Student Number
Module EECF1614 EFEC2614 EECF1614/
code Bfn Campus South Campus EFEC2614
Underline Qwa-Qwa Campus
Surname
Initials
UNIVERSITY OF THE FREE STATE
BLOEMFONTEIN & SOUTH & QWA-QWA CAMPUS
EECF1614 / EFEC2614
DEPARTMENT OF ECONOMICS & FINANCE
CONTACT NUMBER:
0724320897
SEMESTER (GRAPHS) TEST 1
2 May 2024
ASSESSOR: Mrs L. Janse van Rensburg; Dr A. Magwiro; Dr R. Sunge
MODERATOR: Dr C. Duvenhage
TIME: 60 minutes MARKS: 50
INSTRUCTIONS:
• Write down your student number in the space provided at the top of each page.
• This paper consists of 4 questions on 7 pages and it also serves as your answer sheet.
• NB!! Answer ALL questions in PEN. Answers in pencil will not be marked.
• Draw the graphs (answers) on this paper in the space provided after each question.
• Where applicable with calculations, round your FINAL answer off to two decimal
places.
• Do your calculations at the back of your answer sheet and not at spaces meant for
final answers.
TOTAL Question 1 Question 2 Question 3 Question 4
Marker name
Page 1 of 7
Student Number
QUESTION 1 [8 marks]
1.1 Consider a country that can only produce guns and butter. Use the axis below to
draw a hypothetical production possibilities curve (PPC) to represent increasing
opportunity cost between the production possibilities of the two goods. Plot guns
on the vertical axis. Show how a severe drought that killed lots of cows and affected
butter production would affect the PPC. Use labels, captions, and arrows to explain
the impact of the drought. (4)
Guns✓½
✓✓
Butter✓½
1.2 Consider a country that can only produce wine and cotton. Use the axes below to
draw a hypothetical production possibilities curve (PPC) to represent increasing
opportunity cost between the production possibilities of the two goods. Use labels,
arrows, and captions to clearly indicate the following concepts: A for scarcity, B for
unemployment, and C for opportunity cost. (4)
scarcity✓
Cotton
Opportunity cost ✓
unemployment✓
Wine
Page 2 of 7
Student Number
QUESTION 2 [30 marks]
2.1 Use the axis below to construct the supply and demand schedules of the market
for eggs. The supply function is represented as Q = P; and the demand function is
represented as Q = 80 - 4P. Clearly label the supply function and demand function.
(4)
Consumer surplus 32__(½bꓕh = 8*4)
28
26
24 Supply (S) ✓
Marks can only be
22 ✓
20
assigned if S and D is
correctly plotted and
18
labeled. (note the y-
PRICE (P)
16 axis cut off.
14
12
Demand (D) ✓
10
8
6
4
2 ✓ Producer surplus 128(½bꓕh = 16*8)
0
0 2 4 6 8 10 12 14 16 18 20 22 24 26
QUANTITY (Q)
2.2 Use the drawn graph above or the information provided to calculate the size of the
consumer and producer surplus and clearly indicate the consumer surplus and the
producer surplus along with its size. (4)
2.3 By using the concepts of demand and supply explain, with the aid of a labelled
diagram, how a shortage of tickets for a major concert may arise. The concert
venue has a maximum capacity of 30,000 people. (5)
Minus 1 if labels are
incorrect.
S vertical
P of
tickets
P1
P2
Shortage
D
Demand
30 000 >30 000 Quantity
Page 3 of 7
Student Number
2.4 Assume the price of motorcycles, a substitute in consumption for bicycles, falls.
2.4.1 Illustrate the effect of this on the equilibrium price and quantity in the market
for bicycles. (4)
S
Price of bicycles
P1
P2
D2 D1
Q2 Q1 Quantity
2.4.2 Illustrate the effect of the decrease in price on the quantity demanded of
motorcycles. (3)
Price of motorcycles
P1
P2
D1
Q1 Q2 Quantity
2.5 Illustrate, with the aid of a figure by using the axis below, the impact of an increase
in the price of beef on the equilibrium price and quantity in the market for “leather
products” (compliments in production or joint products) ceteris paribus. (4)
S1
Price of leather products
S2
P1
P2
D1
Q1 Q2 Quantity
Page 4 of 7
Student Number
2.6 Suppose the market for bread is determined by the market forces of demand and
supply and the equilibrium price and quantity is set at R10 and 20 thousand loafs
of bread. Suppose further that government imposes a price ceiling of R8 in this
market. Illustrate and explain the effect that this government intervention will have
on the producer and consumer surplus. (Use a well labelled graph, not to scale,
with captions and clearly indicate the producer and consumer surplus before and
after the intervention.) (6)
P a
S
All labels and
curves
presented
R10 c b
g f Price Ceiling
R8
D
d
20 000 Q
Before intervention: consumer surplus = area abc
producer surplus = area cbd
After intervention: consumer surplus = area aefg
producer surplus = area gfd
Page 5 of 7
Student Number
QUESTION 3 [6 marks]
A consumer finds only two products X and Y for sale. The table below represents the
amount of utility which their consumption will yield. Assume that the prices of X and Y
are R3 and R4 respectively and that the consumer has an income of R18 to spend.
With the aid of indifference curves and budget lines, graphically indicate the
equilibrium quantity of Product X and Y that will maximise the consumer’s satisfaction.
You don’t have to draw a diagram to scale, but you must use labels and captions to
clearly indicate the optimal position. (6)
Quantity Product X (Utility) Product Y (Utility)
1 9 16
2 15 28
3 19 36
4 21 40
5 22 42
Product Product
Quantity
X (Utility) Y (Utility)
1 9 3 16 4
2 15 2 28 3
3 19 1,3333 36 2
4 21 0,6667 40 1
5 22 0,3333 42 0,5
8
4
Product Y
(2;3) curve correctly tangent.
3
2
1
1 2 3 4 5 6 7
Product X
Page 6 of 7
Student Number
QUESTION 4 [6 marks]
4.1 Use a well labelled graph to illustrate a perfectly competitive firm making normal
profits. Clearly indicate the profit maximising price and quantity. Marks will be
assigned to the correct indication of AR, MR, ATC and MC. (6)
if shape is correct cut ATC and min
MC ATC if shape is correct and tangent to P line
P / MC / MR / ATC / AR
P = MR = AR = D
Q1 Quantity
~END~
Page 7 of 7
