Eco162 2024 01 Exam Paper
Eco162 2024 01 Exam Paper
Semester 1 2024
Module name Economics I
Module code ECO162
NQF level 6
Date & Time 4 June 2024 – 09:00-12:00
Duration 3 hours
Exam type Closed book
Marks 100
General instructions
1. Complete your personal information on the front cover of the STADIO Examination
Answer Booklet.
2. Ensure you number the answer booklets correctly, in the case where more than one
answer booklet is used, i.e. Book 1 of 2, etc.
3. Use only black or blue pen. Do not use a pencil to answer questions. Pencilled answers
will not be marked.
4. Answer all the questions unless otherwise instructed.
5. Read all questions carefully before attempting to answer.
6. Always number the answers and any sub-question answers the same as the question
numbers in the examination paper.
7. Rough work may be done at the back of the examination book only. All rough work must
be labelled as such.
8. By accepting this examination script, you agree to abide by the STADIO Examination Rules
and Regulations.
9. Round off all answers to two decimal places.
ECO162
©STADIO [ECONOMICS I - ECO162] [Semester 1 2024]
Page 1 of 13
Equipment (Closed book)
1. No documents, notes, files, study guides, textbooks, or other materials will be allowed
into the examination.
2. Calculators are permitted.
3. No mobile devices or electronic equipment including smart watches, laptops, iPads,
Kindles, etc. will be allowed on your person or at your desk during the examination.
4. No borrowing or lending of any examination material and/or stationery will be
permitted.
5. No formula sheet is included at the end of the paper.
6. Additional blank paper will be provided for calculations.
Multiple-choice questions
Select the correct answer and write down only the sub-question number and next to it the letter
that represents the answer you have selected.
1.2 John spends R5 000 on a new carpet. What is the opportunity cost to him of the
carpet?
A. R5 000
B. The land, labour and capital used in manufacturing the carpet.
C. The other things he could have bought with the R5 000.
D. The reduction in his bank balance due to purchasing the carpet.
1.4 Which one of the following is the best definition of opportunity cost?
A. The out-of-pocket money costs incurred when a decision is made.
B. The value of the best alternative sacrificed when a choice is made.
C. The value of all the alternatives given up when a choice is made.
D. The value of time lost when a choice is made.
1.6 Use the diagram below, which indicates maximum combinations of good X and good
Y that can be produced with available resources, to answer the question.
Which one of the following statements is correct with regard to the maximum
combinations of good X and good Y that can be produced with available resources?
A. Output combinations D and E represent full and efficient use of resources, but A,
C and F represent inefficient resource use.
B. Output combination D represents the most efficient use of resources.
C. Output combinations A, D, E and C all represent full and efficient resource use.
D. Output combination A and C represents less efficient resource use than either D
or E.
What is the point where the opportunity cost of producing an additional textbook
would be greatest at?
A. A
B. B
C. C
D. E
1.9 Which of the following is correct regarding the South African economy?
A. Pure market economy.
B. Pure command economy.
C. Pure mixed economy.
D. Pure traditional economy.
1.13 Which one of the following best describes the goods produced by a perfect market?
A. Heterogeneous goods.
B. Homogeneous goods.
C. Durable goods.
D. Public goods.
1.14 Which one of the following statements best describes Adam Smith’s concept of the
invisible hand?
A. The selfish actions of rational individuals will generate an efficient allocation of
scarce resources.
B. The public-spirited actions of individuals will generate an efficient allocation of
scarce resources.
C. The systematic but largely unseen intervention of government in the operation of
markets will generate an efficient allocation of scarce resources.
D. Market failure cannot arise, and there is therefore no economic role for the state.
1.15 Simple economies can be described in terms of three major economic flows. Which
one of the following is the best description of these economic flows?
A. Income, spending and saving.
B. Spending, production and saving.
C. Income, saving and investment.
D. Income, spending and production
1.17 Which of the following factors of production is both a primary factor of production
and a human resource?
