2.1 How is the price of a product related to the quantity demanded? If the price of peanut butter had to decrease, will consumers demand a larger or smaller quantity? (10 marks)

2.2 Using appropriate diagrams, distinguish and explain the difference between a movement along an existing demand curve and a shift in a demand curve. (10 marks)

QUESTION 3 (20 Marks)

3.1 Suppose that you are the owner of an ice-cream shop and you have established that the price elasticity of the demand for ice-cream in your particular market is 1.8. Explain if you would sell icecream at R5,00 per litre or R4.50 per litre? (10 marks)

3.2 Monopolies are mainly the result of Government intervention and can be regarded as a market structure that does not optimise benefits to society. Evaluate the statement and provide practical examples to enhance your answer.

(10 marks)

QUESTION 4 (20 Marks)

Trade protectionism has spiked many debates. Supporters of free trade claim that international free trade is beneficial to all participants than protectionism.

Making reference to your country, critically discuss the above statement.

QUESTION 5 (20 Marks)

Suppose the central bank wanted to reduce aggregate demand (to fight inflation) and the government wanted to increase total expenditure (to fight unemployment).

Critically discuss the type of action each would take and what effects would their combined actions have on Gross Domestic Product (GDP)?.