MOPANI WEST DISTRICT

GRADE 12

ECONOMICS
GRADE 12
REVISION PACKAGE MARKING GUIDELINES
MICRO ECONOMICS & CONTEMPORARY ECONOMIC
ISSUES

This revision package marking guidelines consist of 66 pages

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MICRO ECONOMICS

PERFECT MARKETS

PART 1 LOW ORDER QUESTIONS

QUESTION 1

1.1 MULTIPLE CHOICE

1.1.1 B

1.1.2 B

1.1.3 C

1.1.4 D

1.1.5 D

1.1.6 A

1.1.7 C

1.1.8 A

1.1.9 A

1.1.10 C

1.1.11 D

1.1.12 B

1.1.13 D

1.1.14 A

1.1.15 C

1.1.16 B

1.1.17 C (34)

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1.2 MATCHING ITEMS

1.2.1 D

1.2.2 F

1.2.3 A

1.2.4 M

1.2.5 H

1.2.6 J

1.2.7 I

1.2.8 C

1.2.9 K

1.2.10 B

1.2.11 L

1.2.12 G (12)

1.3 ONE TERM/CONCEPTS

1.3.1 Short run

1.3.2 Homogeneous

1.3.3 Shut down point

1.3.4 Economic profit

1.3.5 Industry

1.3.6 Perfect market

1.3.7 Economies of scale

1.3.8 Short run

1.3.9 Fixed

1.3.10 Break-even point/ normal profit    (10)

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QUESTION 2

2.1 Answer all questions

2.1.1 Name any TWO examples of a perfect market structure

• Agricultural sector
• Foreign exchange market     (2)
Accept any correct response

2.1.2 Give TWO examples of fixed costs

• Rent
• Property tax
• Insurance
• Depreciation
• Salaries (2)
Accept any correct response

2.1.3 Give TWO examples of explicit costs.

• Rent
• Interest
• Wages (2)
Accept any correct response

2.1.4 Name TWO institutions responsible for regulating competition

in South Africa

• Competition Commission
• Competition tribunal
• Competition appeal court (2)

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PART 2 MIDDLE & HIGH ORDER QUESTIONS

1 Distinguish between economic and normal profit in the perfect

market.

Economic profit

• This occurs when the average revenue is greater than the average
cost
• It is experienced when the average cost per unit is less than the
price
• Economic profit is made when there is addition to the normal profit
(4)

Normal profit

• Minimum earnings required to prevent the entrepreneur from

leaving the industry
• Maximum return the owner of the firm expects to receive to
keep on operating in the industry
• This occurs when the total revenue (TR) is equals to the total
cost (TC)/when the average revenue (AR) is equals to the
average cost (AC) (4)

2 Explain the roles played by any TWO key institutions that

monitor competition in South Africa

Competition Commission

• Investigates any restrictive business practices and abuse of dominant

market power
• Grants permissions in cases of mergers and take-overs after
evaluation has been made
• Makes recommendations about penalties for businesses found guilty of
uncompetitive behaviours

Competition Tribunal

• Accepts or rejects the recommendations made by the Competition

Commission
• It is the tribunal of record and independent from the other competition
institutions
• Grant exemptions, authorises, or prohibits large mergers, adjudicates if
misconduct takes place

Competition Appeal Court

• Makes final rulings on disputed matters by amending or confirming

the decisions

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• Has the similar status to that of a High Court

• It has jurisdiction throughout the country and may give judgements
or orders that the circumstances require.    (8)

3 Explain the aims of South Africa’s anti-monopolistic policy

• To promote economic transformation by making sure that there is

no restriction on entry in any industry
• To curb an economic power of big businesses in South Africa in
order to achieve a more equitable distribution of income and wealth
• To help South African businesses to become more competitive and
sell at lower prices
• To ensure that South African competition law is in line with
international standards
• To prevent monopolies and other powerful businesses from abusing
their power
• To regulate the formation of mergers and acquisitions who wish to
exercise market power
• Stop firms from using restrictive practices like fixing prices and
dividing markets
• Regulates transfers of ownership in keeping with public interest
• Provide environment to compete effectively in internal markets
• Provide markets in which consumers have access to freely select
quantity and variety (8)
Accept any correct response

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4 With the aid of the graph, explain the economic loss of the perfect
competitor.


          Graph: 4
• The minimum point of the short-term average cost curve (AC) is higher than
the market price B 
• The business is in equilibrium at point E where MR = MC 
• At the market price B, the firm will produce the quantity 100 
• At this point, however, total cost exceeds total revenue 
• In view of its cost structure the business is making a loss at point b which is
represented by the area, ABEC       (4) 
(8)














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5 Use the graph of total cost (TC) and total revenue (TR) to explain
profit maximisation in a perfect market.

       Graph Max: 4

• The firm will make profits between points A and B (TR and TC) 
where the total revenue exceeds the total cost 
• Profit is maximised when the gap between TR and TC is the 
greatest 
• This occurs at 4 units of production at a cost of R40 
• Breakeven points will occur at points A and B 
• Economic loss will occur at output of 1 and 6 units according 
to the graph above, where TC is more than TR
Explanation Max: 10
Accept any other correct graph with corresponding explanation

6 How effective is competition policy in regulating mergers and

takeovers in South Africa?
The competition policy is effective in:

• Putting in place the competition commission, competition tribunal

and competition appeal court to investigate and approve mergers
and takeovers, investigating whether it is going to substantially
prevent or lessen competition 
• Taking into account the public interest effects such as its impact on
employment 
• Considering the ability of small businesses owned by
disadvantaged to become competitive 
• Ascertaining the merger of Massmart and Wallmart where they
ensured no job losses occurred for a certain period of time 

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• Providing services to local businesses to ensure sustainability of

local producers
• Ensuring that mergers are not for the sake of creating market power

• Looking into the details of each case and come to a suitable
decision 
• Declining the merger where Air Link wanted to acquire SAfair in
2018, to limit competition due to a few firms in that market 
• Approving mergers with conditions, e.g., between Regent and
Hollard insurance companies in 2017 The condition was that
no employees may be retrenched for a period of 3 years after the
merger 
• Approving a successful merger with no conditions attached, in the
Mondi acquiring Excelsior technologies in 2017 (Max 10) 
(Accept other correct relevant higher order response)
(Allocate a maximum of 2 marks for mere listing of facts or
examples)

7 Outline the challenges that the competition policy in South Africa
face in achieving their goals.

• Fines charged are too lenient and do not cover the costs suffered
by consumers. 
• Fines are too lenient to act as a deterrent to other businesses
colluding which is evident from the larger number of firms being
investigated regularly.
• Lack of human resources results in some investigations or act of
collusion sometimes goes undetected. 
• Cases of restrictive practices take longer to investigate and lose
merit in the process. 
• Corruption and political interference/interests prevent some acts of
collusion from being investigated properly 
• Some mergers and acquisitions only protect workers in the short
term. Eventually workers are retrenched. 
• Artificial monopolies and other powerful businesses abuse their
market power as the competition policy fails to create opportunities
for new entrants to the market 
• The monitoring measures to identify collusion practices are
compromised due to a lack of information as many investigations
takes place after a long period of collusion. 
• The monitoring and enforcement of competition policies is difficult
due to the vastness of areas     (max 8)
(Accept any other correct relevant response)

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8 How can the government discourage firms from engaging in anti-

competitive behaviour?

• Granting licenses to other businesses to compete against existing

oligopolies. ✓✓
• Imposing heavy fines on firms found guilty of anti-competitive
practices/ behaviour. ✓✓
• Speeding up investigations on firms/businesses suspected of
collusion/price fixing. ✓✓
• Prohibiting mergers and takeovers by oligopoly businesses with the
aim of reducing competition. ✓✓
• Implementing/introducing maximum prices on markets where
there are possibilities of price fixing. ✓✓
• Regulating unfair business practices, such as acquiring exclusive
rights to resources, which may prevent new firms from entering
the market.✓✓ (8)
(Accept any other correct relevant response)

9 How successful is competition policy in promoting a more

competitive economy?

The competition policy is successful by:

• Making provision for institutions like the Competition Commission,

Competition Tribunal and Appeal Court to investigate any unfair
competition in the country 
• Functioning as an investigator and evaluator of restrictive business
practices 
• Making recommendations about penalties for businesses found
guilty of abuse 
• Implementing the Competition Tribunal who accepts or rejects the
investigation and recommendation of the Competition Commission
and confirms penalty imposed 
• Making it possible for businesses to appeal for a penalty imposed
by the Competition Appeal Court 
• Curbing the economic power of big conglomerates to arrive at a
more equitable distribution of income and wealth 
• Regulating mergers and takeovers to control market power of
mergers 
(Accept practical examples where Competition policy has
succeeded)

The competition policy is not successful because of
• Frequency of investigations into collusive behaviour e.g.,
cement / steel / bread / bank industries
• Fines were too lenient and not acceptable to some parties 
• Having too many competitors still preventing affirmative action/young
black industrialists entering into the market (BEE) 

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10 With the aid of a well labelled graph, explain the shut- down point of
the individual firm in the perfect market.