A. Natural resources
B. Capital
C. Labour
D. Entrepreneurship
1.18 In the market for public transport, which of the following variables would decrease
demand, ceteris paribus?
A. A decrease in the price of private motor vehicles.
B. An increase in the price of private motor vehicles.
C. A decrease in the price of bus tyres.
D. An increase in the price of motorbikes, a substitute.
1.20 If a household receives rent, what type of factor of production is the household selling
on the factor market?
A. Natural resources
B. Labour
C. Capital
D. Entrepreneurship
1.22 When an individual’s income rises, ceteris paribus, what is the effect on his/her
demand for an inferior good, e.g., half a loaf of bread?
A. Demand rises
B. Demand falls
C. Demand remains unchanged
D. Demand becomes more positive
1.23 Which of the following are the two types of markets in the simple circular flow of
income and expenditure?
A. Public markets and private markets.
B. Free markets and regulated markets.
C. Goods markets and factor markets.
D. Factor markets and foreign exchange markets.
1.24 What could have caused the demand for ice cream at a local café to shift from DD to
D1D1, as shown in the graph below?
SECTION B
1.1 Explain, with the aid of a figure, the impact of an increase in the demand for bread,
resulting from the economic prosperity in the country, on the equilibrium price and
quantity in the market for bread in South Africa. (5)
1.2 Explain, with the aid of a figure, the impact of a decrease in the supply of resulting
from the three-month drought on the equilibrium price and quantity in the market for
lettuce. (5)
1.3 The following table shows Cindy’s marginal and total utilities from the consumption of
Steers beef burgers (good X) and Coke Zero (good Y). The per-unit price of a beef
burger is R20 while the per-can price of Coke Zero is R8. Cindy has R84 to spend on the
two food items each week.
3 340 80 C 216 32 H
4 390 50 D 240 24 I
5 420 30 E 248 8 J
0 0 –
1 10 10
2 A 8
3 25 B
4 30 C
5 D 3
6 34 E
1.5 Explain what does elasticity mean and why economists are interested in measures of
elasticity? (2)
1.6 Define total revenue (TR), average revenue (AR) and marginal revenue (MR) (in
general). (6)
Dr Chris was a macroeconomics lecturer who earned R500 000 per year. Over time he accumulated
savings of approximately R2 million, which yielded him an average annual return of R150 000. He
decided to retire from the university to go into the transportation sector. He used the R2 million
savings to get started. His first step was to sell his own house to buy five scooters. He had to pay
the salesman who managed to sell his house R700 000 and R800 000 to buy equipment he will
need. At the end of the year, he sold four of the scooters for R600 000 each.
2.1 Calculate the total explicit costs and total implicit costs. Show all your calculations. (6)
Read the following case study and answer the questions that follow.
Picture: Bloomberg – The Standard Chartered headquarters in London. A bank s pokes pers on
confirmed that it had lodged a laws uit agains t the owner of a metals trading company in Qingdao,
China.
By Kim Heller
In 2019, the EFF asked whether the National Treasury had investigated “the impact of the
manipulation of the rand by various banks” and if so, what were the findings. “No” answered
Minister of Finance, Tito Mboweni. Mboweni stated that neither the National Treasury nor
the South African Reserve Bank “have any evidence that any bank has taken part in currency
It was in 2015, four years earlier, that the Commission opened its probe into allegations of
rand manipulation and collusion by a large concert of local and multinational financial
institutions. These included Standard Bank, Absa, Investec, Citibank, First Rand Bank,
Barclays, Merrill Lynch, HSBC and Standard Chartered. Evidence points to a network of well-
coordinated corrupt activity as banks colluded on prices in the trading of the rand in a six-
year period, from 2007 to 2013. The Competition Commission estimates that close to R1
trillion was transacted daily between 2007 and 2013 in this illicit currency trading. Today
eight years after the investigation began there has been paltry accountability and justice.
