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1.4 What is the opportunity cost of producing a fourth ton of apples? 1.5 What is the opportunity cost of producing a fifth ton of apples? 1.6 Based on your answers to Questions 1.4 and 1.5, what law regarding opportunity cost holds when you produce more and more of a good? (2 Marks) (2 Marks) (2 Marks) 1.7 If there is economic growth, what would happen to the PPC? 1.8 Explain how economic growth comes about. Question 2 Study the scenario and complete the questions that follow: (2 Marks) (2 Marks) Sea Harvest Reports Profit Fall Amid Demand Shift The group shifted its product mix amid the Covid-19 pandemic, which weighed on profits somewhat Fishing group Sea Harvest has reported a slight fall in half-year profits amid shifting demand from consumers during the Covid-19 pandemic The group operated as an essential service during the Covid-19 lockdown, saying that there had been an increase in home consumption during the pandemic, but a slowdown in demand by pubs and restaurants. This required a change in product mix, including diverting more product to retail markets, which negatively affected profits, the group said. Profit fell 4% to R154.7m in the group's six months to end-June, with it spending R16.7m on Covid-19 related costs, including for health and safety. Group revenue increased 7% to R2bn, but revenue from Sea Harvest's aquaculture business slumped 63% to R15m, due to a closure of Far East markets in early 2020, and the curtailment of air freight from SA. "The group will continue to focus on its Covid-19 protocols to ensure the safety and wellbeing of its employees; continue to match supply with demand and conserve cash through the suspension of noncritical capital expenditure; and continue with its focus on sound working capital management," the statement read. COECA1-B22- Take-Home Assessment Paper Block 2 2021 | V1.0 In morning trade on Monday, Sea Harvest's share was unchanged at R13.55, having fallen 6.87% so far in 2020. Page 3 of 9
Source: Gernetzky. K. 2020. Sea Harvest reports profit fall amid demand shift BusinessDay, 31 August 2020. [Online] Available at: https://www.businesslive.co.za/bd/compa ... and-shift/ [Accessed 20 October 2020 2.1 The article states that the fishing group, Sea Harvest, has reported a slight fall in half year profits amid shifting demand from consumers during the Covid-19 pandemic. Using demand and supply analysis, illustrate and explain how the pandemic affected the fishing group Sea Harvest. (6 Marks) 2.2 The article states that the fishing group operated as an essential service during the Covid- 19 lockdown, saying that there had been an increase in home consumption during the pandemic, but a slowdown in demand by pubs and restaurants. Using demand and supply analysis, illustrate and explain the impact of the slowdown in demand by pubs and restaurants on the fishing group despite them operating as an essential service during the Covid-19 lockdown. (6 Marks) 2.3 The article states that the group's revenue increased 7% to R2bn, but the revenue from Sea Harvest's aquaculture business slumped 63% to R15m due to the closure of Far East markets in early 2020, and the curtailment of air fright from SA. Using demand and supply analysis, illustrate and explain effects of the closure of Far East markets in early 2020, and the curtailment of air fright from SA. (6 Marks) 2.4 The article states that profit fell 4% to R154.7m in the group's six months to end-June, with it spending R16.7m on Covid-19 related costs, including for health and safety. Using demand and supply analysis, illustrate and explain how expenditure on Covid-19 related costs, including for health and safety, affected the performance of Sea Harvest. (6 Marks) Question 3 The accompanying table shows the price and yearly quantity sold of souvenir T-shirts in the town of Crystal Lake, according to the average income of the tourists visiting.
