QUESTION 3: CONTEMPORARY ECONOMIC ISSUES 40 MARKS - 30 MINUTES 3.1 Answer the following questions. 3.1.1 Name any TWO types of pollution. (2 x 1) (2) 3.1.2 How is a reduction in taxes linked to demand pull inflation? (1 x 2) (2) 3.2 Read the extract below and answer the questions that follow. IMPACT OF INFLATION ON THE ECONOMY For people whose incomes do not keep pace with the rate of inflation, its impact can be especially strong. Inflation can make it difficult for low-income people to pay for basic household expenses such as housing and food When prices of these goods rise, purchasing power of the consumer declines. In South Africa prices are regarded as stable when the changes are within the inflation target range. [Adapted from www.google.co.za] 3.2.1 Identify ONE item which low-income earners may struggle to pay when inflation is high. (1) 3.2.2 Which phrase in the extract implies a decrease in the quantity of goods purchased by the consumer? (1) 3.2.3 Briefly describe the term inflation. (2) 3.2.4 How do the actions of trade unions cause inflation? (2) 3.2.5 How can the government use taxation to combat inflation? (2 x 2) (4)3.3 Study the graphs below and answer the questions that follow. Price Price D, MC e Quantity Quantity GRAPH 1 GRAPH 2 3.3.1 Which market structure do the graphs above represent? (1) 3.3.2 Give a correct label for curve H in Graph 2. (1) 3.3.3 What effect will an increase in demand have on the market price? (2) 3.3.4 Briefly describe the supply curve of an individual firm in this market structure. (2) 3.3.5 Why will a business not produce to the left of point 'g'? (2 x 2) (4) 3.4 With the aid of a graph, explain why monopolies are considered to be both productive and allocation inefficient. (8) 3.5 Suppose there were 'price wars' in an oligopoly market. How will these affect consumers? (8) [40]QUESTION 3: CONTEMPORARY ECONOMIC ISSUES 40 MARKS - 30 MINUTES 3.1 Answer the following questions. 3.1.1 List any TWO goods where prices are administered by the government. (2 x 1) (2) 3.1.2 Why do countries engage in deforestation? (1 x2) (2) 3.2 Study the information below and answer the questions that follow. CONSUMER PRICE INDEX A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI is a statistical estimate constructed by using the prices of a sample of representative items whose prices are collected periodically. Basic types of data needed to construct the CPI are price data and weighting data. The annual percentage change in CPI is used a measure of inflation. [Source: https/www.wkipedia.org] 3.2.1 List any example of a good or service on which CPI's are based. (1) 3.2.2 How is the Consumer Price Index (CPI) calculated? (1) 3.2.3 Briefly describe the term hyperinflation. (2) 3.2.4 Briefly explain consumer spending as a cause of demand pull inflation. (2) 3.2.5 Why are products with volatile prices excluded from the consumer price index? (2 x 2) (4)
