Any 3 x 2)

(6)

Study the graph below and answer the questions that follow:
2.3.1

At point e / e / at the point where DD intersects SS / at a price of
R10 and a quantity of 100 33

2.3.2

Increased 99
Reasons:
• Increase in the number of South African's visiting USA99
• South Africans buy more American financial assets.99
• Increased imports from the USA. 99
• Increased exports to South Africa. 33
• Services (shipping, insurance) from USA. 99
• Payments of interest and dividend on foreign capital.99
• Payment of installments on repayments of overseas loans.99
• Other payments to foreign countries, which take place from
time to time.99
• Foreign currencies speculations 33
• (Accept any other country using the dollar as currency)
(Any 1 x 2)

2.3.3
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Depreciated/Decreased 33
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Motivation:
• Increased demand for dollars 99 OR
• Decreased demand for rand 99
• More rand for dollars 33
• More expensive to buy dollars 33
• One dollar cost R12,00 instead of R10,00
2.4

(4)
(Any 1 x 2)

Study the table below and answer the questions that follow.
2.4.1

2.4.2

2.5

DBE/November 2010

Export prices X 100
Import prices
105 3x 100 = 103,9 3 / 104 3
1013

(3)

Indicates that a country is poorer since greater volumes of exports
to be produced to afford the same value of imports / A decrease in
export prices / an increase in import prices 99

(2)

2.4.3

2005 33

(2)

2.4.4

The terms of trade increased from 2005 – 201093 An increase in
the terms of trade indicates an improvement in the welfare 9 of the
country since fewer exports are needed to buy the same amount of
imports.9
Accept any other relevant facts.
(Max 3)

(3)

Explain leakages and injections.
•
•
•
•

Leakages is any flow that does not give rise to a further round of income
99 also known as withdrawals 99 because it represents a withdrawal of
money from the economy.99
(e.g.) of leakages are taxes (T)99 expenditure on imports (Z/M) 99 and
savings (S) 99
(Max 4)
Injections represent the introduction of additional money into the
economy 99
(e.g.) of injections are government spending (G)99 income earned from
exports (X)99 investment spending (I)99
(Max 4)

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Discuss the Monetarist approach as a cause of business cycles.
•
•
•
•
•
•
•

Also called the sunspot theory / exogenous approach 33
Believe markets are inherently stable.99
Departures from the equilibrium state are caused by factors outside of the
market system.99
Market forces (supply and demand) kick in and bring the economy back
to its natural state or equilibrium route.99
These interferences are not part of the normal forces operating in the
market. 99
Governments should not interfere in the markets. 99
Major cause of economic fluctuations are inappropriate government
policies 99, undesirable increases and decreases in money supply 99
weather conditions 99 shocks (September 11) 99 structural changes
99 severe increases in the price of fuel 99and wars99
(Maximum 4 marks for examples)
(Any 4 x 2)

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QUESTION 3
3.1

3.2

Choose the correct word from those given in brackets:
3.1.1

Oligopolistic 33

3.1.2

Natural / artificial 33

3.1.3

Revenue 33

3.1.4

Can 33

(8)

Large number of producers / diverse businesses 33
Product is differentiated 33
Entry to the market is free 33
Businesses have little/some control over the price of the product 33
Incomplete information for buyers and sellers 33
Hybrid structure 33
It’s often local 33
(Any 3 x 2)

(6)

List any THREE characteristics of monopolistic competition.
•
•
•
•
•
•
•

3.3

(4 x 2)

Study the extract below and answer the questions that follow:
3.3.1

3.3.2

3.3.3

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• Increase efficiency in the market 33
• Improve equity in the markets 33
• Contribute to developmental objectives 33
• Prevent monopoly power / abuse of economic power 33
• Regulate growth of acquisitions (takeovers) and mergers 33
• Prevent restrictive practices 33
• Promote competition 33
• Exploit advantages of scale to benefit society in general 33
• Eliminate price fixing 33
Accept any other relevant response
(Any 2 x 2)

(4)

Grant the order / confirm the penalty (order) imposed on the
company by the Competition Commission. 333

(3)

Competition Appeal Court. 333

(3)

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Study the graph below and answer the questions that follow:
3.4.1

Perfect market / goods and services / factor market 33

3.4.2

The individual producer on the market is a price taker /
Market demand and supply establish the price in the market /
Price determined by market forces / where demand and supply
interact or meet 3333
Accept any other relevant fact.