• It is important that a firm's revenue covers it average variable costs or

variable costs to stay in business 
• The lowest level of production is 100 where AR = AVC / MC = AVC
(shutdown point) 
• The firm will not produce at prices lower than R40 as AR will be 
less than AVC        (8) 
(Accept any other correct relevant response) 

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IMPERFECT MARKETS

PART 1 LOW ORDER QUESTIONS

QUESTION 1

1.1 MULTIPLE CHOICE

1.1.1 A

1.1.2 C

1.1.3 D

1.1.4 B

1.1.5 D

1.1.6 B

1.1.7 C

1.1.8 D

1.1.9 B

1.1.10 C

1.1.11 D

1.1.12 A

1.1.13 A

1.1.14 D

1.1.15 B

1.1.16 C

1.1.17 C

1.1.18 D       (36)

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1.2 MATCHING ITEMS

1.2.1 H

1.2.2 C

1.2.3 A

1.2.4 M

1.2.5 F

1.2.6 J

1.2.7 E

1.2.8 G

1.2.9 K

1.2.10 D

1.2.11 L

1.2.12 B         (12)

1.3 ONE TERM/CONCEPTS

1.3.1 Natural

1.3.2 Duopoly

1.3.3 Price leadership/ tacit collusion

1.3.4 Artificial

1.3.5 Monopolistic competition

1.3.6 Duopoly

1.3.7 Price leadership

1.3.8 Monopolistic competition

1.3.9 Monopolistic competition

      (9)

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QUESTION 2

2.1 Answer all questions

2.1.1 Name TWO characteristics of monopolistic competition.

• Existence of large number of firms

• Product differentiation
• Price setter
• Downward sloping demand curve
• Firms are acting independently
• Non-price competition
• Free entry and exit from the market   (2)

2.1.2 Name TWO methods of non-price competition

• Advertising
• Loyalty point
• Door-door sales
• After hours sales services
• Packaging
• Branding (2)
Accept any correct response

2.1.3 Name TWO broad types of monopolies

• Natural monopoly
• Artificial monopoly
     (2)

2.1.4 Give any TWO examples of monopolistic competitive markets

• Supermarkets
• Fast-food restaurants
• Clothing shops
• Furniture shops
• Medical doctors
• Hair dressers
• Car dealers       (2)
Accept any correct response

2.1.5 Name TWO types of collusion.

• Overt/explicit/formal
• Tacit/implicit/informal (2)

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PART 2 MIDDLE & HIGH ORDER QUESTIONS

1 Distinguish between price leadership and cartel as forms of

collusion

Cartel
• Cartel is an organisation of businesses in an oligopoly that comes
into existence with the aim of operating like a collective monopoly
• Collusion that occurs openly and formally between oligopolists
• This is also called overt/ explicit collusion
• Oligopolists will agree on prices, market share, advertising
expenditure and product development (4)

Price leadership

• Occurs when a dominant firm in the oligopolistic market

structure increases its prices hoping that other firms will follow
• This form of collusion occurs when oligopolies collude silently
and informally amongst themselves on prices and quantities to
maximise profits
• It is also called tacit/implicit collusion
• This type of collusion occurs when one firm fixes the price and the
others accept it as a market price (4)
Accept any correct response

2 Compare monopolistic competition with perfect competition

• Both market structures have many producers

• Under monopolistic competitor is a price setter because the
demand for goods or services is relatively elastic, while the perfect
competitor is a price taker and has no influence on the market
price
• Products produced by the monopolistic competitor are differentiated
meanwhile for the perfect competitor are homogeneous
• Productive inefficiency is possible under monopolistic competition as
the producer may choose to use resources optimally while under
perfect competition the producer produces at the lowest cost and
supplies maximum output, hence productive efficiency occurs.
• The demand curve under monopolistic competition is relatively elastic
downward sloping curve, while for the perfect competition is perfectly
elastic horizontal curve
• Both market structures make normal profit in the long run (8)
Accept any correct response and accept tabular form

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3 Why do oligopolies often collude though it is illegal in South Africa?

Because:
• It is an effort to try reduce uncertainty
• They will like to enjoy the advantage of high profit and limit other
businesses to enter the market
• They want to control the market and form collective monopoly
• The cost of doing business in oligopoly is very high, and requires a
large amount of money
• Firms are mutually interdependent and large amount of money is
required to monitor each other’s actions and this increases the firm’s
total cost of doing business
• Collusion makes firms to engage in cooperation with one another
instead of competing (8)

4 Draw a well labelled graph to illustrate the economic profit in the

monopoly market

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5 Differentiate between the monopoly and monopolistic competition under

nature of product

Monopolistic Competition

• Each firm sells a slightly differentiated product 

• Differences might be real or imagined / differences can be based on the
opinion of consumers
• Producers can compete against one another on the grounds of unique
characteristics (4)
Monopoly

• The good or service is unique 

• There is no close substitutes
• The consumer does not have a choice between alternative goods
and services        (4)
(8)
(Accept any other correct relevant response)

6 Draw a fully labelled graph to illustrate the economic loss of the

monopoly market structure

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7 Draw a fully labelled graph to illustrate the long-run equilibrium of the

monopoly.

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8 Discuss the challenges that the monopolist might face if excessively high
prices are charged for the products.

The monopolist would not charge very high prices because:

• increasing the price might reduce the demand for the product that will
reduce revenue and decrease profits 
• consumers with limited budgets might switch to substitutes even though
substitutes might not be close to the product of the monopolist ✓✓
• their price increases are sometimes restricted by regulatory bodies such
as NERSA (price of electricity) if electricity becomes too expensive,
consumers can switch to gas or firewood 
• a business might close down due to a persistent reduced demand and the
loss of revenue ✓✓
• doing so could encourage other businesses to enter the market and
provide cheaper alternatives but not of the same quality ✓✓ (8)
• Accept any correct response

9 With the aid of a correctly labelled graph, briefly explain why it is

advisable for oligopolies to sell at market price.

• When oligopolists sell at market price, they yield more income. 
• Suppose an oligopolist is selling at a market price of R70 and 40 units of
outputs are sold. Total revenue is R70 x 40 = R2800 
• When a firm wants to increase profits by increasing the price to R90,
quantity demanded will fall to 10 units and total revenue would decrease to
R90 x 10 = R900/ If a firm wants to increase profits by reducing the price
to R60, the quantity demanded will increase to 42 units, total revenue
would be R 2520       (6)
Accept any correct graph with correct corresponding explanation
(10)

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10 Evaluate the impact of collusion in the economy.

Negative

• Reducing competitiveness in the long run by decreasing GDP and

employment 
• Allowing price fixing, market sharing and output control by cartels and
price leadership 
• Creating scarcity in order to increase prices while also protecting
inefficient suppliers 
• Forcing community, consumers, businesses and even governments to
pay higher prices for goods and services 
• Distorting economic markets and slowing down innovation because
there is little incentive to spend money on research and development


Positive
• Benefiting the supplier by logically fixing prices 
• Benefiting third parties e.g., OPEC (oil cartel) and Greenpeace
actually have similar interests - OPEC artificially increase the price of oil
through collusion. This reduces quantity consumed. This decreases the
'amount' of negative externalities of pollution
• Benefiting the government through increased revenue via indirect 
taxes on inflationary prices       (10)
Accept any other correct relevant response) 

11 Evaluate the impact of imperfect competition on consumers.

Negative
• Most businesses operating in imperfect markets maximise profits by
supplying less than the optimal quantity of goods or services produced
which means that some consumers’ needs may not be met 
• Reduced quantities lead to higher prices which may exclude lower
income groups 
• New businesses are sometimes prevented from entering the industry,
thereby limiting competition, which prevents consumers from enjoying
lower prices and a variety of goods 
• Collusion which is rife in oligopoly markets results in higher prices which
at times prevent some consumers to afford the product 
• Consumers pay higher prices in the imperfect markets due to the fact
that production does not take place at the lowest point of the LAC-
curve 

Positive impact
• Imperfect markets can stabilise supply or output of certain goods and
services, that requires a vast amount of input capital, ensuring a variety of
goods available to consumers 
• Imperfect markets can also provide better quality product to the consumer;
large corporations have Research and Development units that constantly
develop new technology and improved production methods 

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• Patent rights give the patent holder exclusive rights to produce a product;
this stimulate innovations and inventions (new products) that could be
beneficial to consumers 
(Accept any other correct relevant response)

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MARKET FAILURES

PART 1 LOW ORDER QUESTIONS

QUESTION 1

1.1 MULTIPLE CHOICE

1.1.1 C

1.1.2 B

1.1.3 A

1.1.4 D

1.1.5 B

1.1.6 C

1.1.7 A        (14)

1.2 MATCHING ITEMS

1.2.1 A

1.2.2 J

1.2.3 D

1.2.4 I

1.2.5 C

1.2.6 B

1.2.7 E

1.2.8 F

1.2.9 H         (9)

1.3 ONE TERM/ CONCEPTS

1.3.1 Minimum wage

1.3.2 Opportunity cost

1.3.3 Subsidy

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1.3.4 Social cost

1.3.5 Subsidy

1.3.6 Externality

1.3.7 Social cost

1.3.8 Negative externality

1.3.9 Minimum price

1.3.10 Black market

1.3.11 External cost

1.3.12 Pareto efficiency      (12)

QUESTION 2

2.1 Answer all questions

2.1.1 Name TWO types of inefficiencies that can exist in the imperfect
market

• Productive
• Allocative        (2)

