Professional Documents
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NATIONAL
SENIOR CERTIFICATE
GRADE 12
ECONOMICS
FEBRUARY/MARCH 2012
MEMORANDUM
MARKS: 300
SECTION A (COMPULSORY)
QUESTION 1: LO1–LO4
TOTAL SECTION A: 50
SECTION B
2.1.3 Finance 33
2.3 2.3.1 Shows the relation between tax rates and tax revenue of the
government 99 (2)
2.3.4 At 100% tax rate, nobody will be prepared to work and the
revenue of government will also be zero 99 (2)
2.5 • There is a flow of goods (imports) to the business from the foreign sector
99
• which the business pays for 99
• This will be regarded as expenditure for the business 99
• There is also a flow of goods from the business to the foreign sector 99
• This will be income for the business 99 (Any 4 x 2) (8)
3.1.2 fixed 33
3.1.3 social 33
3.3.2 Market demand and supply establishes the price in the market
(R8) 33 /
The individual producer on the market is a price taker33 and will
sell any quantity at the price of R8. (2)
3.3.3 Price D S1
33 S
E2
R10 New supply curve (S1) = 2 marks
R8 3 E1 Decrease in quantity = 1 mark
3 Increase in price = 1 mark
Labelling of axes = 2 marks
TOTAL = 6 MARKS
S1
3
S D
0 100 000 Quantity
3
(6)
3.5 • If the provision of public goods were left to the market we would not have
any public goods. 33
• The provision of public goods and services requires a huge capital
outlay33 and the return on investment in provision of public goods is not
profitable33
• The failure to supply public goods means we would be less well-off. 33
• There would be allocative inefficiency33
• The reason why the market fails to supply these goods is because:
- public goods are non-excludable33 (8)
- public goods are non-rival33 (Any 4 x 2)
Price/Cost MC3 AC 3
3 Labelling of axes = 2 marks
AVC 3 Labelling of curves = 3 marks
Profit maximising point = 1 mark
Shut-down point (e1) = 2 marks
R8 TOTAL = 8 MARKS
R6 e MR = AR 3
333
e1
0 60 3 Quantity
(8)
[50]
4.1 4.1.1 3% 33
4.1.2 GDP 33
4.1.3 free-trade 33
4.3 4.3.1 Dumping occurs when goods are sold to foreign markets at such
low prices that the local industries cannot compete 99
(Any other relevant answer) (2)
4.5 • Calculated from using the information provided by the Lorenz curve 99
• Shows the distribution of income among proportions of the population99
• Is the ratio of the proportion of the population who lives on less than a
proportional income 99
• Measures the degree of inequality in incomes 99
• If income is perfectly distributed the co-efficient is 0 99
• At the other extreme the co-efficient would be 1 99
• A government should try to address the unequal distribution of incomes
in a country by using tools such as the progressive tax scale 99 and by
creating opportunities to create higher incomes99 through BEE 99 and
employment equity 99 (Any 4 x 2) (8)
5.1.2 debtors 33
5.1.3 within 33
5.3.3 Natural disasters limit their availability due to the rate at which they
can be produced 33 (2)
5.6 • Granting property rights 33 ensures that people cares for things that
belong to them by using them as profitable as possible 33 if property
rights are expanded to common goods, polluters can be charged for the
right to pollute 33
• Charging for the use of the environment 33 impose environmental
charges – levies fee on consumers and producers for waste they produce
and dump in environment 33
• Environmental taxes 33 taxes imposed on output of good e.g. taxes
charged on items such as tyres will increase the price of tyres 33
• Environmental subsidies 33 for activities that reduce environmental
damage – cost to reduce or prevent harmful effects is recovered from
proceeds of taxation 33 used for development of new techniques or
equipment 33 encourage production of environment friendly substitutes
33 encourage recycling of waste 33
• Marketable permits 33 businesses are allowed to pollute by giving them
a licence to pollute up to a maximum – these licences can be sold to other
businesses if they do not pollute at all 33 (Any 2 x 4) (8)
[50]
6.1.2 Industrialised 33
6.1.3 Identical 33
6.3.3 • Exports 99
• Tourism 99
• Agriculture 99
• Information, communication and technology 99
• Cultural industries 99 (Any 1 x 2) (2)
6.4 6.4.1 Occurs when some of the costs and benefits of a decision or action
are borne or enjoyed by a second or third party not directly
involved in the decision making 99
(Any other relevant answer) (2)
6.4.4 The cost of the externality is not included in the market price 99
the market overproduces 99 therefore there is a misallocation of
resources 99 If the cost of externality was taken into account, then
the market would produce at Q2 99 which is more desirable to
society 99 (Any 2 x 2) (4)
6.6 • Through its taxing (Progressive Tax System 99) and spending powers
(Budget 99) the government can distribute income by subsidising goods
and services 99
• Transferring income to poorer households 99 (e.g.) grants 99
• Providing certain goods free of charge 99
• Implementing job creation programmes 99
• Implementation of minimum wages for the unskilled worker 99
• Setting of maximum prices on basic foodstuffs (paraffin) 99 which benefit
the poor 99
• Policy measures (e.g.) Land Reform programmes 99/BEE 99/
Affirmative Action 99(Employment Equity Act), Property subsidies 99
• Preferential access to government contracts for the previously
disadvantaged 99 (Any 4 x 2) (8)
[50]
SECTION C
Answer any TWO questions from this section in the ANSWER BOOK.
