ECONOMICS PAPER 2
GRADE 12
SENIOR CERTIFICATE EXAMINATIONS
MAY/JUNE 2017

INSTRUCTIONS AND INFORMATION

1. Answer FOUR questions as follows in the ANSWER BOOK:
   SECTION A: COMPULSORY
   SECTION B: Answer TWO of the three questions.
   SECTION C: Answer ONE of the two questions.
2. Answer only the required number of questions. Answers in excess of the required number will NOT be marked.
3. Number the answers correctly according to the numbering system used in this question paper
4. Write the question number above each answer.
5. Read the questions carefully.
6. Start EACH question on a NEW page.
7. Leave 2–3 lines between subsections of questions.
8. Answer the questions in full sentences and ensure that the format, content and context of your responses comply with the cognitive requirements of the questions.
9. Use only black or blue ink.
10. You may use a non-programmable pocket calculator.
11. Write neatly and legibly.

SECTION A (COMPULSORY)
QUESTION 1 30 MARKS – 20 MINUTES
1.1 Various options are provided as possible answers to the following questions. Write down the question number (1.1.1–1.1.8), choose the answer and make a cross (X) over the letter (A–D) of your choice in the ANSWER BOOK.

1.1.1 The average revenue of a firm in a perfectly competitive market is equal to its …

1. selling price.
2. total cost.
3. marginal cost.
4. economic profit.

1.1.2 The supply curve for a firm in a perfectly competitive market has a … slope.

1. negative
2. horizontal
3. positive
4. convex

1.1.3 Differentiated products are …

1. identical.
2. heterogeneous.
3. homogeneous.
4. unique.

1.1.4 The demand curve that explains oligopolistic behaviour is described by some theorists as …

1. kinked.
2. vertical.
3. horizontal.
4. circular.

1.1.5 The market is unable to protect the environment because it is mainly driven by …

1. self-interest.
2. social interest.
3. social cost.
4. the community.

1.1.6 The implementation of inflation targets is the responsibility of the …

1. South African Revenue Services.
2. Department of Finance.
3. South African Reserve Bank.
4. Department of Trade and Industry.

1.1.7 For a trip to be classified as part of tourism, the maximum length of stay should be less than … year(s).

1. ten
2. one
3. five
4. two

1.1.8 Global warming is the result of the emission of … gases into the atmosphere.

1. natural
2. hydrogen
3. greenhouse
4. oxygenated (8 x 2)

(16)
1.2 Choose a description from COLUMN B that matches the item in COLUMN A. Write only the letter (A–I) next to the question number (1.2.1–1.2.8) in the ANSWER BOOK.

(8 x 1) (8)
1.3 Give ONE term for each of the following descriptions. Write only the term next to the question number (1.3.1–1.3.6) in the ANSWER BOOK.
1.3.1 A cash incentive given to a producer to lower the cost of production
1.3.2 A situation where one firm fixes a price and other firms accept it as the market price
1.3.3 The spillover effect of an economic activity that affects third parties
1.3.4 An excessive rise in the general price level, sometimes referred to runaway inflation
1.3.5 The dumping of waste matter into the environment
1.3.6 The long-term change in weather patterns which includes changes in temperature, rainfall patterns and wind (6 x 1)
(6)
TOTAL SECTION A: 30

SECTION B
Answer any TWO of the three questions in this section in the ANSWER BOOK.
QUESTION 2: MICROECONOMICS 40 MARKS – 30 MINUTES
2.1 Answer the following questions.
2.1.1 Give any TWO examples of community goods. (2 x 1) (2)
2.1.2 Why is the demand for skilled labour difficult to adjust in South Africa? (1 x 2) (2)
2.2 Study the graph below and answer the questions that follow.

2.2.1 Identify the price of cigarettes before a tax was imposed on it. (1)
2.2.2 What quantity is demanded after the government imposed a tax on cigarettes? (1)
2.2.3 Clearly distinguish between merit goods and demerit goods. (4)
2.2.4 Use the graph above and explain how a tax on cigarettes will reduce market failure. (4)
2.3 Study the extract below and answer the questions that follow.

2.3.1 Name the institution in the extract that investigates anticompetitive behaviour in South Africa. (1)
2.3.2 Identify ONE aspect that was influenced negatively by ArcelorMittal's anticompetitive behaviour. (1)
2.3.3 What is the role of the Competition Tribunal? (2)
2.3.4 What is meant by market dominance? (2)
2.3.5 How will ArcelorMittal's anticompetitive behaviour affect the industrial sector? (2 x 2) (4)
2.4 Distinguish, without using graphs, between productive inefficiency and allocative inefficiency. (2 x 4) (8)
2.5 Draw a fully labelled graph to illustrate the economic loss of a monopoly market structure. (8)
[40]

QUESTION 3: CONTEMPORARY ECONOMIC ISSUES 40 MARKS – 30 MINUTES
3.1 Answer the following questions.
3.1.1 Name any TWO World Heritage Sites in South Africa. (2 x 1) (2)
3.1.2 How can people be educated to manage the environment in such a way that sustainability is ensured? (1 x 2) (2)
3.2 Study the information below and answer the questions that follow.