3.4.3

Price

D

(2)

(4)

S
S1 3
33
e

P1
3P2

Correct movement of supply
curve = 2 marks
Labeling = maximum 2 marks

e1 3
S

S1

D

0
Q1 Q23
3.5

Quantity

(4)

Discuss how non-price competition influences the behaviour of
oligopolists.
•
•
•
•
•
•
•
•
•

Oligopolists do not compete with each other on price because price wars
will not benefit them. 33
Prices are determined by mutual agreement. 33
They compete with each other on product differentiation and efficient
service. 33
Convenience shopping 33
E.g. extended shopping hours 33
Firms make use of advertisements to increase awareness and to lure
customers towards their products. 33
E.g. Pick n Pay use extensive advertising to increase market share. 33
Non-price competition builds brand loyalty and product recognition. 33
E.g. after sales service, loyalty rewards. 33
(Accept examples for maximum of 2 marks)
(Any 4 x 2)

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Draw a fully labelled graph to illustrate economic profit for a
monopolist in the short run.
Price/Cost 3
MC 3
AC 3
33
P1

f

Economic
profit

c

e
d

MR 3
0

Q1

AR = D 3
Quantity 3

Labelling of axes = 2 marks
Labelling of curves = 4 marks
Indicating economic profit = 2 marks
TOTAL = 8 MARKS

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QUESTION 4: LO3 ECONOMIC PURSUITS, AS1 – AS4
Choose the correct word from those given in brackets:
4.1

4.2

4.1.1

WTO / World Trade Organisation 33

4.1.2

NEPAD / New Partnership for Africa’s Development 33

4.1.3

Strategies 33

4.1.4

Human 33

(8)

List any THREE arguments in favour of free trade.
•
•
•
•
•
•
•
•
•
•
•
•
•

4.3

(4 x 2)

Promotes competition and specialization / greater world production /
leads to lower prices 33
Improves resource allocation / efficient distribution of resources 33
Job creation 33
It promotes product improvement 33
Leads to innovation 33
It accelerates overall economic growth / increases total output 33
It generates foreign exchange 33
Developing countries can take advantage of foreign exports 33
Leads to economies of scale 33
Productivity boosted 33
Increases choice 33
Mutual gains 33
Optimal use of factors of production 33
(Any 3 X 2)

(6)

Study the extracts below and answer the questions that follow:
4.3.1

4.3.2

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What does the abbreviation IDZ mean?
Industrial Development Zone 33
Accept any relevant definition (no examples accepted)

(2)

State any THREE aims of the IDZ in the SA economy.
• Attract new investment in export-driven industries. 33
• Encourage economic growth by attracting foreign investment
in industrial development.33
• Duty free importation of production-related raw materials and
inputs. 33
• A zero rate of VAT on supplies procured from South African
sources. 33
• Government incentive schemes.33
• Reduced taxation and exemption for some activities or
products.33
• Promote exports 33
• Job creation 33
• Enhance competitiveness of local industries (immediate
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•
•

4.3.3

4.4

DBE/November 2010

environment) 33
Promote and develop links between domestic and zone-based
industries 33
Enable exploitation of resource-intensive industries 33
(Any 3 X 2)

What is the purpose of the EIDD?
To provide leadership in the development of policies and strategies
/to enable competitiveness in the environment, equity and
enterprise development 33

(6)

(2)

Study the cartoon below and answer the questions that follow:
4.4.1

4.4.2

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Briefly explain the North-South divide as illustrated in the
above cartoon.
The socio-economic and political division, which exists between
wealthy developed countries collectively known as the North33
and the poorer developing countries, collectively known as the
South,33 is referred to as the North-South Divide.33
Any relevant example 33
(Any 2 x 2)

(4)

The negative effects of globalisation on South Africa:
Poverty 3 There is a growing gap between the rich and the
poor.33
Growth 3 South Africa is unable to attract adequate FDI, to ensure
sustainable economic growth / unemployment 33
Trade 3 Rich countries continue to subsidize agricultural
production, making it difficult for South Africa to
compete on the global market / dumping 33
Environment 3 dumping of nuclear waste 33
Imported inflation 3 leads to an increase in production costs in
import country 33
(Any 2 X 3)

(6)

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Discuss dumping as an argument in favour of protectionism.
•

•
•
•
•
•

4.6

DBE/November 2010

Foreign enterprises may engage in dumping because government
subsidies permit them to sell goods at very low prices or below cost 33
or because they are seeking to raise profits through price discrimination
33
In the latter case the initial reason for exporting products at a low price
may be to dispose of accumulated stocks of goods.33
In the short term, consumers in the importing country will benefit.33
However, their long-term objective may be to drive out domestic
producers and gain strong market position.33
In this case consumers are likely to lose out as a result of the reduction in
choice and the higher prices that the exporters will be able to charge. 33
Protectionism prevents foreign industries from dumping their surpluses
and out-of-season goods at low prices, which may be harmful to home
industries 33
(Any 4 X 2)

(8)

Discuss the difference between economic growth and economic
development.
•
•

Economic growth consists of growth of real GDP 33 and implies an
increase in capacity of economy 33to produce more goods and
services 33 It requires policies that empower the economy 33
Economic development consists of growth of per capita real GDP 33 and
implies an increase in standard of living / capacity of population to
produce more goods and services. 33 It requires policies that empower
people 33
(2 X 4)