Essay responses:
INTRODUCTION
BODY
1. Accountability 99
• It is required to give an explanation of one's decisions, actions and
expenditures over a period of time 99
• There are mechanisms for evaluating government's economic and financial
performance 99
• That the desired quantities and quantity of goods and services for which
taxes are raised are delivered 99
• That monopolies, corruption, nepotism, incompetence and apathy does not
occur 99
• Two important elements of accountability is participation and transparency
99
• Ministerial responsibilities i.e. the ministers of government departments are
responsible for decisions and actions and expenditures 99
• Parliamentary questioning arises and members of the government
departments have to respond 99
• The national treasury is responsible for treasury control 99
• The Auditor-General reports annually in writing on each government
department99
2. Efficiency 99
• Public goods are efficiently provided if Pareto efficiency is achieved 99
• That is if resources are allocated in such a way that no one can be made
better off without making someone else worse off 99
• Bureaucracy 99 the official rules and procedures.99/insensitivity to the
needs of their clients 99
• Incompetence99 the lack of skill or ability to do a task successfully99 /
• may have improper qualifications/or an attitude of apathy 99
• Corruption99 the exploitation of a person's position for private gain 99 /
taking bribes, committing fraud, nepotism 99
3. The problem of assessing needs 99
• State owned enterprises do not operate according to the forces of supply and
demand 99
• It becomes thus very difficult for state-owned enterprises to assess needs
and they are thus prone to under- or over-supplying public goods and
services 99
• The census and other household surveys as well as local government
structures provide this type of information 99
• Since resources are scarce, government must then decide which needs and
whose needs are to be satisfied 99
• In the private sector houses are built according to the price that people are
able and willing to pay 99
• In the public sector housing is regarded as a social responsibility and
authorities supply them according to the needs of people 99
4. Pricing policy 99
• In a market economy prices are determined by supply and demand 99
• The objectives of firms are to maximise their profits and they usually set
prices to achieve this objective 99
• Government is not set confined to the profit maximisation objective 99
• Government takes into account certain social, economic, political and
environmental conditions as well as public opinion 99
• Free-of-charge services99 this is met from taxes 99 and applies to most
community goods 99 (e.g.) defence, police 99 and collective goods 99
whereby charges and toll fees are levied 99
• User-charges 99 option to charge depends on technical reasons 99 (e.g.)
cost of providing a double lane road could be recovered by toll charges 99
Economic reasons 99 such as services like water and electricity 99 that
have a zero price 99 political reasons 99 where income distribution is
significantly unequal, administrative rationing according to need takes place
99 (e.g.) public health and education 99
• Direct and indirect subsidies 99 direct subsidies are used to cover part of
the costs 99 (e.g.) urban bus service 99 and an indirect subsidy is used to
write off accumulated losses or deficits 99
• Standing charges 99 called availability charges 99 (e.g.) water and
electricity 99 standing charges goes to meet fixed costs and the price per
unit consumed covers variable costs 99
CONCLUSION
If the above problems are not dealt with timeously by government, government will
continue to fail its people in terms of service delivery 99
(Any other relevant conclusion) (Max. 2)
Use the following assessment grid in conjunction with the above to assess the
discussion:
Discuss monopoly as a market structure and illustrate, with the aid of a graph,
how a monopolist can achieve economic profit.
