ECS2604 ASSIGNMENT 03 SEMESTER 1 2025 QUESTION 1 [25 Marks] 1.1 Using examples, illustrate how the labour market differs from the goods market. (5 marks) The labour market and goods market differ in several key ways: Feature Labour Market Goods Market N

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Table of Contents
QUESTION 1 [25 Marks] ............................................................................................ 5


1.1 Using examples, illustrate how the labour market differs from the goods market. (5

marks) ........................................................................................................................ 5


1.2 Differentiate between normative and positive economics and use examples to

illustrate it. (4 marks) .................................................................................................. 7


1.3 Why is it said that a worker in a labour market is a human being, not a product? (2

marks) ........................................................................................................................ 9


1.4 Explain with the aid of examples the two assumptions of a perfectly competitive

market. (4 marks) ..................................................................................................... 10


1.5 Why is the labour supply curve upward sloping and the demand curve downward

sloping? Use a graph to illustrate this. (6 marks) ..................................................... 12


1.6 Why is there a low increase in the demand for unskilled and semi-skilled workers

in the South African labour market? (4 marks) ......................................................... 15


QUESTION 2 [25 Marks] .......................................................................................... 17


2.1 The recent statistics from Stats SA (2021) indicate that the South African labour

market is becoming more educated. Briefly discuss and support this statement with

statistics from Stats SA and interpret the numbers. (5 marks) ................................. 17




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2.2 Given the following leisure-income bundles, use the chord method to calculate the

marginal rate of substitution (MRS), with the marginal utility of income (MUY) and

marginal utility of leisure (MUL) being two and 50, respectively: .............................. 19


2.3 Utilise the information in Table 1 below to calculate the labour supply elasticity for

the four individuals as the hourly wage doubles from R20 to R40. Include all

calculations and interpret the results. (10 marks) ..................................................... 22


QUESTION 3 [25 Marks] .......................................................................................... 25


3.1 Discuss the law of diminishing marginal product and illustrate graphically how this

law can be used to derive the short-term demand for labour. (10 marks) ................ 25


3.2 Discuss the differences between an employer’s labour demand in a perfectly

competitive market and that of a monopolistic employer. Illustrate graphically. (15

marks) ...................................................................................................................... 29


QUESTION 4 [25 Marks] .......................................................................................... 38


4.1 Explain, with the aid of a figure, the impact on wages and employment in a perfectly

competitive labour market in the construction sector in a hypothetical country,

assuming the danger involved in the work increases and labour productivity in the

sector declines. (10 marks) ...................................................................................... 38


4.2 In the finance sector of a hypothetical country, there is an increase in the number

of immigrants with qualifications in finance seeking work. In contrast, this sector

experiences a rapid decline in strike incidence. Explain, with the aid of a figure, their

combined impact on wages and employment in this sector, assuming there is a

perfectly competitive labour market. (7 marks)......................................................... 42


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4.3 It has been found that most jobs in the “legislators, senior officials and managers”

occupation are located in province X of a hypothetical country. Additionally, it has been

discovered that the cost of relocating from other provinces to province X has

increased. At the same time, workers in this occupation are well-known for their low

absenteeism rates due to a low prevalence of HIV and AIDS. Explain, with the aid of

a figure, the combined effect of these factors on wages and employment in this

occupation category in province X, assuming there is a perfectly competitive labour

market. (10 marks) ................................................................................................... 45


References ............................................................................................................... 48




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