GRADE 11 ECONOMICS
JUNE 2015
Paper 2
Time: 1 hour
100 marks
INSTRUCTIONS MEMO
1.
2.
This exam consists of Paper 2: Micro Economics (100 marks)
Answer following questions:
Paper 2:
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

SECTION A: COMPULSORY.
SECTION B: COMPULSORY
SECTION C: Answer ONE ESSAY.
(20)
(40)
(40) [100]
SECTION A: 20 Marks
Question 1
1.1
Choose the correct word to match the sentences.
Complements; variable; short run; YED; controlled market; PED; VAT; fuel tax
1.1.1
1.1.2
1.1.3
1.1.4
1.1.5
1.2
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
The responsiveness of demand to a change in price PED.
The period of time where at least one factor of production is fixed short run.
An increase in the price of these goods results in the decrease in demand for related goods. Complements;
The tax charged on consumption of goods and services. VAT
Costs that increase with output. variable;
(5 x 2=10)
State whether the following are True or False.
Fixed costs do not change in the long run. F
Average variable costs constantly decrease. F
Average fixed costs never increase over different levels of output.T
The IED is used by firms to determine what will happen to their revenue during a recession. T
Farmers tend to have an elastic supply. F
(5 x 2=10)
[20]
SECTION B: 40 Marks
QUESTION 2
2.1.1
What is the formula for revenue maximisation?
MC = MR
(4)
2.2
Draw a diagram to illustrate a firm with downward sloping revenue curves making super normal profit
(10)
2.3
Study the following diagram and answer the questions that follow:
2.3.1
Using a formula, calculate the PED and state what the implications are for the firm who wants to increase revenue.
(8)
% change in Qd / % change in Price = +80% / - 40% = -2
2.4
Draw two supply and demand diagrams to show the relationship between Coca-Cola (Product A) and
Pepsi-Cola (Product B)
Substitutes
(8)
Product A
Product B
2.5
Provide the formulas for: ATC, AVC, MC, MR and AR.
(10)
ATC = Total cost/quantity
AVC = Variable cost/ quantity
MC = Change in TC/Change in output
MR = Change in TR/ Change in quantity
AR = Total revenue/quantity
SECTION C: 40 Marks
Answer ONE of the following essays
Question 3
Discuss the concept of Price elasticity of Supply and its importance for a business in its decision making.
(40)
Intro
Body
Formula
What are we looking for in the PES answer
4x types of elasticities plus examples – who can react quickly and who cannot? Why not? Short run vs long run. What deisicions
should be made for each.
4x PES graphs
Conclusion
Or
Question 4
Making use of diagrams and tables, discuss the concept of cost and revenue. Analyse the different output levels that could be
decided on by the firm, operating under perfect competition, using these curves.
(40)
Intro
Body
Cost and Revenue schedule
All curves and formulas
Economic profit, normal profit, loss and shut down point + curves.
Conclusion