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QUESTION 5: LO4 CONTEMPORARY ECONOMIC ISSUES, AS1 – AS4
5.1

5.2

Choose the correct word from those given in brackets:
5.1.1

demand-pull 33

5.1.2

deflation 33

5.1.3

international 33

5.1.4

government 33

(8)

Sudden decrease in the supply of key inputs / Supply shocks / key
inputs (increase in price of oil) 33
Increase in factor prices/wages (cost of labour) / input costs rise 33
Sudden rise in interest rates 33
Deterioration/depreciation in exchange rate 33
Increase in profits 33
Increase in taxes / revenue for Government 33
Increase in the price of imports related to cost of production
Decrease in productivity levels 33
Natural disasters 33
(Any 3 x 2)

(6)

List any THREE characteristics of cost-push inflation.
•
•
•
•
•
•
•
•
•

5.3

(4 x 2)

Study the extract below and answer the questions that follow.
5.3.1

5.3.2

5.3.3

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Tuna, becoming extinct, will disappear from shopping lists 333
It might lead to a definite forced change in taste and habits at the
side of consumer 333
Accept any other relevant fact.

(3)

Tuna fetches very high prices / worldwide ($50 per kg) / and one
fish may weigh up to 680 kg. 333

(3)

Support Greenpeace or WWF financially so that marine reserves
can increase 33
Restrict by using quota system 33
Make employees/stakeholders aware of this endangered species
33
Better management of fish resources 33
Accept any other relevant solutions.
(Any 2 x 2)

(4)

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Study the cartoon below and answer the questions that follow.
5.4.1

5.4.2

5.5

DBE/November 2010

Inflation is out of control and the SARB is trying to control it. 33
Accept any other relevant answer.
•
•
•
•
•
•
•

Increased direct taxes 33
Increased indirect taxes 33
Reducing government expenditure 33
Tax rebates to improve productivity 33
Financing the budget on a non-inflationary basis 33
A loan levy can be introduced 33
Imposing a surcharge on imported goods 33
(Any 1 x 2)

(2)

(2)

5.4.3

3% – 6% 33

(2)

5.4.4

Yes 33 e.g. the current inflation figure is within the target range
33
No 33 e.g. continuous interest rate cuts may push inflation above
the upper level of the target 33
Accept relevant answer

(4)

Distinguish between renewable and non-renewable resources.
RENEWABLE
• Resources
that
can
be
or
generated,
replaced
replenished 33
• Limiting
factor
of
the
availability is the rate at which
they can be produced33
E.g. timber, forest products,
agricultural products33
Accept if not tabulated.

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NON-RENEWABLE
• Once these materials are extracted
they are gone for ever 33
• Once used, they cannot be
replaced 33
• E.g. mineral resources, fossil fuels,
such as oil, petrol, copper, gold
and coal 33
Examples: maximum 2 marks
(Any 2 x 4)

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Explain hyperinflation and stagflation.
Hyperinflation:
• Most extreme form of inflation / runaway inflation / inflation out of
control 33
• 50% or more per month 33
• National currency is almost worth nothing 33
• Leads to exchange of goods for goods (barter) – widespread
phenomenon 33
• E.g. Zimbabwe 33
• People lose confidence/faith in the economy 33
• It can occur in times of war 33
(Any 2 x 2)
Stagflation:
• Low economic growth rate exists due to strong monetary and fiscal
policies to curb high inflation rates 33
• Conditions of high inflation and high unemployment rates at the same
time 33
• Occurs in economies that lost the ability to create new jobs 33
(Any 2 X 2)

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QUESTION 6: LO1 & LO3, AS1 – AS4
6.1

6.2

6.3

Choose the correct word from those given in brackets:
6.1.1

opposite 33

6.1.2

resource 33

6.1.3

growth 33

6.1.4

Eskom 33

(4 x 2)

(8)

List THREE methods by which Gross Domestic Product can be
calculated.
• Production method / Value Added Method 33
• Income method 33
• Expenditure method 33
(3 x 2)

(6)

Study the table below and answer the questions that follow.
6.3.1

6.3.2

6.3.3

A subsidy (grant) on a product is paid on the outputs to reduce the
price to make it more affordable 33 E.g. R1 for each loaf of bread
3

(3)

Consumption of Fixed Capital is the diminishing value of an asset
over a period of time, also called depreciation 33 E.g. depreciation
in the value of equipment, machinery, vehicles 3

(3)

1 086 9073 X 100
2 423 3233
1
(4)

= 44,85 % / 44,9% / 45 % 33
6.4

Study the table below and answer the questions that follow.
6.4.1

Life expectancy is the expected number of years a person would
live 333

(3)

6.4.2

Western Cape 333

(3)

6.4.3

•
•
•
•

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Lack of education and training 33
Ignorance 33
Apartheid regime 33
Poverty trap 33
Any other relevant reason.