2.1.2 Give two examples of merit goods

• Education
• Health care
• Safety
• Disaster management      (2)
(Accept any correct response)

2.1.3 Give TWO examples of community goods

• Defense
• Police services
• Street lighting (2)
Accept any correct response

2.1.4 Give TWO examples of positive externalities.

• Education
• Health care

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• Skills training
• Job creation
• Infrastructure development    (2)
Accept any correct response

2.1.5 Name TWO features of public goods.

• Non-rivalry
• Non-excludability
• Non-rejectability      (2)

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PART 2 MIDDLE & HIGH ORDER QUESTIONS

1 Analyse productive inefficiency with the aid of the production possibility curve
graph

Production Possibility curve

Tea

• C

0 B Coffee

Heading: I mark
PPC: 1 mark
Axes: 1 mark
Inefficient point: I mark
Total: 4 marks

• All points on the PPC AB illustrate combinations of tea and coffee produced
when resources have been efficiently utilised
• Any point on the PPC illustrate productive efficiency.
• At point A the business is allocating all of its resources to produce tea
• At point B all available resources are used to produce coffee 
• Any point to the left of PPC indicates that resources are not fully utilised
and this is point C on the PPC and is known as inefficient point  (4)
(8)

2 Explain why governments sometimes proceed with a project even if the

private costs exceed the private benefits in a cost benefit analysis

Governments might proceed with a project because:

• the primary objective is to provide public goods and services. 

• social costs and social benefits are also taken into account when
deciding on a project. 
• a service is vital to the existence of the community. 

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• a need for infrastructure is necessary but might not have any benefits
in terms of profit, e.g., the building of a community centre or a
bridge
• funding of these projects is mainly financed through tax revenue and
does not impoverish any individual as such. 
• this infrastructure adds to the welfare of the community at large and is
non-excludable to anyone using it.     (8)
(Allocate a maximum of 2 marks for mere listing of facts / examples) 

3 Explain with an aid of the graph the effect of a negative externality on

the production level

Negative externality
Cost/Price

D S1
S

P1 b

P a

S1

D
S

0 Q1 Q
Quantity

(4)

• At point a, the price charged for the good is P and Q is the quantity sold 
• This represents private costs 
• However, if it was possible to calculate the external costs, these could have
been added to the private costs 
• If consumers were required to pay the full cost (social cost), a different
equilibrium would prevail at b, giving a higher price of P1 and a reduced
output of Q1         (6)
(Accept any other correct relevant response) (10)

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4 Distinguish between productive and allocative efficiency without the use

of graphs

Productive inefficiency

• The business does not produce at the lowest possible cost. 
• When businesses do not maximise outputs from given inputs 
• Resources are not used appropriately to produce the maximum
number of goods. 
• There is room to reduce cost without producing fewer goods or without
producing lower quality goods 

Allocative inefficiency

• When resources are not allocated in the right proportions and the
product mix does not meet the consumers' tastes. 
• Some goods might be oversupplied, while other goods might be under-
supplied. 
• Businesses are allocated resources inefficiently and produce goods
and services that consumers do not want 
• The quantities required by the consumers are not available  (4)
(Accept any other correct relevant response) (8)


5 Why is cost-benefit analysis (CBA) necessary for public sector projects?

• CBA leads to objective decision-making by weighing up costs and

benefits 
• CBA is applied to those projects where it is expected there will be a
significant difference between social costs and benefits, in other 
words a likelihood of market failure 
• It includes the wider social impact and externalities in the decision-
making process 
• It is used to make final decisions about whether the project should
proceed or not 
• There is an absence of market signals to support whether the 
project can go ahead or not  (8)


6 Briefly discuss merit and demerit goods as a cause of market failure.

Merit goods
• These are goods/services that are deemed necessary or beneficial to
the societye.g., education, health care 
• These goods are highly desirable for general welfare but not highly
rated by the market, therefore provide inadequate output/supply
• If people had to pay market prices for them relatively too little would be
consumed – the market will fail to produce

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• The reason for undersupply of merit goods is that the market only takes
the private benefits into account and not the social benefitsMax: 4

Demerit goods
• These are goods/services that are regarded as bad or harmful for
consumption hence we should use less of thesee.g., alcohol,
cigarettes 
• There is an oversupply of demerit goods. Some consumers may be
unaware of the true cost of consuming them
• Demerit goods lead to an increase in social costs, therefore, the
government charges sin tax / excise duties to discourage the
consumption of such goods     Max: 4
Accept any other correct relevant response (8)

7 Briefly discuss the reasons for a cost-benefit analysis.

• CBA helps to make better decisions on how scarce resources are

allocated to satisfy wants 
• Involves making decisions based on comparing economic benefits with
economic costs of a project 
• The feasibility of the project is determined by subtracting costs from
benefits, if the difference is positive (benefits > costs) then the project
could be undertaken 
• Greater objectivity in decision making
• There are no market signals like supply and demand to guide efficient
resource allocation (leads to subjectivity in decision making)  (8)
(Accept any other correct relevant response)

8 How effective has government spending been in addressing market
failure?
Government spending is effective in addressing market failure by:

• transferring income directly to the poor such as child support grants,

unemployment benefits and thereby reducing income inequalities
• providing goods free of charge e.g., community goods, education
etc. and allowing access to basic needs to all citizens. 
• implementing employment creation programmes, which will create
jobs and improve skills for all types of labour e.g., public works
programme, subsidising producers to encourage production of merit
goods as they are beneficial to the society.
• spending on campaigns that will inform public about policies and
legislation that protects them against exploitation. 
• investing on infrastructure development such as roads, railways
and communication networks as private sector find these
unprofitable or difficult to finance.    (Max 10)
(Accept the negative evaluation of government spending)

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9 How would implementation of maximum prices impact negatively on the

economy?

• Causing a shortage of goods and services in the economy. ✓✓

• The shortage in supply will result in the economy declining. ✓✓
• Developing of black markets where producers may attempt to sell
the goods at higher prices. ✓✓
• Producers of goods and services may leave the market as they are not
making sufficient profits. ✓✓
• Investors may withdraw their investment due to low return on their
investment. ✓✓
• Decline in economic growth and investment withdrawal will result in
loss of jobs leading to an increase in the level of unemployment. ✓✓
• Maximum prices result in a decrease in supply which leads to an
increase in prices of goods and services. ✓✓ (8)
• (Accept any other correct relevant response)

10 Explain by means of a neatly drawn graph, the impact of maximum

prices on the market.

• The government might set the price of a good or service at a maximum

level (P1-maximum price) that lies below the market price P 
• The drop in price will cause the demand for the good or service to
increase while producers will decrease their supply(under supply)
• The quantity demanded will increase from Q to Q2, and the quantity
supplied will decrease from Q to Q1 
• This will cause a shortage of goods and services on the market 
• This leads to the development of black markets (Max 4) 
(Accept any other correct answer)

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11 With the aid of the graph, explain the impact of minimum prices on the
market.

• A minimum price is set to help producers because the equilibrium 

price is too low 
• It enables producers to make a comfortable profit 
• It encourages producers to supply important essential goods 
• A minimum price will create a surplus in the economy (difference
between Q2 and Q1) 
• A surplus will mean that government will have to buy the surplus 
and dump it locally or abroad      (4)
(Accept any other correct relevant responses) (8)

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12 How has the implementation of minimum wages advantaged the worker in

South Africa?
• Ensuring that many farmworkers and domestic workers are better off
than before and the basic human rights are protected by law
• Workers enjoy a better living standard and are ensure of sustainable
income 
• They can also enjoy unemployment benefits for which they did not
qualify before 
• They are also entitled for sick leave and annual leave with pay 
• Women are also entitled to maternity leave without the risk of
becoming unemployed     (10 marks)
Accept any other correct response

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INFLATION
PART 1 LOWER ORDER QUESTIONS
1.1. MULTIPLE CHOICE
1.1.1 B √√
1.1.2 D √√
1.1.3 D √√
1.1.4 C √√
1.1.5 B √√
1.1.6 C √√
1.1.7 C (14)
1.2 MATCHING ITEMS
1.2.1 B √
1.2.2 D √
1.2.3 C √
1.2.4 A √
1.2.5 H √
1.2.6 J √
1.2.7 I √
1.2.8 E√
1.2.9 F √ (9)
1.3 ONE TERM/CONCEPTS
1.3.1 Deflation √
1.3.2 Inflation targeting √
1.3.3 Demand pull inflation √
1.3.4 Administered price inflation √
1.3.5 Administered price √
1.3.6 Stagflation √
1.3.7 Cost push inflation/ Cost inflation/ Producer price index √
1.3.8 Inflation √
1.3.9 Hyperinflation √ (9)

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PART 2 LOW & MIDDLE ORDER QUESTIONS