Price of T-shirt in Dollars ($) $4 $5 $6 $7 Quantity of T-shirts demanded when the average tourist's income is $20 000 3 000 2 400 1 600 800 Quantity of T-shirts demanded when the average tourist's income is $30 000 5 000 4 200 3 000 18 000 3.1 Using the information provided in the scenario, calculate the income elasticity of demand when the price of a T-shirt is $4, and the average tourist income increases from $20 000 to $30 000 using the average or arc formula. (5 Marks) 3.2 Interpret your results in Question 3.1 and advise the seller which business strategy to implement in order to increase revenue in the business. (3 Marks) 3.3 Using the information provided in the scenario, calculate the income elasticity of demand when the price of a T-shirt is $7, and the average tourist income increases from $20 000 to $30 000 using the average or arc formula. (6 Marks) 3.4 Interpret your results in Question 3.3 and advise the seller which business strategy to implement in order to increase profits in the business. (3 Marks) 3.5 Identify any three determining factors of elasticity of demand. In your answer, state if demand is elastic, inelastic or unit elastic to the product in the scenario (souvenir T-shirts). (3 Marks)
Question 4 Study the scenario and complete the questions that follow: Supply and Demand The accompanying table shows the supply and demand schedules for used copies of the first edition of a textbook. The supply schedule is derived from offers at Amazon.com. The demand schedule is estimated COECA1-B22-Take-Home Assessment Paper Block 2 2021 | V1.0 Price of Book (in Dollars) 60 65 70 75 80 85 90 95 100 105 110 Quantity of Books Demanded 30 27 25 20 17 15 12 9 8 2 0 Quantity of Books Supplied 0 3 7 4.3 Calculate the total consumer surplus at the equilibrium price. 7 8 ( midina/ 15 16 17 29 31 34 Page 5 of 9 Source: Pearson Education Inc. 4.1 Identify the equilibrium price and quantity from the information provided in the above table. (1 Mark) 4.2 State the highest price that buyers are willing to pay at each point and provide the value of consumer surplus at each point. (6 Marks) (3 Marks) 4.4 State the highest price that sellers are willing to pay at each point and provide the value of producer surplus at each point. (5 Marks) 4.5 Calculate the total producer surplus at the equilibrium price. (3 Marks)
Question 5 Study the scenario and complete the questions that follow: National Minimum Wage Can't be Blamed for Joblessness Reckless allegation is based on bending facts and the assumption that labour is a commodity like any other, it isn't. COECA1-822-Take-Home Assessment Paper Block 2 2021 |V1.0 Page 6 of 9 Last week Statistics SA released the results of the latest quarterly labour force survey. The findings of the survey highlight many of SA's biggest economic problems, especially around employment, and do not make good reading. The narrow unemployment rate hit 27.6% in the first quarter of 2019, an increase from 27.1% in the previous quarter. We should all be concerned about these numbers. As a general trend employment tends to fall between the last quarter of one year and the first quarter of the next, partly because people employed over the busy year end period as temporary staff are not employed in the new year. Even so, there has been some very poor and often incorrect interpretation of the results. One such example is that several commentators and economists have blamed the national minimum wage (NMW), which was introduced on January 1, for driving up unemployment. For the most part this criticism has revealed ignorance about what the minimum wage is, how minimum wages work in general, and the policy intention behind the NMW in SA. Our first point is that specifics matter. The minimum wage is R20 per hour, not R3,500 per month, as it will vary based on the actual number of hours worked. This is a crucial distinction that has important implications for how the minimum wage will affect part-time employment, and for how we make comparisons between current earnings and the minimum wage. All of this is set out in detail in the report of the minimum wage advisory panel, which we both worked on Our second point is a simple one about causation. Most simply put it is reckless to infer from a single quarter of labour force survey data that the minimum wage is driving up unemployment in SA. Unemployment has been growing, as a general trend, since 2009 and has grown even faster since 2016. Understanding whether the most recent increase is due to the NMW requires careful statistical work and data for a sufficiently long period to allow for the policy to be properly implemented-neither of which is the case just yet. Any attribution of rising unemployment to the minimum wage at this stage is therefore mere speculation. Understanding what impact the NMW is having on employment will, at the very least, require several quarters of employment data and intricate analysis.
