TABLE OF CONTENT
QUESTION 1………………………………………………… 2-4
QUESTION 2………………………………………………… 5-6
BIBLIOGRAPHY…………………………………………… 7
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TOLAMO
SEATE
Grade 12 ECONOMICS PROJECT
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QUESTION 1 (research about a perfect market)
1.1
Perfect competition is an economic term that refers to a theoretical
market structure in which all suppliers are equal and overall supply
and demand are in equilibrium. For example, Although it may seem
like each supermarket is different from another with sales and
different offers, ultimately, their primary business is to sell various
products under one roof. The products stocked by supermarkets
are produced by different companies, meaning each supermarket
is selling the same product at a similar price, excluding the sales.
1.2
Price Takers – The firms in a perfectly competitive market do not
have any role in setting prices. Since all the products are identical
and there are many sellers, each firm must take the market price
determined by demand and supply. Free Entry and Exit –
Companies can easily enter the market if they see profits and exit
if they incur losses. There are no significant legal, financial, or
technological barriers to keep companies from competing.
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1.3
Given a market price of P3, profit is maximised where MR = MC = P3.
This occurs at a quantity of Q3. At Q3 the firm’s average revenue (AR)
per unit of production is P3, the average cost per unit is C1 which is
lower than the price of P3. The firm is making an economic profit per unit
of production of P3 – C1.
1.4
-Resources are used optimally, reducing unnecessary costs and
environmental impact. For example, A supermarket notices that
fresh produce sells faster on weekends, so it increases stock on
Fridays to meet demand while minimizing spoilage.
-When resources are allocated effectively, businesses thrive,
leading to job creation and economic expansion. For examples, in
manufacturing, companies apply automation to maximize
production, reducing costs and increasing output.
-Investors feel confident in stable markets, leading to sustained
economic growth. For example, big time investors will invest large
sum of money into the supermarkets because they will have a
stable competition.
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-A stable market prevents extreme price swings and financial
crises.
1.5
-The Competition Commission proactively promotes anticompetitive behaviour, ensuring that businesses compete on equal
terms and consumers get competitive prices.
- The policy includes social and economic factors in merger
assessments, helping to protect jobs and local businesses.
- Despite the success of the Competition Commission, there are
still very concentrated industries, limiting true competition.
- South Africa has been able to prosecute price-fixing cases,
particularly in areas like construction and food, to maintain market
integrity.
QUESTION 2 (research about imperfect markets)
2.1
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2.2
Eskom (Natural Monopoly) – Eskom, the South African stateowned electricity provider, is a natural monopoly based on the
economies of scale and the costliness of infrastructure making it
unprofitable for multiple firms to compete to produce and distribute
electricity.
Telkom (Artificial Monopoly) – Telkom was historically an
artificial monopoly in the telecommunications sector, as it was
legally protected from competition for decades. Government
policies granted Telkom monopolistic privileges to provide fixedline services, deterring competitors from entering the market. Over
time, deregulation allowed other telecommunication players into
the market, reducing Telkom's monopoly power.
- Reducing barriers to entry (such as high licensing fees or
restrictive
regulations) allows new businesses to compete.
Example: South Africa can support small telecom providers to
compete with major firms like Telkom.
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- Where private monopolies are not in the interests of the public,
the government can take over essential services.
Example: Eskom is still owned by the state to keep electricity
supply available to everyone.
- Providing financing, tax credits, and training to small businesses
allows them to compete against big monopolies.
Example: South African Government grant helps local
supermarkets (Discount Supermarket) compete with big retail
(Checkers) chains.
2.3
- Powerful brand, marketing, and customer service allow firms to
establish loyal customer bases, slashing the efficacy of price
warfare.
- Firms invest in differentiation, quality improvement, and
packaging in order to differentiate.
- Providing higher service quality, convenience, and accessibility
increases customer satisfaction and repeat purchase.
- Investment in advertising, product development, and customer
care improvement is required, though sometimes it will not lead to
higher profitability.
- Even with differentiation and branding, there are consumers who
value affordability over other factors, which restricts the
effectiveness of non-price strategies.
- In highly competitive industries, differentiation is challenging and
thus returns on non-price strategies decline.
BIBLIOGRAPHY
http://www.masterclass.com
www.elimuza.com
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www.simplicable.com
www.virtosoftware.com
www.wallstreetmojo.com
www.thestrategystory.com
www.business-explained.com
www.compcom.co.za
www.blsa.org.za
www.econex.co.za