ADMINISTERED-PRICE INFLATION

Eskom monopolises South Africa's electricity sector. The firm generates, transmits and distributes electricity. Prices changed by Eskom are regulated by the National Energy Regulator of South Africa (NERSA). In 2016 Eskom requested NERSA's approval of an increase of 14%. Eventually an increase of 9% was granted, which is still higher than the inflation target.

3.2.1 Identify the average price of a kilowatt per hour (kW.h) electricity in 2002. (1)
3.2.2 What trend does the average price of electricity show, as represented in the graph? (1)
3.2.3 Briefly describe the term administered-price inflation. (2)
3.2.4 Why does NERSA allow Eskom to have price increases above the inflation rate? (2)
3.2.5 Why is it important that NERSA regulates electricity prices in South Africa? (2 x 2) (4)
3.3 Study the table below and answer the questions that follow.

3.3.1 Identify TWO purposes in the table above why South Africans travelled domestically. (2)
3.3.2 Briefly describe the term domestic tourism. (2)
3.3.3 What is a possible reason for the decline in holiday trips between 2015 and 2016? (2)
3.3.4 Calculate the number of people who undertook business trips in 2016. Show ALL calculations. (4)
3.4 Briefly discuss the granting of property rights as a measure to sustain the environment. (4 x 2) (8)
3.5 How can indigenous knowledge systems (IKS) be used to increase tourism in South Africa? (4 x 2) (8)
[40]

QUESTION 4: MICROECONOMICS AND CONTEMPORARY ECONOMIC ISSUES
40 MARKS – 30 MINUTES
4.1 Answer the following questions.
4.1.1 Name TWO environmental problems that affect environmental sustainability. (2 x 1) (2)
4.1.2 How will the producer react if the government implements a maximum price on his product? (1 x 2) (2)
4.2 Study the information below and answer the questions that follow.

THE 'BIG FIVE' IN SOUTH AFRICA
	The current framework of the banking industry in South Africa is such that the oligopoly enjoyed by the bigger banks is extremely difficult to break because of high barriers to entry for entrepreneurs looking to enter the space. A significant entry barrier into the South African banking industry is the large, upfront capital requirement of R250 m cash for a banking licence.

4.2.1 Identify ONE of the five big banks in South Africa. (1)
4.2.2 What, according to the extract, prevents any entrepreneur from entering the banking industry in South Africa? (1)
4.2.3 Briefly describe the concept oligopoly. (2)
4.2.4 Explain the nature of the product offered by the banking industry. (2)
4.2.5 How do banks compete to increase their market share in South Africa? (2 x 2) (4)
4.3 Study the extract below and answer the questions that follow.

The Convention on the International Trade in Endangered Species (CITES) agreement is legally binding and aims to ensure that international trade in species of wildlife does not threaten their survival. More than 2 500 representatives from more than 180 countries attended the conference in Johannesburg in September 2016, against the depressing background of a 30% decrease in African savannah elephant numbers in just seven years, mainly because of poaching driven by Far Eastern syndicates. Poaching poses a major threat to the environment. Conservationists also worry that ivory poaching is moving through southern Zambia towards Botswana's Okavango Delta, location of the world's largest elephant herds.

4.3.1 In which city was the world wildlife conference held? (1)
4.3.2 Identify the aim of CITES in the extract above. (1)
4.3.3 Briefly describe the term conservation. (2)
4.3.4 Why is elephant poaching a threat to the environment? (2)
4.3.5 How can CITES contribute to the conservation of elephants? (2 x 2) (4)
4.4 Briefly discuss the reasons for growth in the tourism industry. (2 x 4) (8)
4.5 Why is a cost-benefit analysis (CBA) necessary for public sector projects? (8)
[40]
TOTAL SECTION B: 80

SECTION C
Answer any ONE of the two questions in this section in the ANSWER BOOK.
Your answer will be assessed as follows:

QUESTION 5: MICROECONOMICS 40 MARKS – 40 MINUTES
Markets are the backbone of economic activities in any country.

• Compare the market structure of a monopolistic competitor to that of a perfect market. (26)
• Explain, with the aid of a graph, how economic profit is achieved for a perfect competitor. (10)
  [40]

QUESTION 6: CONTEMPORARY ECONOMIC ISSUES 40 MARKS – 40 MINUTES
The disadvantage of a market economy is often demonstrated by inflation.

• Discuss the causes of cost-push inflation. (26)
• Advise the Minister of Finance on how to use taxes as an instrument to combat inflation. (10)
  [40]

TOTAL SECTION C:40
GRAND TOTAL: 150