In 2016, Jacob Zuma, who was the President of South Africa, had openly shared his suspicion
that banks were manipulating the rand and purposefully damaging both his Presidency and
the economy. His protestations were scornfully dismissed. He had borne the brunt of blame
for the volatile and negative performance of the rand. These revelations call for a revision of
the assessment of the economy under his watch.
In 2017, the South African arm of Citibank pleaded guilty and paid an “administrative
penalty” of R69.5m for its role in price fixing and currency manipulation. In the same year,
Barclays Africa asked for forgiveness for their involvement in this illicit activity.
Not one of the institutions voluntarily came forward to admit to their transgressions. Or
repent for their sins. They were simply found out. This is what prompted the ‘sorry is the
hardest word to say’ apology from Barclay’s Africa Group’s Maria Ramos who said, “We
deeply regret that this conduct took place within our organisation … those who are found to
have contravened our rules and conduct will in due course be held accountable.” Barclays
Africa’s co-operation with the Competition Commission meant that its financial assets,
Barclays Capital, and Absa were afforded leniency in the matter.
Last week, the British based multi-national bank, Standard Chartered, agreed to pay an
administrative penalty of R42.7 million. Standard Chartered Bank admitted to currency
manipulation back in 2019. Most of the banks implicated are still trying hard to weasel their
way out of the situation claiming that the accusations are unfounded or that the Commission
lacks the necessary jurisdiction to prosecute. They are also trying to diminish the scale and
effect of the illicit activity.
Feeble apologies, and pocket money fines are not enough. For the damage done by currency
manipulation is no small change. Currency manipulation has the potency to damage
economies, downgrade prospects of citizens and can plunge economies into junk status. The
grand scale manipulation of the rand has left South Africans poorer.
In an analysis published in the Mail & Guardian, on January 18, 2016, entitled ‘Why the rand
is falling’, economist Fatima Bhoola wrote “The weak rand has a number of implications for
the country’s growth prospect”. “Firstly, the weakening currency carries the risk of pushing
up inflation because imported goods are more expensive. This means that the South African
Reserve Bank faces a difficult decision. It can keep interest rates low but then faces even
higher inflation. This will only devalue the rand further. If the central bank takes more
Bhoola continued: “The rand’s weakening could not have come at a worse time for South
Africa. The country is suffering from the worst drought since 1992 which has increased food
costs and pushed the farming industry into recession. The price of white corn, a staple food
in southern Africa, has more than doubled on the South African Futures Exchange in the past
year.
With large parts of the economy already in recession, coupled with worsening debt levels
and the threat of credit-rating downgrades, it looks like the economy will contract. The weak
rand will also see the cost of imported goods for consumers rise. In addition, while the rest
of the world benefits from record low oil prices, the country’s weaker currency means it will
not be able to take full advantage of this and may face higher fuel prices in the near future.”
President of the ATM, Vuyo Zungela has said “We can’t let this currency manipulation slide.
The banking industry must be fully investigated for any and every unethical practice they are
involved in. People lost homes, cars got repossessed, millions of people are in an endless
cycle of debt because of these greedy banks”. Zungela has written to the speaker of
Parliament requesting an urgent parliamentary debate regarding the manipulation and
banking misconduct.
This article was written exclusively for The African. To republish, see terms and conditions.
1.1 Using the article above explain what rand manipulation is. (2)
1.2 Explain the implication of the rand manipulation on the four economic participants
(Households, Government, Financial markets (the ones who were involved in rand
manipulation) and Businesses) (4x4)
1.3 Do you think that the fine imposed to the banks who were involved in the rand manipulation
is justified given the crime committed? Explain in detail. (3)
1.4 Under which market structures do Banks fall into? (1)
1.5 Explain any two of the conditions that needs to be met for banks to be classified as the
market structure named on 1.4. (2)