2.1 Name any TWO types of consumer inflation?
• Headline (CPI) √
• Core √
• Administered price √ (2)
2.2 Name any TWO ways to measure inflation?
• Indexes (CPI and PPI) √
• Weighting √
• Inflation rate √
• Implicit GDP deflator √ (2)
2.3 Name the institution that is responsible for controlling inflation in South
Africa?
• The South African Reserve Bank (SARB) √ (1)
2.4 Name the South African institution responsible for combatting inflation?
• The South African Reserve Bank (SARB) √ (1)
2.5 Briefly describe the term hyperinflation?
• When a country experience extravagant and unrestrained general
price increases / in excess of 50% / that leads to the value of the
currency becoming worthless. √√ (2)
2.6 Briefly describe the term inflation?
• Inflation is a sustained and significant increase in the general price level over
a period of time. √√ (2)
2.7 Briefly describe the term headline inflation?
• The inflation rate that represents the cost of a basket of goods of an average
South African household which is measured by the Consumer Price Index /
unadjusted CPI figure. √√ (2)
2.8 Briefly describe the term hyperinflation?
• It is a type of inflation whereby prices rise so rapidly that people lose
confidence in the value of money. / Occurs when the inflation rate is so high
that it can be described as out of control. √√ (2)
2.9 Briefly describe the term core inflation?
Core Inflation:
• Is a consumer inflation that is based on an adjusted CPI inflation rate √√
• Volatile elements such as fuel and subsidised elements such as food have
been removed from the calculation √√

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• Affected by government intervention and policy √√

2.10 Briefly describe the term repo (repurchase) rate?
• It is the rate that commercial banks pay the SARB when borrowing money /
Rate at which the Reserve bank lends money to commercial banks. √√ (2)
2.11 Explain the term retirement lump sum?
• A cash payment / money that you receive on retirement√√ (2)
2.12 Explain the importance of measuring inflation in the economy?
• To determine whether the inflation rate is still within the target range√√
• It helps policy makers to make informed decisions relating to monetary
policy√√
• To measure the cost of living which is used for collective bargaining√√ (2)
2.13 Explain the effect of a decrease in the general price level on producers?
• Producers will earn less revenue resulting in lower profits√√
• Producers may leave the market for other profitable business ventures
• Low prices will result in businesses reducing their production levels and
employ less workers√√
• Producers may access some of their inputs at a lower cost which will reduce
cost of production. √√ (2)
2.14 Explain the influence of inflationary expectations on consumption
expenditure?
• Under inflationary conditions, consumers expect prices to rise further, and start
to buy more goods e.g., petrol prices √√
• Labour unions wish to protect their members' income against erosion of
purchasing power caused by inflation √√ (2)
2.15 Which school of thought believes that inflation is influenced by the total
money supply?
• Monetarist √ (1)
2.16 What is the inflation target range set by the SARB?
• The inflation target is between 3% and 6% √ (1)
2.17 How can the South African Reserve Bank ensure that the CPI fluctuates
within the 3%– 6% band?
• SARB will adjust the repo/interest rate√√
• Selling or buying government bonds to commercial banks (open market
transactions) √√
• Adjust the cash reserve requirement √√
• Appeal to banks to limit the granting of credit (moral suasion) √√ (2)

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2.18 How will a decrease in the inflation rate benefit low-income earners?
• It will enable low-income earners to satisfy more needs √√ (2)
2.19 How can the government use fiscal policy to combat inflation?
The government can combat demand-pull inflation by:
• Increasing the level of taxation to decrease disposal income and curb excess
demand and spending. √√
• Implementing or increasing surcharge on imported goods to curb the buying
of imported goods. √√
• Cutting back on spending such as cancelling infrastructure development
project, e.g., building of dams and public buildings.√
• Borrowing less to finance expenses thereby not contributing to an increase of
money in circulation. √√ (2)
2.20 How would the cost of imported key inputs contribute to a higher
inflation rate?
• When key inputs (machinery) are imported from countries that experience
inflation, the cost of locally produced goods will increase / If supplier countries
experience inflation, countries that import key inputs from them will experience
a higher inflation as the cost of production will increase √√ (2)
2.21 How can the government use the fiscal policy to combat demand pull
inflation?
• Increase in direct tax √√
• Increase in indirect taxation √√
• Reduction in government expenditure √√
2.22 Why is a monetary policy effective in reducing demand-pull inflation?
• Monetary policy decreases aggregate spending by increasing interest rates
√√
• An increase in the cash reserve requirements limits the amount available to
consumers, which reduces demand √√
• Sale of government bonds (open market transactions) reduces the money
supply where banks have less money to supply √√
• Banks can be persuaded by the central bank to limit the amount of credit √√
• Helps to raise the cost of credit in the various sectors of the economy√√ (4)
2.23 How would an increase in value-added tax impact on the economy?
An increase in VAT could:
• ensure increased government revenue which would allow government to
provide more social services to benefit communities √√

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• lead to a decrease in government revenue due to consumers reducing their

consumption √√
• influence production (supply) negatively, due to a decrease in demand through
higher prices √√
• impact the lower income groups more adversely due to the regressive nature
of the taxation √√
• impact negatively on the level of aggregate demand due to increased prices,
that might lead to more unemployment √√
• stabilize the inflation rate due to a lower demand √√ (4)
2.24 How can price stability affect the economy positively?
Price stability will influence the economy positively by:
• reducing inflation expectations among consumers, businesses and workers√√
• allowing businesses to make investments in long term projects knowing that
prices will be stable √√
• increasing foreign direct investment to benefit economic growth through mass
production √√
• allowing consumers to make better decisions that can result in an increase in
aggregate demand and economic growth √√
2.25 How can pensioners safeguard themselves against the eroding effect of
inflation?
• The retirement fund should be invested in high yield returning
investment/portfolios √√
• Purchasing of property√√
• Purchasing of blue-chip shares √√
• Specialized investment tools√√ (4)

PART 3 MIDDLE & HIGH ORDER QUESTIONS

3.1 How would an increase in the prices of imported key inputs, such as oil,
affect the domestic economy?
• When the prices of key inputs that are imported increase, the domestic cost of
production increases especially in the manufacturing sector. √√
• Production of goods and services will decrease resulting in low economic
growth. √√
• Unemployment will increase as businesses retrench some of their workers. √√
• Producers increase the prices of their goods to compensate for the loss of
profits, which will stimulate cost-push inflation. √√
• High costs of crude oil will lead to an increase in the prices of fuel resulting in
high transport costs. √√
• Investors may be discouraged to invest due to increased cost of doing
business. √√

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• The country's exports may decrease due to an increase in domestic prices of

goods and services. √√
• The trade balance of the current account may therefore be reduced as a result
of a decrease in exports. √√
• The country will earn less foreign exchange/currency and making it more
difficult to pay for imports. √√
• Increase in oil prices may result in higher fuel prices which may increase cost
of production for different industries. √√
• Increase in prices of agricultural inputs such as fertilisers and other chemicals
may result in higher food prices in the economy. √√
• Increased cost of importing machinery and equipment may lead to low
production of goods and services. √√ (8)
3.2 How will the consumer price index influence the economy?
• Inflation influences the economy by distorting prices and it is no longer a
correct indicator of the value of goods and services √√
• Supply useful indicators of price movements, which might channel investment
in a certain direction √√
• Compare price indexes of different months, that helps to assess the state of
the economy √√
• Trade unions negotiate wage increases that are not in line with an increase in
productivity of workers √√
• SARB uses the CPI to apply suitable monetary policy options, that will help to
pursue the inflation target of 3 – 6% √√
• The selection of goods and services in the calculation of the CPI does not
always represent the average household and might influence each household
differently √√
• Households are worse off as the CPI is not a true reflection of the real impact
to households in the economy √√ (8)
3.3 How effective has inflation targeting in South Africa been to ensure price
stability?
Inflation targeting has been effective by:
• curbing demand–pull inflation through limiting consumption expenditure√√
• managing consumers' expectations about future trends in inflation √√
• ensuring the central bank adjust interest rates if inflation is outside the target
range of 3-6% √√
• stimulating economic activity due to the relative small changes in input prices
• allowing businesses to make investment decisions knowing that prices will be
stable √√
• providing an explicit measure that serve to improve discipline and
accountability of the SARB √√

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Inflation targeting has not been effective in:

• controlling cost-push inflation since it was designed to control the aggregate
demand√√
• controlling many factors, because the increase in costs of production is
influenced by factors that fall outside the control of the monetary policy e.g.,
increase in oil price √√ (8)
3.4 Explain the negative effects of inflation on investors and people with a
fixed income?
Inflation will influence investors negatively by:
• decreasing the value of the investors' assets with a fixed nominal value√√
• giving the investors a fixed return if the assets are held until maturity e.g., fixed
deposits/government bond as it decreases in value as inflation increases √
• discouraging foreign investors from investing money in a country with a high
inflation rate√√
Inflation will influence people with fixed income negatively by:
• increasing at a faster rate than the fixed income people earns √√
• decreasing their buying power to purchase fewer goods and services, as
prices increase e.g., the poor who receive social grants/pension/retired people
√
• saving less because they became poorer √√ (8)
3.5 Briefly discuss demand-pull inflation and cost-push
inflation?
Demand Pull Inflation:
• Demand-pull inflation occurs when aggregate demand in
an economy exceeds aggregate supply √√
• Groups responsible for demand inflation are consumers
(no savings), businesses (create more credit) and
government (less tax is levied) √√
• Foreigners contribute to inflation by increasing the
demand for our goods and services through increased
exports √√
• A relative increase in aggregate demand components of
C, I, G and M√√
• Too much money is chasing too few goods√√

