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Economics 1500ECS1500
ASSIGNMENT 02 (SECOND SEMESTER)
UNIQUE NUMBER 826849
Closing Date 9 September 2019
Learning Units 5 to 7
Complete the assignment and provide your final answers on the prescribed answer sheet.
Feedback on these questions will be provided on myUnisa under Additional Resources after the
final closing date.
For questions 2.1 to 2.6 you need to indicate if the statement is true or false. As indicated, if the
statement is true, choose [1] and if the statement is false, choose [2].
2.1 Demand is elastic when the quantity demanded changes by a larger percentage than the
percentage change in price.
[1] True
[2] False
Elastic demand is when the percentage change in the quantity demanded exceeds the percentage
change in price. That makes the ratio more than one. For example, say the quantity demanded
rose 10% when the price fell 5%.
When demand is inelastic it means that the quantity demanded will not change much when the
price level changes. When demand is elastic the quantity demanded will be sensitive to a change
in the price level. The larger the elasticity, the more the quantity demanded will change due to a
, certain change in the price level. Unitary elasticity of demand means that the percentage change in
the quantity demanded will be exactly equal to the percentage change in the price level.
Note: The price elasticity of demand is determined by the extent of the change in the quantity
demanded relative to the extent of the change in the price level. It does not matter if a good is
expensive or cheap; it is the percentage changes in both quantity and price that determine the
elasticity.
Questions 2.2 is based on the following information.
Item Price elasticity of demand in Country A
Petrol 0,3
Motorcars 1,8
2.2 Based on the information in the table above, demand for motor cars will change a lot when the
income of consumers increases.
[1] True
[2] False
As a result of the higher income levels, the demand curve shifts to the right.
People have more money on average, so they are more likely to buy a car at a given price,
increasing the quantity demanded.
2.3 Explaining market equilibrium is an important macroeconomic objective.
[1] True
[2] False
A balanced economic policy framework usually takes the following important policy
objectives into account:
i. Full employment. It is of the utmost importance to ensure that the available factors of
production are used to their full capacity. Apart from the material poverty that the
unemployed suffer, there is also the socio-economic effect of such. In South Africa, as in
most other countries, unemployment poses a serious threat to social and political stability.
Full employment can rightfully be regarded as South Africa's most important economic
objective.
ii. Price stability. Even though the desirability of a low rate of inflation is less clear than the
objective of full employment, it is generally accepted as being one of the most important
aims of macroeconomic policy makers. Rising prices are not a problem in themselves, but
their effects on certain sectors and groups are viewed as being undesirable.
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