QUESTION 3

1. Consider the hypothetical information in the table below vis--vis the firms who produce Good X, to answer the questions that follow.

Firms	Turnover (R'000) of Good X
Firm A	40
Firm B	520
Firm C	80
Firm D	200
Firm E	120
Firm F	800
Firm G	2000
Firm H	240

1. 3.1. Calculate the CR4 and the HHI and classify the degree of concentration. CR4 = % HHI = ; ; ......(3 marks) The market has a (high/moderate/low) level of concentration. 3.2. Suppose Firm B and Firm D propose to merge. By how much will the HHI increase if this merger is approved? Increase in the HHI = 3.3 Suppose that Firm G noticed that due to the fall in consumer income of 6%, the sales of Good X increased by 24% this year. 3.3.1 Calculate and classify the Ey-coefficient. Ey = Good X is classified as a (luxury/necessity/inferior) good. 3.3.2 Suppose economists predict that the level of consumer income willincrease by 4% next year. Calculate the change in the quantity demanded (in units) for next year, if Firm Gsold 300 units of Good X thisyear. Change in units = units

9 points