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• Increase in wages without an increase in productivity √√

Cost Push Inflation

• An increase in labour costs due to aggressive trade union
negotiations√√
• Producers increase profits – prices rise more than the rise
in production cost √√
• State imposes a higher VAT rate √√
• Expensive imported products (intermediate goods) cause
an increase in the prices of locally finished goods √√
• Lower productivity but the same remuneration √√
• Natural disasters i.e. floods or droughts increase the cost
of production √√
• Increased total costs on the supply side √√
3.6 Briefly discuss the producer price index?
• PPI is very useful in the analysis of inflation, due to the fact
that PPI measures the cost of production √√
• PPI measures prices at the level of first significant
commercial transaction / Prices of imported goods are
measured at the point where they enter the country and
manufactured goods are priced when they leave the
factory√√
• The basket consists of goods only (no services) √√
• Capital and intermediate goods are included √√
• Prices exclude VAT √√
• Interest rates are excluded √√
• Prices of imported goods are shown explicitly √√ (8)

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ESSAY
• Discuss the consequences of inflation. (26 marks)
• How does foreign direct investment influence inflation in the economy?
(10 marks)

INTRODUCTION
Inflation refers to a sustained and significant increase in the general level of prices
over a period of time 
(Accept any other correct relevant response) (Max. 2)

BODY: MAIN PART

Creditors
• Creditors (lenders) suffer due to price increases because they get money back
which has a lower purchasing power, especially if the interest rate has been
below the inflation rate / inflation harm creditors as they lose due to a fall in the
real value of money 
• Changes in price levels affect debtors and creditors differently at different time
periods 

Debtors
• Debtors (borrowers) receive money with a high buying power and pay back with
money with a lower buying power 
• Borrowers benefit from price increases
• During periods of rising prices, debtors gain in real terms because the contract
was signed in advance and cannot be changed 
• Debtors receive the money with a relatively high purchasing power and repay
their loans with low purchasing power, unless interest rates are sufficient to
prevent the situation 

Salary and wage earners
• Price increases affect people negatively because their incomes are relatively
fixed 
• Real wages fall sharply during period of high inflation as a result of a decline in
capital stock and a shift in relative prices 
• Inflation can impoverish large segments of the population by eroding the real
wages
• Relative wages are the important component of wealth; they constitute the main
source of income for many households, especially for the less well-off 
• The behaviour of real wages therefore has a direct bearing on income
distribution and the level of poverty 
• This group includes retired people, pensioners and the poor, that will
experience the erosion of spending power and eventually earn too little to
survive 
• Wage increases are lower than the inflation rate increase
Investors and savers
• Assets with a fixed nominal value have a fixed return and lower purchasing
power as prices increase 
• Purchasing power is reduced unless the interest rate is above the inflation rate

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• People who invest in negotiable instruments such as shares, often benefit from
inflation, because during periods of inflation, interest rates are increased to
encourage savings 
• Investors in assets with flexible market value gain when prices increase,
because their assets with a flexible market value increase at least
proportionately to the rate of inflation 
• Often, the prices of these assets increase more rapidly than increases in the
general price level 
• People save money for long periods with the aim of using these funds to meet
future expectations, these savings may be invested as fixed deposits, in the
money market, as life policies or in pension funds 

Tax payers
• With inflation taxpayers' nominal income rise although their real income remain
unchanged, because taxes are levied on the nominal income but not on real
income, and this affects the purchasing power of tax payers 
• Taxes are levied on nominal income and not on real income
• If the income tax brackets remain unchanged, inflation increases the average
rate of personal income tax 
• Individuals will have to pay higher taxes even if they are actually no better off
than before – bracket creep leads to a redistribution of income from taxpayers
to the government 

Industrial peace
• Wage bargaining is accompanied by strikes and mass action
• These actions can sometimes spill over into violence which affects society at
large 
• Inflation leads to demands for increased wages as trade unions put increasing
pressure on employers to raise wages and salaries 
• In extreme situations, in the presence of exceptionally high inflation together
with a government that is determined not to yield to wage increase demands
(which can push inflation to even higher levels) widespread civil unrest would
follow 

Inflation has an adverse effect on a country's balance of payments

• If a country's rate of inflation is higher than that of its trading partner, the prices
of exported goods increase while the prices of imported goods decrease 
• This leads to loss of competitiveness in the export market leading to a decrease
in exports 
• Cheaper imports have a negative effect on a country's balance of payments
• The loss of competitiveness can be a result of increased unemployment

Unemployment and poverty

• The effects of inflation are uneven, because it does not benefit anyone and harms most
– some less than others 
• Inflation also tends to redistribute income from low income groups to higher income
groups 
• This is because people in the low income groups do not have assets than can rise in
value faster than the rate of inflation to help them overcome the effects of inflation


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• Powerful groups such as trade unions, large companies and the wealthy people, are
able to increase their share of national income at the expense of disadvantaged people
such as pensioners, the unemployed and the welfare recipients 

Psychological influence
• Low inflation expectations
• limit excessive wage demands by different labour unions because workers do
not expect increases in cost of living in the future 
• allow consumers to postpone consumption expenditure thereby reducing
pressure on price increases.
• give households confidence that inflation rate will be low in future and
encourage them to save more from the income, thereby controlling excess
demand 
• reduce panic buying by consumers when they expect that prices will be stable
in the future 
• boost real interest rates which will encourage savings.
• increase the burden on debtors which discourages them from borrowing money,
due to the real interest rate 
• High inflation expectations
• Excessive wage demands by different labour unions because workers
anticipate increases in cost of living in the future will lead to producers
increasing prices in order to recover extra costs of production 
• Prompts consumers to engage in panic buying when they expect prices to rise
and thereby increasing pressure on price to rise. 
• Make households to save less, thereby leading to excess demand for goods
and services 
• Decreases real interest rates which will discourage savings.
• Reduce the burden on creditors as they will receive their money at higher
interest rates 
(Accept any other correct relevant response)
(A maximum of 8 marks may be allocated for headings/examples) (Max 26)
BODY: ADDITIONAL PART

Foreign direct investment influences inflation in the economy by:

• increasing the production of goods and services which will increase aggregate
supply thus stabilizing prices 
• bringing more efficient production techniques that will reduce production costs,
slowing down cost push inflation 
• increasing competition in local markets which will keep local prices low
• strengthening the rand through higher export volumes which helps to reduce
the cost of importing production inputs such as crude oil 
• improving technology in production which increases productivity thereby
reducing cost push inflation 
• creating more employment opportunities thereby stimulating consumer
spending which contributes to demand pull inflation
• increasing expenditure on capital goods such as machinery and equipment
resulting in increased aggregate demand 
• increasing real wages more than domestic investment, leading to cost push

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inflation
(Accept any other correct relevant higher order response.) (Max 10)
(A maximum of 2 marks may be allocated for mere listing of facts)

CONCLUSION

Unacceptably high inflation rates cause hardships among the poor, the unemployed,
low-income earners; proper measures to control it have to be

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TOURISM
PART 1 LOW ORDER QUESTIONS
1.1 MULTIPLE CHOICE
1.1.1 C √√
1.1.2 B √√
1.1.3 B √√
1.1.4 C √√
1.1.5 D √√
1.1.6 A √√
1.1.7 C √√
1.1.8 A √√
1.1.9 C √√ (18)
1.2 MATCHING ITEMS
1.2.1 A √
1.2.2 C √
1.2.3 B √
1.2.4 E √
1.2.5 D √
1.2.6 I √
1.2.7 K √
1.2.8 F√
1.2.9 J √
1.2.10 G√ (10)
1.3 ONE TERM/CONCEPTS
1.3.1 Transit tourist’s √
1.3.1 Tourism √
1.3.3 Cultural/ Paleo tourism √
1.3.4 Cultural/ Paleo tourism √
1.3.5 Rent √
1.3.6 Cultural √

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1.3.7 Outbound tourist √

1.3.8 Marketing √
1.3.9 Transit tourist √ (9)

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PART 2 LOW &MIDDLE ORDER QUESTIONS

