Grade 10 Economics Exam
September 2014
Time: 120 Minutes
Marks: 150
INSTRUCTIONS
1
Answer FOUR questions as follows:
SECTION A: COMPULSORY QUESTION
SECTION B: TWO QUESTIONS OUT OF THREE OPTIONS
Question 2 – Demand, Supply & Prices
Question 3 – Elasticity
Question 4 – Fiscal Policy
SECTION C: ONE QUESTION OUT OF THREE OPTIONS
(+/- 20 minutes)
(+/- 60 minutes)
(+/- 40 minutes)
2
Write the number of the question next to each answer.
3
Number the answers according to the system used in this question paper.
4
Start each question on a NEW PAGE. Leave one to two lines open between subsections of each question.
5
Read each question carefully.
6
A neat and systematic presentation of facts is required.
7
Answer in full sentences.
8
Do not answer more than the required number of questions. Only the required
number of questions, in the order in which they have been handed in, will be
marked.
9
Use only a black or blue pen (graphs / diagrams may be done in pencil).
10
Non – programmable pocket calculators may be used.
THIS QUESTION PAPER CONSISTS OF TEN PAGES AND ONE ANSWER SHEET
SECTION A (COMPULSORY)
For this section, use the ANSWER SHEET attached to the question paper.
QUESTION 1
1.1
Which piece of information would enable you to construct the market demand curve
for a product?
A.
B.
C.
D.
1.2
The equilibrium price of the product
The number of consumers who would purchase the product at each price
The number of firms in the industry
The quantity that each consumer would be willing and able to buy at each price
The number of passenger journeys per week by train on a certain route is shown by
the demand curve in the diagram.
Initially the fare is OP, but it is then reduced to OW.
Which area measures the amount spent on the extra journeys resulting from the
lower fare?
A VUT
1.3
B PWTV
C VRST
D URST
What must be the effect on consumer surplus if the supply of a product, that has a
normal demand curve, halves?
A.
B.
C.
D.
Consumer surplus will fall.
Consumer surplus will fall by 50%.
Consumer surplus will rise.
Consumer surplus will rise by 100%.
Grade 10 Economics: September 2014
2
1.4
The diagrams show possible relationships between income and the quantity of a
good purchased.
Which diagram shows an inferior good?
1.5
The diagram shows a market subject to a maximum price.
What will happen if the maximum price is removed?
A.
B.
C.
D.
1.6
There will be allocation by a queuing system.
There will be allocation by government rationing.
There will be allocation by seller’s preference.
There will be allocation by the price system.
The price elasticity of demand for good X is 1. At a price of $10, quantity demanded
is 40 000 units.
What will be the price when the quantity demanded is 20 000 units?
A $2.00
B $5.00
C $15.00
D $20.00
Grade 10 Economics: September 2014
3
1.7
A supermarket reduces the price of oranges from R2 each to R1.60 each. The
weekly sales increase from 8,000 to 12,000. The price elasticity of demand is
A.
B.
C.
D.
1.8
(-)0.6
(-)2.5
(-)0.4
(-)2.0
Consumer spending decreased in the recession of 2009-10. A firm tried to keep
revenue high by giving discounts to encourage demand. It measured the price
elasticity of demand (PED) for its own product and the cross elasticity of demand
(XED) with its competitors’ products.
When might such promotions achieve the result the company hoped?
A.
B.
C.
D.
1.9
If a good is a luxury, its income elasticity of demand is
A.
B.
C.
D.
1.10
when PED is greater than one and XED is positive
when PED is less than one and XED is negative
when PED is less than one and XED is positive
when PED is unity and XED is negative
positive and less than 1
negative but greater than -1
positive and greater than 1
zero
An industry's supply curve is more likely to be elastic if
A.
B.
C.
D.
firms are operating at below full capacity
there are shortages of skilled labour needed by the firm to increase production
producers have low levels of stocks
new firms are unable to enter the market
1.11 An advantage of VAT is that
A.
B.
C.
D.
its broader tax base usually results in lower tax rates.
it leads to higher prices and thus higher inflation.
the flow of income from it is very unstable.
it increases the administration costs of proprietors.
1.12 If government spending is higher than current government revenue, this is known as
A.
B.