(4)

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Discuss the role of households (consumers) in the economic circular
flow model.
• Owns four factors of production and presents on input market 33
• Receives income (rent, interest, wages and profit) in return 33
• Primary sector of consumption of goods and services 33
• Pays taxes to the government e.g. income tax 33
• Enjoy collective goods and services delivered by the state 33
• Spending on goods and services (domestic and foreign) 33
• Saving as source of investment 33
• Primary participant in the economy 33
Accept any other relevant fact.
(Any 4 x 2)

6.6

(8)

Discuss capital and technology as factors that are necessary for
economic growth.
CAPITAL:
• Definition of capital: resources used in production of other goods and
services 33
• Capital is necessary for the production of goods and services 33
• The more capital we have, the more goods and services can be
produced 33
• For effective production to take place, we need both human/social and
physical capital 33
• Increase in the production capacity will lead to economic growth 33
(Any 2 x 2)
TECHNOLOGY:
• Definition of technology: new scientific knowledge in the form of
inventions and innovations / sometimes referred to as fifth factor of
production 33
• Sustained economic growth requires technological progress and
innovation 33
• Technological progress means new kinds of capital goods as well as
new production processes 33
• Technological progress can lead to economic growth 33 (Any 2 X 2)

(8)

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TOTAL SECTION B:

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SECTION C
Answer any TWO questions from this section in the ANSWER BOOK.
I.

Essay responses:
•
•
•
•

II.

Should include an introduction, body and conclusion.
For the introduction and conclusion 5 marks will be allocated.
Five marks will be allocated for the interpretation of the topic.
A maximum of 40 marks will be allocated for the body.

Non-essay responses:
•
•
•
•

Can include: formal letters, minutes, reports or memoranda.
Five marks will be allocated for the interpretation of the topic.
In addition, 5 marks will be allocated for the format.
A maximum of 40 marks will be allocated for the content.

QUESTION 7
Due to problems experienced in the Department of Public Enterprises, Nomsa
Dlamini, the Minister of Public Enterprises, writes a memo to personnel in her
Department to discuss the necessity of the public sector and the
macroeconomic objectives in detail.
Write the memo on behalf of Mrs Nomsa Dlamini.

[50]

DEPARTMENT OF PUBLIC ENTERPRISES 3
MEMORANDUM 3
TO

: ALL PERSONNEL 3

FROM

: MINISTER OF PUBLIC ENTERPRISES, NOMSA DLAMINI 3

SUBJECT : NECESSITY OF THE PUBLIC SECTOR AND ITS OBJECTIVES. 3
DATE
)

: ____________________ 3

(Format: maks 5

All countries have public sectors and there are good reasons for the existence of such
sectors.99 The public sector is necessary for the following reasons.
1. To provide public goods99
• Public goods are mostly in the form of services.99
• Government use policies such as taxation and government spending 33
• Community goods 33 are characterized by non-excludability and nonrivalness.99 Non-excludability (e.g.) defence force 93The protection available
to everyone living in a country irrespective of whether they are willing to pay for
it or not. 93
• Collective goods 33 e.g. parks, beaches 33 can exclude free-riders by levying
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fees 33

2. To take care of common resources99
• Environment consists of resources that no one owns yet everyone can use free
of charge.99
• (e.g.) oceans for fishing / the air we breathe / natural scenery we enjoy 99
• Governments have to intervene in order to protect the environment and prevent
the creation of negative externalities / protection and enforcement of legal
structure 99
3. To manage the economy.99
• Governments manage the collective interests of its people 99
• Government has to ensure a social and legislative environment in which
businesses and individuals can pursue their own interests to the maximum 99
• Government must also apply suitable and credible economic and other policies
in order to achieve internationally respected economic objectives.99
• Public policy needed to secure high employment, price stability and socially
desired rate of economic growth 33
4. Externalities 33
• benefits or costs from production of goods and services 33
• government can subsidize or restrict production 33
5. Merit and demerit goods 33
• merit goods benefit the public more than private goods 33
• e.g. health care and education 33
• demerit goods are goods considered to be harmful to society 33
• government impose taxes and regulations to discourage consumption 33
• e.g. cigarettes 33
6. Monopolies and imperfect competition 33
• Government should intervene and prevent economically inefficient and
imperfect competition from occurring 33

In developing countries governments have FIVE macroeconomic objectives.
A. Economic growth 99
• Refers to an increase in the production of goods and services in the
economy.99
• it is measured in terms of real GDP 99
• For economic development to occur, economic growth rate must be higher than
the population growth rate.99
• Growth and development in a country benefits its citizens because it often
leads to a higher standard of living.99
B. Full employment 99
• Accept any relevant definition 33
• Government is always trying to attain high levels of employment.99
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•
•