INTRODUCTION
Is a market structure in which there is only ONE seller of a good or service that has no
close substitutes 333 (Max. 3)
BODY
1. Number of firms 33
• The monopoly consists out of one single firm 33
• Example: Eskom 33 or De Beers – diamond-selling 33
(Accept any other relevant example)
2. Nature of product 33
• The product is unique with no close substitute 33
• Example: Diamonds are unique 33
3. Market entry 33
• Refers to how easy or difficult it is for businesses to enter or to leave the
market 33
• Is entirely/completely blocked 33
• A number of barriers to entry that may give rise to monopoly can be:
economies of scale 33 or limited size of the market 33 or exclusive
ownership of raw materials 33 or patents 33 or licensing 33 or sole rights
33 or import restrictions 33
4. Market Information 33
• For a monopolist all information on market conditions is available to both
buyers and sellers 33
• This means that there are no uncertainties 33
8. Cost of production 33
• The shape of the cost curves (MC and AC) is the same as any other producer
33
• The MC increases as more is produced 33
• The AC declines, reaches a minimum and then increases 33
• Profit maximisation is where MC = MR 33
9. Profit 33
• Can earn economic profit in the short run and the long-run 33
• Because new entries are blocked(no competition) and short-run economic
profit therefore cannot be reduced by new competing firms entering the
industry 33
• The monopoly can thus continue to earn economic profit as long as the
demand for its product remains intact 33
(Max. 30)
Price/Cost 3
MC 3
AC 3
333
P1 f
Economic
profit
c e
d
MR 3 AR = D 3
0 Q1 Quantity 3
CONCLUSION
In the short run a monopolist can make an economic profit or an economic loss. They
produce less output than competitive industries and sells at a higher price. 33
(Any other relevant conclusion must be accepted.) (Max. 2)
Use the following assessment grid in conjunction with the above to assess the
discussion:
INTRODUCTION
BODY
REASONS
METHODS
NOTE: For the response with regard to the effectiveness of export promotion
methods, a maximum of 5 marks can be allocated.
ADVANTAGES
• Cost and efficiency of production 33 based on this and organised along lines of
comparative advantage 33
• Increased domestic production 33 will expand exports to permit more imports and
may result in backward linkage effects that stimulate domestic production in related
industries 33
• Exchange rates are realistic 33 and there is no need for exchange control and
quantitative restrictions 33
DISADVANTAGES
• Lack of competition 33 businesses charge prices that are so low that they force
competitors out of the market 33
CONCLUSION
The South African government has mandated Trade and Investment South Africa
(TISA) 33 From the above discussion it is clear that protection still plays a significant
role in the South African international trade policy 33
(Any other relevant conclusion must be accepted.) (Max. 2)
Use the following assessment grid in conjunction with the above to assess the
discussion:
Discuss the benefits of tourism to the different sectors in the South African
economy.
INTRODUCTION
Tourism describes the activities of people traveling to and staying in places outside
their usual environment for no more than one consecutive year for leisure, business
and other purposes 333 (Max. 3)
BODY
1.1 Households 93
• They receive income because of salaries and wages through employment
99 and their own involvement in the tourism industry as tour operators.
• Most of the infrastructure that is created for tourists are also used by the local
people 99 e.g. roads, hotels 93
• Tourism requires a number of skills, which require education and training. 99
• Learnerships for a number of skills required by the tourism industry are
offered 99e.g. tour guides, travel agents and chefs 33
1.2 Government 93
• The main avenue for governments to benefit from tourism is through the
levying of taxes 99
• These taxes have a dual purpose 99
• To recover external costs 99 This cost is recovered from the tourist through
adding the taxes to the supply price/normal expenditure taxes (e.g. VAT,
excise duties, customs duties) 99
• This amount serves to compensate the host community for providing the
infrastructure, public amenities (showers, toilets) to the tourists 99
• To raise revenue. 99 Tourists are seen as part of the overall tax base 99
• E.g. through airport departures, air ticket taxes and taxes on hotel rooms 39
1.3 Businesses 93
• They are normally private sector activities and make up the profit-generating
element of a tourist destination 99
• A combination of public and private sector finance is used to develop
destinations 99
• The public sector also provides a range of financial incentives for private
sector tourism investment (grants, subsidies, loans, taxes) 99
• There are also many informal and less traditional opportunities for tourism
benefits and these serve as stepping stones for previously neglected groups
in the tourism business 99
• E.g. car rentals, craft curios sales 93
1.4 Infrastructure 93
CONCLUSION
From the above discussion it is clear how households, businesses, the government
and infrastructure benefit from increased tourism. (Max. 2)
Use the following assessment grid in conjunction with the above to assess the
discussion:
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