,ECS1501 - ALL-IN-ONE EXAM PACK
All answers were researched using the study guide, prescribed book and memo’s.
Please note that human errors are possible in this document.
SUMMARISED NOTES
About Economics Page 3
The Economic Problem Page 6
The Mixed Economy Page 10
Demand, Supply and Prices Page 12
Demand and Supply in Action Page 20
Elasticity Page 24
Consumer Choice Theory Page 28
Production and Cost Theory Page 33
Perfect Competition Page 37
Other Market Structures Page 42
The Labour Market Page 43
EXAM/ASSIGNMENT
Assignments 2018 Page 48
Assignments 2019 Page 57
Assignments 2020 Page 71
Test Bank 1 Page 88
Test Bank 2 Page 100
May/June 2015 Page 148
May/June 2016 Page 160
October/November 2016 Page 173
May/June 2017 Page 184
October/November 2017 Page 193
May/June 2018 Page 203
October/November 2018 Page 212
May/June 2019 Page 221
October/November 2019 Page 230
May/June 2020 Page 239
October/November 2020 Page 247
October/November 2021 (Mock Exam) Page 259
, ABOUT ECONOMICS
Economics in Brief
Economics is the study of how our scarce productive resources are used to satisfy human wants. Economics is a
discipline studying how people choose to use resources (cash, land, buildings etc.) to satisfy their daily needs/
wants. It involves the production, distribution and consumption of goods and services. Economics is primarily
concerned with the choices that are made in seeking to use scarce resources efficiently. As long as the marginal
benefit (i.e. additional benefit) is greater than or equal to the marginal cost, then a consumer’s choice would be
rational.
Wants, Needs and Demand
Wants: Human desires for goods and services, unlimited.
Needs: Necessities, essential for survival.
Demand: The amount of a good or service that a consumer wants to purchase at a given price.
A want is something you would like to have. It is not absolutely necessary or essential for survival, but it would
be a good thing to have. Human wants are unlimited or insatiable. A need is something you can't do without. A
demand for goods and services is only a demand, if those who want to purchase them have the ability to do so.
Real life examples:
A baby needs milk but wants candy.
Humans need food for survival
You can demand a cellphone, if you have the money to buy it.
Basic Economic Problem
Scarcity
Choice
Opportunity cost
Scarcity
Is the basic economic problem that arises because people (society) have unlimited wants and the resources to
satisfy them are limited.
Choice
Hence, people have to make choices among these limited resources and decide which satisfies their needs.
Opportunity cost
Of a choice is the value of the best alternative that could have been chosen but was not chosen.
The Concept of Opportunity Cost
Opportunity cost of a choice is the cost expressed in terms of the next best alternative sacrificed. Opportunity
cost is the value of the best alternative that could have been chosen but was not chosen. Everything involves a
trade off , i.e. 'something is given up in favour of something else'. Opportunity cost measures the cost of the best
alternative to the decision taken. With every choice made by a consumer, opportunity costs are incurred and
economists always measure costs in terms of opportunity costs what was given up to as a result of the choice.
, Opportunity cost is illustrated by a negative slope of the curve, which means that more of one good can only be
obtained by sacrificing the other good. As we move along the production possibilities curve from point A to
point B through to point F, the production of pencil increases while the production of books decreases. To
produce 1 pencil, 5 books have to be sacrificed (from 100 to 95). To produce the second pencil, an additional 5
books (95 - 90 ) have to be sacrificed, and so on. The opportunity cost of each additional pencil therefore
increases as we move along the production possibilities curve.
I have a number of alternatives of how to spend my Saturday afternoon : I can go to the Kirstenbosch music
concert; I can stay home and watch a movie on TV, or go out for drinks with friends. If I choose to go to the
music concert, my opportunity cost of that action is what I would have chosen if I had not gone to the concert
either watching the movie or going out for drinks with friends. Note that an opportunity cost only considers the
next best alternative to an action, not the entire set of alternatives.
Production Possibility Curve
Production Possibility Curve (PPC) is a curve that illustrates the production possibilities of an economy the
alternative combinations of two goods that an economy can produce with given limited resources and
technology.