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Unemployment rate increased from 14,0% in 1994 to 26,5% in 2005.99
Employment increased mainly due to informal sector activities.99
The GEAR strategy was implemented to create a climate that was conducive to
employment creation by the private sector.99

C. Exchange rate stability 99
• The government should manage the economy through effective fiscal and
monetary policies, so that the exchange rate remains relatively stable.99
• Depreciations and appreciation of a currency could create uncertainties for
producers and traders and should be limited.99
• The SARB changed the exchange rate from a managed floating system to a
free-floating exchange rate system.99
D. Price stability 99
• SARB has succeeded in keeping inflation within the target range of
3% - 6% 99
• Market economies produce better results in terms of economic growth and
development when prices are relatively stable.99
• Interest rates, based on the repo rate are the main instrument used in the
stabilization policy.99
• The stable budget deficit also has a stabilizing effect on the inflation rate.99
E. Economic equity 99
• Redistribution of income and wealth is essential in market economies.99
• In South Africa, the progressive tax system is used. 99
• Progressive income tax 93 tax on profits 93, wealth and expenditure are used
to finance free social services39 (e.g.) health 39 education 39 and to pay
cash grants to the poor39 (e.g.) pensions39 and other vulnerable people 39
(max 40)

______________________________3
MRS NOMSA DLAMINI
3
MINISTER OF PUBLIC ENTERPRISE

___________________________3
DATE

Use the following assessment grid in conjunction with the above to assess the
discussion:
MARKS
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INTERPRETATION OF TOPIC
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1
3
5

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Candidate has shown no understanding of the topic.
Candidate has shown some understanding of topic but has missed
important aspects of topic.
(1 - 15)
Candidate has interpreted topic correctly but has not linked facts to
topic.
(16 - 30)
Candidate has interpreted topic correctly and has linked facts to
topic.
(31 - 45)

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QUESTION 8
Discuss FIVE reasons for market failures and briefly outline the South African
government’s attempts to improve income distribution.
INTRODUCTION
ƒ Market failures occur when the market is not efficient. Sometimes free markets fail
to produce maximum of goods and services from a given set of resources / The
market also fails to produce the optimal mix of goods and services desired by
consumers. 333
(max 3)
BODY
REASONS:
1. Externalities 33
ƒ Known as spill-over effects 33
ƒ Sometimes in ideal market conditions some people gain or suffer due to the
existence of externalities 33
ƒ Are cost and benefits to third parties which are not included in the market
price33
ƒ Private costs (internal costs) and benefits are determined the market
mechanism33
ƒ Externalities do not go through the market mechanism and thus do not have a
price attached to them33
ƒ Externalities converts private costs and benefits are converted to social costs
and benefits 33
ƒ Externalities are difference between social costs and benefits and private costs
and benefits 33
o Private costs 33 price of bicycle of R990 33
o Private (internal) benefits 33 e.g. profit for the producer 33
o Social costs 33 e.g. additional costs like disposing waste products,
decreasing appeal of area 33 optimal social and market allocation 33
o Social benefits 33 e.g. clean water leading to few illnesses, healthier
workforce, higher productivity 33
(max 6)
2. Public goods 33
ƒ Markets incomplete – do not meet demand for certain goods – public sector
provides these goods known as public goods33
ƒ Divided into community (water drainage and light houses) and collective goods
(parks, pavements) 33
ƒ Public goods are not provided by price mechanism – producer cannot withhold
goods for non-payment 33
ƒ State finance public goods through taxation and provide it themselves 33
ƒ In SA – most goods and services private goods – have rivalry in consumption
and excludability 33
ƒ Features of public goods:
- non-rivalry 33 consumption by one person does not reduce consumption by
another individual e.g. lighthouse 33
- non-excludability 33 consumption of public goods cannot be confined to
those who pay for it (free riders e.g. radio and television licenses) 33
- social benefits outstrip private benefits 33 large social benefits relative to
private benefits e.g. health care and education 33
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infinite consumption 33 once provided, marginal cost of supplying one
more individual is zero (traffic lights) 33
non-reject ability 33 individuals may not be able to abstain from consuming
them even if they want to (e.g. street lighting) 33
(max 6)