2.1 Briefly describe the term tourism?
• The activity of people travelling to and staying in places outside their usual
environment for no more than one year for leisure, business or other
purpose√√ (2)
2.2 Name TWO types of Tourism?
• Leisure and recreation √
• Business and professional √
• Eco-tourism √
• Cultural √
• Medical √
• Community √
• Paleo √
• Adventure √
• Humane √ (2)
2.3 State ONE purpose of tourism?
• Leisure and recreation √
• Business and professional √
• Studying √
• Medical purposes √
• Cultural tourism √ (1)
2.4 Give any TWO examples of transport infrastructure needed for tourism?
• Roads √
• Railway lines √
• Airports √
• Harbours / ports √
• Car parks √ (2)
2.5 State any TWO ways in which households can benefit from tourism?
• Enjoy infrastructure √
• Skills development √
• Income increases √
• More job opportunities √ (2)
2.6 Give TWO examples of World Heritage Sites in South Africa?
• Mapungubwe √
• Vredefort Dome √
• Sterkfontein caves / Cradle of human-kind √
• Robben Island √
• iSimingaliso / Greater St Lucia wetland park √

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• uKhahlamba-Drakensburg Park √
• Khomani Cultural Landscape √
• Cape Fynbos region / Table Mountain √
• Richtersveld Cultural and Botanical Landscape √
• Barberton Makhonjwa Mountains √ (2)
2.7 State any TWO criteria for an activity to be regarded as tourism?
• Purpose of the visit √
• No remuneration √
• Minimum of one night √
• Maximum of one year √
• Travelling distance of more than 160 km √ (2)
2.8 Give ONE reason why the government imposes tax on tourist activities?
• Raise revenue √
• To improve tourist attraction sites / Maintain infrastructure√
• Recover external costs√ (1)
2.9 How do households benefit from tourism?
• Members of households earn income directly from the tourism sector as tour
operators, travel agents. √√
• Many households are indirectly involved in tourism as employees. √√
• Entrepreneurs from households that operate as curio producers or musicians
can earn income from tourism. √√
• A large number of households acquire skills in the tourism industry. √√
• Tourism encourages rural development because many tourist attractions are
located in rural areas. √√
• Local people benefit from improved infrastructure that was meant for
tourists.√√
2.10 Briefly describe the term inbound tourist?
• Tourists from other countries who come to visit South Africa√√
2.11 Explain the role played by tourism in infrastructure development in
South Africa?
• Development of tourism sector leads to improvement of social infrastructure
in the form of hospitals, public protection services, information service, etc. √√
• Tourism sector also plays an important role in the development of economic
infrastructure such as ports, beaches, roads etc., which is shared by residents
and visitors alike. √√
• Tourism contributes to improvement of technology in the form of transport and
communication. √√
• Energy infrastructure is needed to operate tourist sites √√
• Basic services are required, such as clean water and refuse removal √√

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2.12 Briefly describe the term indigenous knowledge systems?

• The practices and ceremonies that are unique to the country's indigenous
(local) people / Local knowledge that is unique to a given culture or society /
Stories and traditions carried over from one generation to the other √√ (2)
2.13 How can the depreciation of the rand affect inbound tourism?
• Foreign tourists will spend less of their currency to buy rand on a foreign
exchange market. √√
• More foreign tourists will visit the country as it will be cheaper for them to buy
goods and services in South Africa. √√ (2)
2.14 Which strategies can be used to promote tourism in South Africa?
Tourism can be promoted by:
• Improving marketing and advertising of tourism destinations √√
• Improving infrastructure used by tourists such as communication and
transport√√
• Improving the quality of services given to the tourists so that they can return
√√
• Developing new tourist attraction sites and properly maintain the existing
ones√√
• Welcome campaigns – aims to encourage people to offer better services √√
• Welcome awards – recognizes those businesses and individuals who improve
the quality of tourist offerings. The awards recognizes high standards and
excellent service √√
• Shot’left campaign – aims to promote a culture of local holiday travel √√
• Tourism Indaba – one of the largest tourism marketing events it show cases a
variety of the Southern Africa’s best tourism products and attracts international
visitors and media from across the world √√ (4)
2.15 Briefly describe the term indigenous knowledge?
• A knowledge that is unique to a particular society / refers to knowledge that
has practical application for daily survival of local communities √√ (2)
2.16 Why is marketing as a tourism policy important?
• Marketing will sustain demand in existing markets or generate demand from
new markets √√
• Marketing helps to rectify the negative images of the country √√ (2)
2.17 Why is tourism growth important to the government?
• The tax base for the government will expand which will increase the tax
revenue. √√ For example, through increased airport departures taxes, air ticket
taxes and taxes on hotel rooms. √

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• Tourism helps the government to reduce poverty and unemployment at no or

little cost. √√
• Tourism may help to create a positive image or international relations and
attract foreign investments. √√
• Enables government to achieve its socio-economic objectives of informal
sector growth, black economic empowerment and SMME development. √√
• Helps to generate foreign exchange in the country √√ (2)
2.18 How does a decline in tourism activities impact on rural communities?
• People in rural areas will have less job opportunities thereby increasing
poverty levels √√
• People in rural areas may be forced to migrate to urban areas in search for
jobs√√
• Investment in tourism-related activities (restaurants, hotels) will decline due to
decreased demand for goods and services √√ (4)
2.19 How can crime as a socio-economic issue negatively influence the
tourism sector?
• High crime levels give a negative perception of the country as a tourism
destination hence discouraging tourists. √√
• The profits in the tourism industry will fall due to a decrease in the number of
visits. √√
• The tourism industry will shed jobs as a result of a decrease in tourism
activities.√√ (4)
2.20 Why do tourists visit South Africa as a tourist destination?
• South Africa offer authenticity and uniqueness of the country for tourist to learn
how local people live and work. √√
• South Africa has a diverse culture for tourist to experience known for its
friendliness and humility √√
• A favourable exchange rate ensures an affordable visit. √√
• South Africa has favourable climatic conditions for tourist to enjoy different
activities. √√
• South Africa has hosted many international events such as conferences and
sporting events √√
• Peaceful political transformation of the country to achieve democracy √√ (4)

2.21 How can tourism have a negative impact on the environment?

• The features of the tourist site will be destroyed if the carrying capacity of the
area is exceeded √√
• Destroying environmental sensitive areas, will destroy both cultural and
natural assets √√

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• Environmental stress leads to a loss of wildlife species due to safari hunting

√√
• Environmental cost involves the generation of waste and pollution and the
unsustainable use of water √√ (4)
PART 3 HIGH ORDER QUESTIONS
3.1 Briefly explain the benefits of tourism for the household?
• Spending by tourists leads to increased income to households through direct
involvement in tourism e.g., travel agents or tour operators√
• Indirect involvement in tourism as employees in trading businesses and the
hotel industry contributes to incomes of households √√
• Most infrastructure created for tourists is also available for use by local people
e.g., roads and electricity √
• Tourism requires a variety of skills for which education and training is needed.
Schools and education institutions offer a number of travel and tourism
programmes to benefit the individual √√
• Tourism allows exposure to foreign cultures which enriches cultural and social
knowledge √√
• Initial involvement of households in the informal sector can lead to future
entrepreneurs in the formal sector √√ (8)
3.2 Why is investment in tourism important for the economy?
Tourism investment is important to the economy because:
• It links markets to rural areas where production takes place, due to the
upgrading of transport infrastructure to tourist sites in rural areas√√
• It improves the efficiency to conduct business by supplying effective
communication infrastructure at hotels (telephone lines and internet access)
√√
• It provides a reliable energy infrastructure, for example lights and hot water
to improve the quality and comfort of the tourists' stay which will grow tourism
further √√
• It requires basic services infrastructure which can lower the level of
unemployment / ensure clean water and refuse removal at tourist sites and in
the local community√√
• It leads to the establishment of businesses near tourist sites such as a general
dealer, chemists, a spa, restaurants which will increase GDP √√
• It allows the tourist to enjoy a unique experience of the country, through a
variety of recreational activities such as abseiling, 4x4 drives, game drives and
hikes √√
• An increase in capital formation could solve the large socio-economic problem
of unemployment, by focusing on this labour-intensive industry√√
• A large part of the South African population lives in areas that are
characterised by extreme poverty and underdevelopment, where various

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major tourist attractions could lead to development of projects to solve these

problems√√
• Negative externalities like carbon emissions could be limited through carbon
taxes or tradable carbon permits as additional income to the government √√
(8)

3.3 Briefly explain marketing strategies used to promote tourism in South

Africa.
• Launching the Welcome campaign to make every tourist feel at home and
encourage them to return for a repeat visit and tell other about their
experience.√√
• Introducing welcome awards to recognize businesses and individual that
improve the quality of tourist offerings. √√
• Launching the Sho't Left campaign aimed to make travel more accessible and
affordable that will encourage South Africans to travel within their country. √√
• Building a strong partnership between SAT and other organisations such as
Computicket Travel and Flight Centre in offering South Africans special deals
from flights to accommodation and train trips. √√
• Showcasing a wide variety of the best tourism products in South Africa and
attracts visitors from across the world through the annual Tourism Indaba √√
• Establishing the Tourism Enterprise Partnership to improve the sustainability
of small tourism enterprises to protect and promote job creation as well as
transforming the tourism industry. √√
• Social Media Platforms such as Facebook, Instagram and Twitter are also
used by government to promote tourism √√
• South Africa has recently launched E-visas which is likely to attract more
tourists√√
(Accept the four P’s that relates to promotional campaigns accessibility of
places, pricing tourism products and tourist attractions and products) (8)

3.4 Discuss the reasons for the growth of the tourism industry in South
Africa?
• Increased disposable income leaves people with money to spend on tourism
activities. √√
• Less working hours allow South Africans more time to travel as many people
travel during public holidays or long weekends. √√
• More people have become aware of the importance for leisure and recreation.
• Improved transport, communication and accommodation facilities make it
easier for tourists to travel to various places. √√
• Increased advertising and promotion make people aware of tourist
destinations.