Since the president announced that agreement had been reached at Nedlac on the principle and level of the NMW, a number of commentators have painted a picture of an oncoming disaster. There are at least three reasons why readers should treat this sort of speculation with caution. First, SA has had minimum wage legislation for many, many years; the NMW builds on an existing architecture of sectoral minimum wages. Second, the panel, in reaching its recommendation, thought carefully about how to implement the system in a way that would reduce the risks. For example, it recommended that in sectors such as domestic and farm work, where levels of wages are very low, a tier system that allows for a longer adjustment period should be part of the implementation. COECA1-B22-Take-Home Assessment Paper Block 2 2021 | V1.0 Page 7 of S Third, in all sectors of the economy businesses that may not be able to pay at the level of the NMW are able to apply for an exemption. None of the commentators who paint a doomsday scenario appear to have understood these basic elements of the design and implementation. More broadly, the argument linking minimum wages to unemployment reveals some fundamental assumptions many hold about the labour market and which we would argue are incorrect. Those who contend that minimum wages must necessarily lead to higher unemployment believe the labour market is a commodity market like any other (think of the market for carrots or tomatoes), where higher prices must lead to lower demand. But in the market for tomatoes there are no power dynamics, no gender discrimination, no racism and no concerns about equality. Assuming that the labour market is the same as the market for tomatoes is a false equivalence. Of course, it is quite obvious that the labour market is very different from most other commodity markets, not least because it is not people who are bought and sold in the labour market, but their labour time. There are many other important factors that differentiate labour markets: industrial structure, market power, concentration and monopsonies, and social and labour market institutions. This means the link between wages and employment is far less straightforward than many believe. The labour market is a social mechanism just as much as it is an economic one. To make this point clearly, let us take the counterfactual. If one believes unemployment is high because wages are above the equilibrium price, it must follow that lowering the price of labour will lead to rising employment, until wages are so low that everyone who wants a job has one. The question then, for those who argue that wages must fall, is how far the level of wages must fall to clear the labour market, and what the consequences would be for poverty and inequality. Unemployment in SA is a major problem, and we should be very concerned about any increases in the level of unemployment. However, what is needed is a sensible debate based on considered and robust research. It is interesting that a number of commentators who have accused the panel of being reckless, without understanding the nuance of design and implementation in its recommendations, are the same people who on one quarter of employment data reach the conclusion that an NMW is bad policy. Who, one might ask, is being reckless?
obvious that the labour market is very different from most other commodity markets, not least because it is not people who are bought and sold in the labour market, but their labour time. There are many other important factors that differentiate labour markets industrial structure, market power, concentration and monopsonies, and social and labour market institutions. This means the link between wages and employment is far less straightforward than many believe. The labour market is a social mechanism just as much as it is an economic one. To make this point clearly, let us take the counterfactual. If one believes unemployment is high because wages are above the equilibrium price, it must follow that lowering the price of labour will lead to rising employment, until wages are so low that everyone who wants a job has one. The question then, for those who argue that wages must fall, is how far the level of wages must fall to clear the labour market, and what the consequences would be for poverty and inequality. Unemployment in SA is a major problem, and we should be very concerned about any increases in the level of unemployment. However, what is needed is a sensible debate based on considered and robust research. It is interesting that a number of commentators who have accused the panel of being reckless, without understanding the nuance of design and implementation in its recommendations, are the same people who on one quarter of employment data reach the conclusion that an NMW is bad policy. Who, one might ask, is being reckless? Source: Adapted from: Valodaland Francis D. 2018 National minimum wage cannot be blamed for BusinessDay, 24 May 2019 Online) Available at www.busineative.co.in/2013-05 31 January 200 The article states that several commentators and economist have blamed the national minimum wage (NMW), which was introduced on January 1, for driving up unemployment. 5.1 Explain what a minimum wage is? COECA1-822-Take-Home Assessment Paper Block 2 2021 | V1.0 (1 Mark) Page 8 of 9 5.2 Provide evidence from the scenario of which sectors have been identified as having low wages in South Africa? (3 Marks) 5.3 The labour market is identified as being different to other markets, such as commodity markets. Provide evidence from the scenario of what differentiates the labour market from other markets. (3 Marks) 5.5 Illustrate and explain how the implementation of a minimum wage will drive up unemployment. 5.4 Provide evidence from the scenario of the effects of lowering wages to clear the labour market and not implementing minimum wages in an economy. (2 Marks) (11 Marks)