3. Merit and demerit goods 33
MERIT GOODS (3)
ƒ Some goods highly desirable for general welfare – not highly rated by market –
leads to too little consumed – market failed 33
ƒ E.g. health care and education, safety – merit goods – special form of private
goods 33
ƒ Few people would pay for education if they had to meet full cost – results in
market failure 33
ƒ In pure market system – consumers’ spending on merit goods determined by
private benefits 33
ƒ Merit goods have positive externalities – social benefits derived from their
consumption exceed private benefits 33
DEMERIT GOODS (3)
ƒ E.g. cigarettes, alcohol and non-prescription drugs – over-consumed 33
ƒ Consumer unaware of true cost of consuming them e.g. increased health costs,
social decay = negative externalities 33
(max 6)
4. Imperfect competition 33
ƒ Competition often reduced by power in market economies – power lies with
producers 33
ƒ Conditions of imperfect competition: restrict output, raise prices where price
exceeds marginal cost, prevent new businesses to enter, prevent full adjustment
to changes in demand 33
ƒ Modern market does not allow for price negotiations 33
ƒ Advertising promote producer sovereignty – encourage consumer to buy
products – delay products from market until it is in businesses’ financial
interest 33
ƒ E.g. businesses had technology to produce long-life light bulbs/allows cars to be
driven by fuels other than fossil fuels/cure for common cold 33
(max 6)
5. Lack of information 33
ƒ
ƒ
ƒ
ƒ

Information is not always available to make rational decisions. 33
Consumers 33– need detailed information to maximize their utility – technology
increase information but it is not perfect. 33
Workers 33 unaware of job opportunities, advantages and disadvantages,
health risks of current jobs 33
Entrepreneurs 33 lack of information about costs, availability and productivity of
some factors of production – operating on basis of incorrect info about reliability
and life span of machines in use 33
(max 6)

6. Immobility of factors of production 33
ƒ Most markets do not adjust rapidly to changes in supply and demand – due to
lack of info, resources not mobile 33
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Labour 33 takes time to move occupationally and geographically – adjust
slowly and inadequately 33
Unskilled workers 33 not able, willing or have time to gain necessary skills 33
Physical capital 33 infrastructure like telephone lines – can move from one
location to another at irregular intervals 33
Structural changes 33 occur slowly – demand increases or decreases –
technology used like robots – takes time for labour-intensive textile production to
be switched to computer assisted production 33
(max 6)

7. Imperfect distribution of income and wealth 33
ƒ Market system is neutral to income distribution 33
ƒ Market economy provides opportunities to earn an income, but it’s not equal –
no equal education and skills 33
ƒ Results in minority groups like women and disabled people earning less 33
(max 6)
8. Price discrimination 33
ƒ A situation in which identical goods and services are sold at different prices to
different consumers 33
ƒ Leads to a situation where some consumers pay lower prices 33
ƒ E.g. when airlines sell tickets on the same flight at different prices to different
customers 33
(max 6)
(Any 5 x 6) (30)
GOVERNMENT'S ATTEMPT TO REDISTRIBUTE INCOME
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Taxation to provide free goods and services33
Subsidising goods and services33
Transferring income to the poor33
Job creation programmes / Expanded Public Works Programme 33
Labour legislation: Basic Conditions of Employment Act, Employment Equity
Act33.
Preferential access to the disadvantaged to government contracts33.
BEE policies33
Affirmative action33.
Land redistribution33
Land restitution3
Property subsidies33
RDP33
Minimum wages 33
Maximum prices 33
Minimum prices 33
Free education and training 33
(max 10)

CONCLUSION
Any suitable conclusion. 99

(Max 2)

Use the following assessment grid in conjunction with the above to assess the
discussion:
MARKS
0
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INTERPRETATION OF TOPIC
Candidate has shown no understanding of the topic.
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3
5

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Candidate has shown some understanding of topic but has missed
important aspects of topic.
(1 - 15)
Candidate has interpreted topic correctly but has not linked facts to
topic.
(16 - 30)
Candidate has interpreted topic correctly and has linked facts to
topic.
(31 - 45)

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QUESTION 9
Discuss and assess the economic indicators as depicted below in terms of the
state of the South African economy.

[50]

INTRODUCTION
A statistic that shows the behaviour of one or other economic variable /
Any suitable introduction. 333

(Max 3)

BODY
1. Real Gross Domestic Product (Production)
ƒ Definition: The GDP is the total value of all final goods and services produced
within the borders of a country in one year.33
ƒ The GDP measures the total production of an economy.33
ƒ An increase in the Real GDP will cause economic growth, which is defined as
the annual rate of increase in total production.33
ƒ Nominal GDP cannot be used because its magnitude is partly caused by price
increases and not by an increase in the physical numbers.33
ƒ The real GDP is obtained when the effect of inflation is removed from the data.
(GDP-Deflator) 33
ƒ RGDP is used to describe business cycles.33
ƒ An important use of the RGDP is therefore to express real aggregate economic
activity and to describe the movement of business cycles.33
ƒ It is also used in forecasting, e.g. if the index of leading indicators starts to
increase after a continuous decrease, it is an indication that the cycle has
turned.33
Assessment:
•
•
•

The total value of production decreased with 4% over the period 2008/2009.
33
It is a clear that South Africa’s economy was trapped into a recession.
(negative growth for two consecutive quarters) 33
As a result one will find the following:
- Increase in the unemployment rate/ layoffs 33
- Increase number of bankruptcies / debt 33
- Poor profit margins etc.33
(Max 5 X 2) (10)