C.
D.
the budget deficit.
the public debt.
money financing.
good fiscal management.
Grade 10 Economics: September 2014
4
1.13
The South African income tax system is
A.
B.
C.
D.
regressive.
proportional.
progressive.
indirect.
1.14 A tax such as VAT would generally be viewed as
A. progressive, because the consumption expenditure of the rich is greater than
that of the poor.
B. regressive, because low-income households spend a greater proportion of their
income on goods that attract VAT.
C. proportional, because the VAT rate is constant across goods that attract VAT.
D. regressive, because the VAT burden increases as household income rises.
1.15 Which of the following would be classed as an expansionary fiscal policy?
A.
B.
C.
D.
A reduction in the number of goods exempted from VAT
An increase in government taxation
An increase in government expenditure
An increase in the VAT rate
15 x 2 = (30)
TOTAL SECTION A: [30]
Grade 10 Economics: September 2014
5
SECTION B: Answer TWO questions from this section.
START EACH QUESTION ON A NEW SHEET OF PAPER.
QUESTION 2 (Demand, supply and prices)
2.1
Name TWO factors which may influence the supply of a product.
2.2
Read the following information and answer the questions that follow:
2 x 2 = (4)
The price of petrol in the United States (US) is determined mainly by market forces but in China
the Government actively intervenes to set the petrol price. However, in 2009 it introduced a
policy by which the price of petrol in China would more closely follow the world price of crude oil.
The price of petrol in the two countries is shown in Fig. 1.
2.2.1 Compare the price of petrol in the US and China between January 2008 and
September 2009.
(2)
2.2.2 How does Fig. 1 confirm that it is in China rather than in the US that the price of
petrol is set by the government?
(4)
2.2.3 Discuss the possible consequences of the Chinese price setting policy between
January 2008 and September 2009.
(4)
Grade 10 Economics: September 2014
6
2.3
The figure below illustrates the demand for and supply of designer jeans in South
Africa. D and S represent the original demand and supply curves and the original
equilibrium position.
Price in
Rands
Quantity (000s per year)
2.3.1 What is the original equilibrium price and quantity of designer jeans?
(2)
2.3.2 If a specific tax of R200 was placed upon each pair of designer jeans sold, what
would be the new equilibrium price and quantity of designer jeans?
(2)
2.3.3 Calculate the total tax revenue earned by government if the tax in 2.3.2 is
implemented.
(4)
2.3.4 What is the “burden” of this tax on producers?
(2)
2.4
Explain, with the aid of a graph, what is meant by excess demand and excess
supply in a goods market.
(8)
2.5
Explain, with the aid of graphs, how an increase in the price of Burger King’s
Whopper burger will impact on the market for McDonalds’ Big Mac burger.
(8)
[40]
Grade 10 Economics: September 2014
7
QUESTION 3 (Elasticity)
3.1
List TWO determinants of the Price Elasticity of Supply of a good.
3.2
Read the following article and answer the questions that follow
2 x 2 = (4)
Coffee Cravers Ignoring Bean-Price Surge for Caffeine Fix
Doreen Cappelli is so hooked on her morning cappuccino that she says she’d pay a lot more to
get it. “I don’t drink wine and alcohol,” Cappelli, 52, said after buying the $3.25 drink at Blue
Bottle Coffee at San Francisco’s Ferry Building. “Coffee is one of my pleasures in life. I would
pay double.”
While prices probably won’t go up that much just yet, pressure is growing on the $80 billion
U.S. coffee industry as the cost of arabica beans used in high-end brews skyrockets. Futures in
New York jumped 86 percent this year to $2.0595 a pound. By May, they may reach $3, the
highest since 2011.
For now, sellers including Starbucks, the largest coffeehouse chain, say they’re in no hurry to
raise prices. Many have stockpiles of cheaper beans from before the rally. Even if they do start
to charge more, history shows that’s no deterrent for American consumers, the biggest
drinkers.
“I need it -- it’s like crack,” said Lindsay Cooper as she stood in line for her morning cup at Philz
Coffee in Mission Bay, near AT&T Park, the San Francisco Giants baseball stadium. “I feel like
I’m exposing a deep, dark secret. Is there some sort of coffee rehab? If so, hopefully mine has
coffee.”
