ECS1500 Assignment 2 Semester 1 2020 Suggested Solutions

Economics 1500
Department of Economics
Assignment 02 for Semester 01 (compulsory)
Unique Number 584839
Learning Units 5 to 7
Weight for semester mark 30%
Number of questions 20
Please answer this assignment on the prescribed answer sheet on myUnisa or in hard copy.
Feedback on these questions will be provided on myUnisa under Additional Resources after
the final closing date.

For questions 2.1 to 2.5 you need to indicate if the statement is true or false. If the
statement is true, choose [1] and if the statement is false, choose [2].

2.1 The price elasticity of demand measures how sensitive the quantity demanded is to
changes in demand.

[1] True
[2] False

Answer:

Refer to page 88 of the study guide:

The price elasticity of demand measures how sensitive the quantity demanded is to a
change in the price of the good, while price elasticity of supply measures how sensitive the
quantity supplied is to a change in the price of the good.

2.2 The income elasticity of a normal good is negative.

[1] True
[2] False
Answer:
Refer to page 93 of the study guide:
Goods with a positive income elasticity of demand are called normal goods (𝑒𝑦 > 0).