2. Per Capita Real Gross Domestic product (Standard of living)
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ƒ If the population grows at a faster rate than the economy, everybody may be
seen worse off despite increases in the quantities of goods and services.33
(For this reason the per capita RGDP is calculated)
ƒ Calculation: per capita RGDP = RGDP / population number 33
ƒ The per capita figures are use for three purposes:
- To indicate economic development 33
- To indicate living standards 33
- To compare living standards 33
Assessment:
• As a result of the global and domestic recession we find our self in the
position where many people is been laid off and with out income, 33
• this will have a negatively impact on the GDP and also on the per capita
RGDP. 33
• That will indicate a drop in the standard of living and contributes to our
growing poverty problem.33
(Max 5 X 2) (10)
3. Consumer Price Index (Price changes)
ƒ Consumer price indexes show price changes of a representative basket of
goods and services that consumers buy. 33
ƒ The index covers metropolitan and other urban areas.33
ƒ It is an overall index and the weights are obtained from the expenditures of
different income categories of households.33
ƒ It is the most comprehensive indicator measuring consumer inflation in South
Africa.33
ƒ It shows changes in the general purchasing power of the rand.33
Assessment:
•
•
•

The CPI decreases to within the inflation target of 3-6% over the period33
What means that inflation is for the time being, under control because of
strict monetary measures by the SARB33 and
The negative perception from consumers of the economy due to the global
recession.33
(Max 5 X 2) (10)

4. Repo rate (Monetary conditions)
ƒ Interest rates are the main determinant of investment on a macroeconomic
scale.33
ƒ The key rate of interest, on which all other interest rates are founded, is the repo
rate.33
ƒ Interest rates are very important indicators, if they move up, the debt of
households and businesses require bigger repayments.33
ƒ This includes hire purchases and housing and other property loans.33
ƒ It may be signal that a downturn in the business cycle is pending.33
ƒ means that household incomes may fall as some workers lose their jobs.33
Assessment:
•

Against the background of a slowing global and domestic economy and the
improved medium-term outlook for inflation, the MPC has decided to reduce
the repurchase rate (Repo Rate) 33
(Max 5 X 2) (10)

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5. Gini Coefficient (Distribution of income)
ƒ The Gini coefficient is calculated from the information provided by a Lorenz
curve.33
ƒ A Lorenz curve shows the distribution of income among proportions of the
population.33
ƒ The Gini coefficient is therefore, the ratio of the proportion of the population who
lives on less than the proportional income.33
ƒ The value of the Gini coefficient can vary between 0 and 1.33
ƒ The higher the value the more unequal the distribution of income is.33

Assessment:
• Gini coefficients for countries with highly unequal distribution are typically
between 0.50 and 0.70. It is therefore clear that South Africa can be classified
as a country, which is highly unequal.33
(Max 5 X 2) (10)
(Any 4 x 10) (40)
CONCLUSION
Any suitable conclusion 33

(Max 2)

Use the following assessment grid in conjunction with the above to assess the
discussion:
MARKS
0
1
3
5

INTERPRETATION OF TOPIC
Candidate has shown no understanding of the topic.
Candidate has shown some understanding of topic but has missed
important aspects of topic.
(1 - 15)
Candidate has interpreted topic correctly but has not linked facts to
topic.
(16 - 30)
Candidate has interpreted topic correctly and has linked facts to
topic.
(31 - 45)

[50]

QUESTION 10
Discuss the positive impact of tourism on the South African economy,
highlighting the contribution of the 2010 Soccer World Cup.
INTRODUCTION
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Tourism represents a unique industry in an economy because its effects extend far
beyond the tourism industry itself. Tourism is an industry that provides a substantial
economic stimulus to other industries 333
(Max 3)
BODY
POSITIVE EFFECT OF TOURISM:
1. Gross Domestic Product (GDP) / Economic growth / Direct foreign spending
by tourists 33
•
•
•
•
•

Direct impact amount to 3.9% of GDP in 2005 33
Indirect impact is about 9.0% in real terms – more than contribution of gold
mining 33
Differs from country to country – Mauritius gets about 1/3 of its National Income
from this sector 33
Biggest impact on services industry than on agriculture or manufacturing 33
Contribution (own opinion) 33

2. Employment / Entrepreneurial opportunities and the informal sector 33
•
•
•
•
•
•
•

World Travel and Tourism Council (WTTC) estimates ½ million jobs directly
created by tourism in 2002 – 1/3 of economy’s workforce 33
Largest provider of jobs and earner of foreign exchange,33 due to: tourism is
labour intensive 33 employs many skills 33 can provide immediate
employment 33 provides entrepreneurial opportunities 33
Indirectly 6.9% of workforce involved with tourism in SA 33
Significant part of tourist expenditure goes towards informal sector activities 33
Tourism contributes equally to GDP and job-creation – indicates how labour
intensive the sector is 33
DEAT shows current focus of government on sector’s potential to create
entrepreneurial and employment opportunities for historically disadvantaged 33
Contribution (own opinion) 33