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• South Africa has a wide range of tourist attractions such as Wildlife parks,
heritage sites, museums, botanical gardens for local people to visit. √√
• There is improved infrastructure and competitive transport system which
makes travelling more convenient and cheaper. e.g., airlines, minibuses and
rail transport. √√
• Improvement in economic growth and increase in disposable income
especially among black people has enabled more South Africans to afford
holidays. √√
• Travelling for business purposes has increased as many people participate in
economic activities. E.g. business conferences √√
• Increased advertising campaigns such as “Sho’t Left” promotes South
Africans to travel within their country. √√
• Socio-economic factors such as migrant workers in urban areas visiting
relatives in rural areas have increased the number of people travelling. √√
• The transformation of South Africa into a democratic society made more
people to feel free when travelling to different parts of the country. √√
• Hosting of international events such as soccer and rugby world cup
tournaments have increased the number of foreign tourists. √√
• Ease of obtaining VISAS and foreign exchange have increased the influx of
foreign tourists in SA. √√
• The depreciation of the rand made it cheaper for foreign tourists to spend
money in SA. √√ (8)

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ESSAYS
1
Tourism plays an important role and can affect the economy negatively or
positively.
• Examine the effects of tourism on the following (26 marks)
o Poverty
o Employment
o Externalities
• How can South Africa promote domestic tourism? (10 marks)
INTRODUCTION
Tourism is the activities of people travelling to places outside their usual
environment for not more than one consecutive year, for leisure, business and other
purposes√√

MAIN PART
Poverty
• Tourism is one of the fastest and most efficient redistribution mechanisms in
development√√
• Tourism stimulates economic growth and brings development to the poor in
rural areas√√
• Tourism offers opportunities to diversify sources of income for poor people
• Allow them a stake√ for example, to start and operate small-scale tourism
businesses around community assets and to establish SMMEs to provide
services√√
• Empowerment√ in order, to exploit opportunities of on-the-job and other
training√√
• Creating partnerships√ linking up with mainstream tourism businesses
supplying goods and services√√
Employment
• Tourism sector directly and indirectly employ people√√
• The sector is the biggest creator of jobs (employs 7% of the workforce in SA)
√√for the following reasons:
• Tourism is labour intensive√ It has the lowest ratio of investment to
employment creation√√, This means that more jobs can be created with
every unit of capital invested in tourism√√, Many tourist activities are
therefore within the reach of small tour operators√√
• Tourism employs many skills√ Various skills are employed in the tourism
sector for example, tour guides, hairdressers, accountant√ It also offers a
huge potential for on-the-job training√√

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• Tourism provide immediate employment√ If it is properly organised and

focused, the tourism sector can create many jobs within a short period of
time√√
• Tourism provides entrepreneurial opportunities√ The tourism industry
accommodates informal sector enterprises from craft and fruit vendors to
pavement vendors, chair rentals and others√√
Externalities
The rapidly expanding tourism industry could have both positive and negative
impacts that extend well into the future:
• Attracts large amounts of revenue, but can cause undue environmental
damage (uses resources and produces waste) √√
• Rapid growth aimed at short-term benefits has more negative than positive
effect: degeneration of traditions and cultural values, environmental damage
to sites and natural settings – pollution and waste√√
• Global tourism will grow due to increased population, improved living
standards, increased free time and expansion of transportation systems but
put unnecessary pressure on tourist sites√√
• Economic effects on individuals: new transport systems, recreation, shops
and increase in property value compared to an increased inflation rate√√
• Economic effect on government: more direct and indirect tax compared to
conservation of infrastructure and tourism attractions√√
• Social effect on individuals: improved health care and education compared
to traffic congestion, crime√√
• Social effect on government: an increased value put on culture, less
migration compared to policing, sanitation and health services√√
(Accept any other correct relevant response)
(Allocate a maximum of 8 marks for mere listing of facts / examples)
ADDITIONAL PART
South Africa can promote domestic tourism by
• Improving its marketing and advertising√√
- Domestic tourism is encouraged through increased advertising
- TV magazine programmes like Shot’left inform people about local places
of interest√√
• Promoting special holiday packages√√
- Special off-season rates make it possible to enjoy cheaper holidays √√
• Enhancing efficiency of tourism information outlets√
- Many towns have information outlets that supply pamphlets and
information about specific area√√

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• Distributing information booklets (awareness) and offer transport to

visit places of interest. This is most done by hotels and other
accommodation resorts √√
• Improving infrastructure√ a greater variety, using new technology to
provide reliable infrastructure√√
• Government effectively managing its tourism sites and other tourist
attractions √√e.g., maintenance, upgrading, security etc.√
(Accept any other correct relevant response)
CONCLUSION
Tourism expenditure is as real as any other consumer expenditure and
international tourism can in addition be seen as an invisible export product√√

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2
• Discuss the benefits of tourism for:
- Business
- Infrastructure development
- Households (26 marks)
• How can tourism attraction in less popular destination be successfully
marketed? (10 marks)
INTRODUCTION
Tourism is the activities of people travelling to and staying in places outside their
usual environment for no more than one consecutive year for leisure, business or
other purposes√√ (Max 2)
(Accept any other relevant response)
MAIN PART
Business sector
• Tourism stimulates business in areas such as accommodation and
entertainment√√
• The construction industry, in private-public partnership with the government
to provide the infrastructure, manufacturing sector and recreation sector all
benefits from increased demand due to tourism√√
• The previously disadvantaged communities get entrepreneurial opportunities
through the black economic empowerment schemes√√
• A large number of people get business opportunities in the informal sector√√
e.g., selling of artefacts√
• Local retailers may have an increase in sale (and profit) because of
increased demand from tourists√√
• Private businesses and government work in partnership to provide the
infrastructure needed for tourism√√
• This increases the market share of and income of these businesses√√
• Allow existing businesses to improve the quality and variety of their products
• Allow natural monopolies √√e.g., Table Mountain Cableway to achieve
abnormal profit√
• The public sector also provides a range of financial incentives for private
sector tourism investment (grants, subsidies, loan, tax rebates) √√
Infrastructure
• Adequate and well-maintained infrastructure is essential for tourist
destinations√√
• Locals share this infrastructure with tourists√√
• Government often prioritises economic infrastructure such as ports and
beaches√√

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• In addition to physical and basic infrastructure, social infrastructure is also

important for the growth of tourism√√
• Most of the SDI’s and development corridors also have tourism as an
important focus√√
Households
• Members of the household earn income from the tourism sector as tour
operators, travel agents etc. √√
• Many households are indirectly involved in tourism as employees e.g. in
hotels, transport sector√√
• Entrepreneurs from households that operates as curio producers or
musicians can earn income from tourism√√
• A large number of households acquire skills in the tourism industry√√
• School curriculum and learnership offer opportunities to acquire these
skills√√
• Encourages rural development because many tourist attractions are located
in rural areas√√
(Accept any other correct relevant response)
(Allocate a maximum of 8 marks for mere listing of facts/ examples)
ADDITIONAL PART
Tourism can be successfully marketed in less popular destination by:
• Advertising the firms’ attractions in a variety of media including social media
and internet which may reach both local and international potential tourists√√
• Focusing on a clear message that concentrates on the strength of the
attraction/ uniqueness of the destination√√
• Using the indigenous knowledge systems of that particular area where
possible √√
• Describing the service offered in the best possible way to catch the interest
of the likely tourist e.g., the use of slogan√
• Charging a price that is competitive and money well spent for the service
offered √√
• Helping the tourist to view the entire service as value for money – deliver a
world class visitor experience√√
• Highlighting other places of interest in the vicinity of the attraction as part of
a package√√
• Focusing on proudly South African products / services / Sho’t Left campaign
√√
• Helping disadvantaged South Africans to benefits from tourist attractions in
the less popular destinations√√
(Accept any other correct relevant response)

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CONCLUSION
A weaker exchange rate has been a major contributing factor to South Africa’s
tourism industry growth over many years √√
(Accept any other correct relevant response)

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ENVIRONMENTAL SUSTAINABILITY
PART 1 LOWER ORDER QUESTIONS
1.1 MULTIPLE CHOICE
1.1.1 A √√
1.1.2 C √√
1.1.3 A √√
1.1.4 D√√
1.1.5 A √√
1.1.6 B √√
1.1.7 D√√
1.1.8 D √√
1.1.9 A √√
1.1.10 B √√
1.1.11 D √√
1.1.12 A √√
1.1.13 C√√
1.1.14 A √√
1.1.15 B √√
(30)
1.2 MATCHING ITEMS
1.2.1 B √
1.2.2 C √
1.2.3 E √
1.2.4 H √
1.2.5 I √
1.2.6 A √
1.2.7 J √
1.2.8 F √
1.2.9 D √
1.2.10 G √ (10)

