Module Code: AEDM 111
Name of activity: ASS1
Due date: 20 March 2026
Lecturer’s name: Mr. Myeki
Group Members
1.Sanele Mkhumbuzi-56292864
2.Sinalo Mpoyi-56313004
3.Nelisa Ndulula-56362935
4.Amahle Chonco-56325479
5.Yonela Roboshi-50399500
6.Wandile Khanyile-56284268
7.Dakalo Thiba-56336810
8.Khutso Bosega-56277458
9.Mawusakhe Ntshweza-56291949
10.Onke Tyasi-56351224
Question 1
1. With the aid of a diagram, Explain the concept of scarcity, choice and
opportunity cost.
Scarcity means there’s not enough bread and butter for everything you want, for
example you have half a loaf of bread, and you need more for your family. Choice is
about deciding what to do with bread and butter, for example making toast with butter or
saving same for later. Opportunity cost is what you lose when you choose, for
example if you use all the butter on toast now, you can’t us it for sandwiches later.
Question 2
2.Explain, with aid of a diagram, the shift and movement along supply/demand,
excess demand and market surplus.
Movement along [D]
Happens when prices of bread changes, causing a change in quantity demanded on the
same curve.
Shift [D1 and D2]
Happens when income or preferences change, moving the entire curve.
Movement along [S]
Happens when prices of bread changes, causing a change in quantity supplied on the
same curve.
Shift [S1 and S2]
Happen when income or preferences changes, moving the entire curve. Shift left[S1] fall
in supply due to higher production. At the same price, less bread is supplied. Shift
right[S2] increase in supply due to lower cost. At the price, move bread is supplied.
Excess Demand
Occurs when quantity demand is greater than, quantity supplied.
Market Surplus
Occurs when quantity supplied is greater than quantity demanded.2w
Equilibrium
Occurs when quantities demanded and supplied are equal.
Question 3
3.In a tabular form, provide a detailed summary for different elasticities.
Type of elasticity
Price elasticity of
demand
Income elasticity of
demand
Cross elasticity of
demand
Price elasticity of supply
Definition
Is concerned with the
sensitivity of quantity
demanded to a change in
the price of the product,
ceteris paribus.
Measure the
responsiveness of quantity
demanded to change in
income, ceteris paribus.
Measure the
responsiveness of quantity
demanded a particular
good to changes in price of
related good, ceteris
paribus.
Measure the
responsiveness of quantity
supplied to change in the
price of good, ceteris
paribus.
Example
If the price of bread
increases customers buy
less bread.
When income increase the
customers buy more
bread.
If the price of butter
increases customers may
buy more margarine.
If the price of bread rises,
bakeries produce more
bread.
Question 4
4. Prove that the utility approach and difference curve approach yield the same
equilibrium.
In the utility approach, equilibrium is shown by equal marginal utility per unit of money
spent on each good.
In the indifference curve approach, equilibrium is shown by tangency between the
budget line and an indifference curve. For example, maximizing utility is used to
describe consumer choice. An indifference curve shows all combinations of goods that
provide an equal level of utility.
At the tangency point, the slope of difference curve equals the slope of the budget line,
which is identical to the utility condition.
Question 5
5. Explain in detail marginal product, average product and six different types of
production cost.
Production is the process where firm combine resources such as labour, land, capital
and technology to produce goods and services. In economics, it is important to
understand how output changes when more inputs are used and what costs are
involved in producing those goods. Two important concepts used to measure
productivity are marginal product and average product, while production costs help
explain the expenses a firm face during production.
Marginal Product refers to the extra output that is produced when one more unit of an
input, usually labour, is added to the production process while other inputs remain the
same. In simple terms it shows how much additional production one extra worker can
create. In many production processes, when a few workers are added at the beginning,
production increases quickly because workers can divide tasks and work more
efficiently. However, as more workers are added, the increase in production becomes
smaller. This happens because workers start sharing the same machines, tools, or
space. If too many workers are added, productivity may even decrease because they
start getting in each other’s way.
Average Product refers to the amount of output produced per worker. It shows how
productive workers are on average in the production process. For example, if several
workers are producing goods in a factory, average product helps show how much each
worker contributes on average. This measure helps businesses understand whether
their workers are being used efficiently or productivity can still be improved.
Production cost are the expenses that a firm must pay to produce goods or services.
Understanding these costs is important for businesses because it helps them determine
how much to produce and how much to price their products. Six types of productivity
costs are as follows …
Fixed Cost are costs that remain the same regardless of how much a firm produces.
Even if the firm produces nothing, these costs must be paid. Example insurance.
Variable Costs are costs that change depending on the level of production. When a
firm produces more goods, these costs increase because more materials and labour are
required. Example electricity used in production.
Total Cost refers to the overall cost of production. It includes both fixed costs. This
represents the total amount of money a firm spends to produce a certain number of
goods.
Average Fixed Cost refers to the fixed cost spread over each unit of output. As
production increases, this cost becomes smaller because the same fixed costs are
shared among more units of production.
Average Variable Cost refers to the variable cost involved in producing each unit of
output.
It helps firms understand how much variable expenses is needed for every product
produced.
Marginal Cost refers to the additional cost a firm experience when it produces one
more unit of output. This concept is important because it helps firms decide whether
increasing production will be profitable or not.
Question 6
6. Provide a detailed summary of different market structures with special
emphasis of features/criteria.
Market
Structure
Perfect
Competition
Number of
firms
Many
numbers
of firms
Monopolistic Many
numbers
of firms
Product type
Differentiated
low
Oligopoly
Both
homogeneous
High
Few
numbers
of firms
Entry
Barrier
Homogeneous none
Price setter
Price taker
Example
Farming,
stocking
etc.
Same control
Clothing
brands,
hair salon
etc.
Interdependent Cell
phone,
airline etc.
Monopoly
One
number of
firms
and
differentiated
Unique or no
close
substitutes
Very high
Price maker
Eskom
etc.