MBA4801- ASSIGNMENT 1 (2021)

Question 1

explain the issue raised in the article concerning Eskom's debit, detailing the relevant theories and the impact to the South African economy and consumers. discuss the impact of Eskom's debt on the company , consumers, energy dependent producers and the South African economy. {30}

Question 2

Explain where there is a shift in the demand curve, or neither , if there is an unexpected shortage of electricity due to low coal supply and or other source. Use a supply and demand diagram, to illustrate the effect. {15}

Question 3

a. Market systems may not allocate resources efficiently for many resources. This is known as market failure. Governments intervene in order to correct such market failures. Imposition of price controls is one of such interventions. Using relevant diagrams, discuss the use of

(1) maximum prices and

(2) minimum price controls in markets and their consequences in the context of the Eskom case above. (20)

b. The effect of subsiding a product/service, to a large extent , depend on the price elasticity of that product/service.

Draw two diagrams, one with a relatively inelastic demand curve and one with relatively elastic demand curve. Explain the different effects of the introduction of a subsidy on electricity in terms of price and quantity. (10)