3. Poverty relief 33
•

•
•

Tourism makes a substantial contribution to economic growth and job creation –
not sufficient to ensure poverty eradication – affect lives of the poor in many
ways / fast and effective distribution mechanism in development of rural areas
33
Sensible policy guidelines can counteract the potentially negative effects of
tourism 33
Prime tourism attractions located in rural areas 33

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Promote balanced and sustainable development 33
Provides alternative to urbanization, permitting people to continue –
enfranchising both women and youth 33
Offers diversity of income sources to poor people: allowing them a stake,
empowering them, creating partnerships 33
Contribution (own opinion) 33

4. Externalities 33
•
•
•
•
•
•
•
•
•

Benefits that arise from economic activities that are not reflected in the actual
prices of transactions – refer to economic side-effects of certain transactions
33
Tourism strategy will maximize external benefits and minimize external costs of
various externalities 33
Such benefits are normally measured in terms of an impact or cost-benefit
analysis 33
Attracts large amounts of revenue, but cause undue environmental damage 33
Rapid growth aimed at short-term benefits 33
Global tourism will grow due to increased population and increased living
standards 33
Potential: attract revenue to country, alleviate poverty, conserve cultural and
natural assets – needs conscious planning 33
Needs to achieve ethical and sustainable tourism must respect tradition and
customs of area, plough back earnings into local community – area must be
protected as attractive tourist resort 33
Contribution (own opinion) 33

5. Environmental effects 33
•
•
•
•
•

People have become more aware of the negative environmental consequences
and implications for consumption and waste 33
Tourism’s relationship with environment is complex – involves many activities
that have adverse environmental effects 33
Led to emphasis on ecotourism development - involves guidelines for
managing social, economic and environmental impact of tourism 33
Objective is to achieve an equitable spread of benefits across the entire
population 33
Local communities engaged in tourism to achieve local empowerment 33

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Ecotourism development embraces principles of ecological preservation 33
Permanent environmental restructuring 33 e.g. highways, airports 33
Contribution (own opinion) 33

6. Infrastructure 33
•
•
•
•
•
•

SA has modern, world-class infrastructure, sophisticated transport system 33
low-cost and widely available energy and advanced telecommunication system
33
Quality infrastructure will increase volume of tourism – need good travel
facilities, well-maintained road network and excellent tourist accommodation,
such as hotels and lodges 33
Most centres have good transport lines, superior road and highway
infrastructure 33
Proper infrastructure planning needed to accommodate growth in tourism 33
Development of infrastructure is seen as public investment 33
Contribution (own opinion) 33

7. Measuring tourism 33
•
•
•
•
•

There should be a purpose for the visit and activity 33
No remuneration should be earned 33
The minimum length of stay is one night 33
The maximum length of stay is one year 33
The travelling distance should be more than 160 km 33

8. Foreign exchange generator 33
•

Every time money is spent locally, it helps to ensure the balance of payments
equilibrium 33

ADVANTAGES:
1. Households 33
• Income is earned through employment 33
• Infrastructure is created for use by both tourists and local people 33
• Skills require education and training – offered as school subjects: Tourism,
Hospitality 33
2. Businesses 33
• Economic and basic services infrastructure provided by public sector forms
foundation for superstructure 33
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•

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E.g. accommodation, transport, built attractions, retailing and recreation
services 33
Combinations of public sector, private sector combinations (PPP) develop 33
Informal opportunities like car rental, arts and craft also exist 33

3. Government 33
• Levying of taxes 33 with two purposes:
• Recover external costs (showers on the beach) 33
• Raise revenue (tourists seen as part of tax base) 33
4. Infrastructure (33)
• Residents and visitors enjoy adequate and well-maintained physical and basic
services essential in tourist destinations 33
• DEAT, SDI, corridors and PPPs with tourism as focus 33
• Also require social infrastructure e.g. ambulance services 33
(Max 40)
(Max 10 for contribution)
CONCLUSION
From the above discussion it is clear that tourism plays a very important role in any
economy, but that certain effects of tourist activities can be harmful to the community
as such. 33
Accept any other relevant conclusion.
(Max 2)
Use the following assessment grid in conjunction 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 has missed
1
important aspects of topic.
(1 - 15)
Candidate has interpreted topic correctly but has not linked facts to
3
topic.
(16 - 30)
Candidate has interpreted topic correctly and has linked facts to
5
topic.
(31 - 45)
TOTAL SECTION C: 100
GRAND TOTAL: 300

[50]

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