3.2.1 Define price elasticity of demand (PED).
(2)
3.2.2 Is the PED of coffee elastic or inelastic? Use evidence from the article to support
your answer.
(4)
3.2.3 Given your answer in 3.2.2, explain why you think coffee has the PED it has. Again,
use evidence from the article to support your argument.
(4)
3.3
The table below shows the income elasticity of demand for different types of fish for
both low and high income households in Bangladesh:
Household
Low income
High income
Sole
1.76
0.75
Hake
2.13
0.83
Carp
1.77
0.74
Cod
1.44
0.55
Shrimp
1.26
0.33
Perch
1.32
0.15
3.3.1 Define income elasticity of demand (YED).
(2)
3.3.2 Using evidence from the table, which group of households consider fish to be a
luxury and which group of households consider fish to be a necessity?
(4)
3.3.3 Explain the difference in income elasticity of demand for fish between low income
households and high income households.
(4)
3.4
Explain “unitary elastic demand” and sketch a graph to illustrate the concept.
(8)
3.5
Discuss cross elasticity of demand (XED).
(8)
[40]
Grade 10 Economics: September 2014
8
QUESTION 4 (The Government and Fiscal Policy)
4.1
Name TWO levels or components that make up the Public Sector
4.2
Study the cartoon below and answer the questions that follow:
2 x 2 = (4)
4.2.1 What is “Capital Gains Tax”?
(2)
4.2.2 What income group is most affected by Capital Gains Tax? Use evidence from the
diagram to support your answer.
(4)
4.2.3 Given your answer to 4.2.2, is Capital Gains Tax fair? Justify your answer.
(4)
4.3
Study the graph below and answer the questions that follow:
4.3.1 What is “Government Debt” and how does it arise?
(4)
4.3.2 What has happened to Government debt over the last 10 years?
(2)
4.3.3 In reference to your answers in 4.3.2, explain why the levels of government debt
have followed the pattern illustrated in the diagram.
(4)
4.4
Compare “Progressive” and “Proportional” tax scales by means of a graphic
representation and give a short explanation of each.
(8)
4.5
Explain the difference between tax avoidance and tax evasion.
(8)
[40]
TOTAL SECTION B: [80]
Grade 10 Economics: September 2014
9
SECTION C (Answer ONE essay question from this section)
Your answer will be assessed as follows:
STRUCTURE OF THE ESSAY:
MARK ALLOCATION:
Introduction
Body:
Main part: Discuss in detail / In-depth discussion / Examine / Critically discuss
/ Analyse / Compare / Evaluate / Distinguish / Explain / Assess / Debate
Additional part: Give own opinion / Critically discuss / Evaluate / Critically
evaluate / Draw a graph and explain / Use the graph given and explain /
Complete the given graph / Calculate / Deduce / Compare /Explain
/Distinguish /Interpret / Briefly debate
Conclusion
Max. 2
Max. 26
Max. 10
Max. 2
TOTAL
40
QUESTION 5 (Demand, Supply & Prices)
“The equilibrium price is determined by the interaction of demand and supply”


Using diagrams to assist you, explain the concepts of consumer and producer
surplus.
(26)
With the aid of diagrams, discuss the welfare loss associated with minimum pricefixing.
`
(10)
[40]
QUESTION 6 (Elasticity)
“Economists, business people and governments are interested in the magnitude of change
in demand and supply”.


Using diagrams to assist you, explain the relationship between the price elasticity of
a downward sloping demand curve and total revenue.
(26)
Discuss why business owners would be interested in the price elasticity and income
elasticity of demand for the products they sell.
`
(10)
[40]
QUESTION 7 (The Government and Fiscal Policy)
“Only two things are certain in life: death and taxes”


Discuss in detail the three modern criteria of a good tax
(26)
To what extent do you think the South African tax regime lives up to these criteria?
(10)
TOTAL SECTION C: [40]
GRAND TOTAL: [150]
Grade 10 Economics: September 2014
10
Grade 10 Economics Exam
September 2014
ANSWER SHEET
NAME: _______________________________
A
B
TEACHER: SH / CCS / MJW
C
D
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
Grade 10 Economics: September 2014
11