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1.3 ONE TERM/CONCEPTS

1.3.1 Environmental/ Green/ Carbon/ Eco tax √
1.3.2 Renewable √
1.3.3 Air pollution/ Pollution/ Emissions √
1.3.4 Administered price √
1.3.5 Pollution √
1.3.6 Biodiversity √
1.3.7 Conservation/ Environmental sustainability √ (7)

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PART 2 MIDDLE ORDER QUESTIONS

2.1 What is the main purpose of preservation?
• To prevent the extinction of plant and animal species / to ensure that non-
renewable resources are not lost forever √√ (2)
2.2 Why is it important to focus on preservation worldwide?
• Preservation ensures that natural resources are kept intact and can still be
used by future generations √√
• Ecological system, heritage site, wetland, birds, flowers, etc. Need to be
preserved to avoid extinction √√ (2)
2.3 How can climate change influence agricultural production?
• Climate change may have a positive effect, increasing agricultural production
(of certain products) √√
• Climate change might have a negative effect, where a decrease in agricultural
products is experienced due to lower rainfall, increased heat √√
• Adaptation in the production of agricultural products due to climate change.
Extreme heat, drought, floods, will definitely influence the type of agricultural
activities allowed to take place √√ (2)
2.4 What effect will the overexploitation of land have on agricultural output in
South Africa?

• The agricultural output will be affected negatively/reduced output √√ (2)

2.5 How does the Paris Agreement intend to reduce the impact of climate
change?
• Making finance available to help countries deal with the impact of climate
change. √√
• Intensifying the efforts to limit the temperature increases (less than 2°C) to
significantly reduce the risks threatening food production. √√
• Increasing the ability of countries to adapt to the adverse impacts of climate
change. √√
• Request countries to submit strategies on how to reduce their greenhouse gas
emissions√√ (2)
2.6 Give any TWO examples of hazardous waste that affects the
environment?
• Pesticides √
• Toxic metal waste (lead, mercury, oil spills) √
• Radio-active waste (using nuclear fuel rods) √ (2)

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2.7 Name any ONE non-renewable resource?

• Coal √
• Natural gas √ (1)
2.8 Give the international measure that deals with the control of hazardous
waste?
• Basel Convention √ (1)
2.9 Briefly describe the term environmental sustainability?
• Environmental sustainability is the ability of the environment to survive its use
for economic activity / it refers to meeting the needs of the present generation
without compromising the needs of future generations √√ (2)
2.10 Briefly describe the term conservation?
• Conservation is a sustainable use and management of the environment to
ensure that it can be used by both present and future generations / manage
the environment to ensure continuity √√ (2)
2.11 Briefly describe the term biodiversity.
• Biodiversity refers to the variety of plants and animals that inhabit the earth
√√ (2)
2.12 Briefly describe the term climate change.
• A change in normal weather patterns, which is normally caused by global
warming√√ (2)
2.13 Explain the effect of soil erosion on food security.
• Land can no longer be cultivated thereby leading to shortage of food supply√√
• The loss of top soil results in higher production costs and increase in price of
food, thereby making food less affordable √√ (2)
2.14 How does human activity negatively affect environmental sustainability?
• Human activity causes environmental degradation, which causes the
depletion of resources √√
• Directly or indirectly overpopulation increases damage to the environment √√
• Actions taken by humans such as the burning and destruction of forests
damage the environment. √√
• Polluting the environment, depletion of the ozone layer, which will lead to
global warming √√ (2)

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2.15 What impact will environmental problems have on food security

(continuous food production)?
• Limiting production due to extreme droughts and floods that might cause heat
waves or veld fires √√
• Hazardous waste and chemical waste will reduce quality, limit quantities and
contaminate food √√
• Forcing producers to change their production processes due to a changing
climate and cultivate different products which may not be in demand √√ (2)
2.16 How can environmental subsidies be used to ensure sustainable
development in South Africa?
• Subsidies can be granted to businesses to reduce environmental damage by
recycling of bottles, cans and cardboards √√
• The government can subsidize new technology that saves energy such as
energy saving light bulbs or solar geysers, air power to reduce air pollution √√
• Promoting environmentally friendly substitutes like unleaded petrol √√ (4)

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PART 3 HIGH ORDER QUESTIONS

3.1 Briefly discuss the reasons why markets fail to ensure environmental
sustainability?
• The environment is a common resource / non-excludability of the environment:
Many parts of the environment are not privately owned and do not have a
price, so there is no economic incentive for markets to economise on their use
√√
• Externalities:
• Because no one person owns the environment, there is no one to enforce
property rights over it, when people pollute the environment, for instance, the
costs are borne mainly by others√√
• Lack of knowledge: People may cause environmental damage without
realising it, especially when the effects build up over a long time √√
• Carelessness / Negligence / Ignorance: Consumers and businesses are
frequently prepared to continue with various harmful practices and leave future
generations to worry about their environmental consequences due to self-
interest√√ (8)

3.2 Analyse the impact of an increase in the population on the environment?

An increase in population will result in:
• Demand for food increasing thereby putting more pressure on the
environment√√
• Deforestation due to increased demand for infrastructure development. √√
• Increased human settlement causing soil erosion and loss of biodiversity √√
• Increased land and water pollution as more biological and non-biological
waste will be introduced to the environment. √√
• Depletion of raw materials due to increased production of goods and
services.√√
• Resources will be severely strained when population increases e.g. water √
• An increase in the burning of fossil fuels such as coal or petrol due to higher
demand for energy √√ (8)
3.3 Explain the government's use of subsidies and permits as measures to
ensure environmental sustainability?
Subsidies
• Government can use income from taxes to provide subsidies to activities that
reduce environmental damage. √√
Subsidy could be given for activities such as:
• The development of new techniques for example to save energy √√
• The encouragement of production of environmentally friendly substitutes such
as unleaded petrol √√

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• The encouragement of recycling of waste such as bottles and cans √√

• The subsidy should be equal to the marginal external benefit √√
• Private individuals who install solar panels/energy saving light bulbs√√
Permits
• Government can decide on the maximum desired level of pollution in an area
• It then can issue a licence to firms to pollute up to a particular limit √√
• Firms are allowed to sell their licenses (or part of) to other businesses that
have larger pollution levels √√
• Impose user fees and charges on individuals who use or damage the
environment √√ (8)
3.4 What are the benefits of using technology in sustaining the environment?
• Technology can facilitate a solution to environmental problems by providing
alternative production techniques √√
• The development of clean technologies can have lower levels of toxic
emissions and stop the existence of high-risk chemical waste in the
environment √√
• It makes it possible for developing countries to comply with emissions targets
/ Substituting products that are more environmentally friendly e.g. paper bags
instead of plastic bags, unleaded petrol √√
• Although the production of platinum causes pollution, the use of the platinum
reduces pollution √√
• Technology facilitates the development of new techniques or equipment to
save energy and replace coal and oil with greener energy resources such as
wind or sun√√
• It enables the recycling of waste materials such as bottles, cans, cardboard
to ensure a cleaner environment√√
• The on-site treatment and controlled disposal of waste can be achieved by
using technology√√ (8)
3.5 Why have the international measures (agreements) been ineffective in
reducing the effects of climate change?
International measures have been ineffective because:
• There is a lack of commitment from governments to meet targets set by
agreements / monitoring policies √√
• Emission targets are not met, and the effects of climate change is more visible
than ever before, leading to a loss in GDP and a decrease in employment √√
• It is difficult to identify organizations responsible for holding these countries
accountable for their actions √√
• There is a lack of strict law enforcement where penalties were not imposed on
those who did not meet targets √√
• Conflicting interests existed between the goal of achieving sustainable
development and that of increased economic development √√

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• Big polluters (like the US) failed to meet the targets set by Kyoto protocol and
still contribute to global warming and are less interested in solving the crisis
due to expensive technology to reduce pollution √√ (8)
3.6 Differentiate between conservation and preservation.
Conservation
• It is the management of the environment in a way that prevents it from being
damaged √√
• E.g. game parks are used to keep certain endangered species √
• It is a creative continuity of the environment to ensure quality of life for both
present and future generations √√
• Conservation is needed due to pollution and over utilisation of the
environment√√
• Ensure economical use of renewable and non-renewable resources √√
Preservation
• It is the process of keeping the environment in its present state √√
• It is often applied where elements of the environment are threatened by
extinction √√
• e.g. Rhinoceros species / heritage sites have cultural significance /
ecosystems√ (8)
3.7 How do consumers as key market role-players fail to protect the
environment?
• As a result of the lack of knowledge consumers' actions often have a negative
impact on the environment / consumers not aware of recycling √√
• By using certain products such as aerosol they cause environmental damage
without realising it √√
• Due to the fact that some resources are not privately owned, they have an
element of non-excludability. Therefore, these resources are often overused
e.g. oceans and rivers √√
• Consumers often care less about their practices that harm the environment
because of self-interest √√
• Some consumers pollute the environment through littering, disposal of waste,
etc. because the costs (negative externalities) are borne by others √√ (8)

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