ECS1501/201/1/2013
Tutorial letter 201/1/2013
MICROECONOMICS
ECS1501
Semester 1
Department of Economics
IMPORTANT INFORMATION:
Solutions to Assignment 1
Examination guidance.
, CONTENTS
1 General ............................................................................................................................... 3
2 Solutions to Assignment 01 of the first semester – unique number 307781................ 3
3 Study guidelines .............................................................................................................. 10
Study Unit 1...................................................................................................................... 11
Study Unit 2...................................................................................................................... 12
Study Unit 3...................................................................................................................... 13
4 Appendix A - Examination guidelines............................................................................ 15
2
, ECS1501/201
Dear Student
1. General
The purpose of this tutorial letter is to provide you with the correct answers to the questions contained in
Assignment 01 of the first semester (unique number 307781), which was included in Tutorial Letter
101/3/2013. We also include the examination tutorial letter for the May 2013 examination as Appendix A.
The aim of assignments is to force you to make an early start with your studies and to keep it up by
submitting the assignments on time. You will appreciate the benefits of this once you start preparing for
your examination.
The study units on which Assignment 01 was based will feature as multiple-choice questions in the
examination paper. This implies that you will not be required to reconstruct any of the graphs form these
study units. However, we will provide graphs and ask questions about them. You should therefore be
able to interpret and understand the graphs in these study units.
2. Solution to Assignment 01 with unique number 307781
[1.1] 1 [1.6] 4 [1.11] 4 [1.16] 3
[1.2] 4 [1.7] 3 [1.12] 3 [1.17] 3
[1.3] 3 [1.8] 4 [1.13] 4 [1.18] 3
[1.4] 2 [1.9] 1 [1.14] 3 [1.19] 3
[1.5] 4 [1.10] 3 [1.15] 3 [1.20] 2
Explanations:
QUESTION 1.1 THE CORRECT OPTION IS 1.
Economics is the study of the use of scarce resources to satisfy unlimited human wants. This implies
that the factors of production (scarce resources) are limited, while the wants are unlimited and therefore
individuals need to make choices.
Statement a is correct. The economic problem is one of scarcity.
Statement b is correct. See the above explanation
Statement c is correct. Page 17 in the textbook indicates that the three central economic
questions are: What goods and services will be produced, How
will these goods and services be produced and For whom will the
goods and services be produced.
Therefore the only option that is correct is option 1.
3
, QUESTION 1.2 THE CORRECT OPTION IS 4.
The production possibilities curve (PPC) indicates the combinations of any two goods or services that
are attainable when the community‟s resources are fully and efficiently employed.
Statement a is correct. See the above definition of a PPC.
Statement b is incorrect. The PPC is concave to the origin (see page 9 of textbook).
Statement c is correct. Opportunity cost is illustrated by the negative slope of the PPC,
which means that more of one good can only be obtained by
sacrificing the other good. Opportunity cost therefore involves a
trade-off between the two goods.
Statement d is incorrect. See the explanation at statement c above.
Therefore only option 4 is correct.
QUESTION 1.3 THE CORRECT OPTION IS 3.
If a production possibilities curve is a straight line then the economic resources can be shifted perfectly
between the production of the two goods. This implies that the two goods produced must make use of
the inputs in similar proportions.
Therefore only option 3 is correct.
QUESTION 1.4 THE INCORRECT OPTION IS 2.
In microeconomics we focus on individual parts of the economy. This implies that we study the price of a
single product like tomatoes, or study the decisions of an individual consumer, the decisions of an
individual firm or the market for individual goods. Considering this definition, options 1, 3 and 4 are all
microeconomic topics.
Option 2 is a macroeconomic topic since macroeconomics focus on the economy as a whole and studies
topics such as the consumer price index (see page 10 of the prescribed textbook).
QUESTION 1.5 THE CORRECT OPTION IS 4.
A positive statement is an objective statement or fact, while a normative statement involves an
opinion or value judgement.
Statement a is incorrect. This is a normative statement since it is an opinion and a
debatable issue.
Statement b is correct. This is a positive statement since it can be proved by visiting
FIFA‟s website to determine who was the winner of the
tournament.
4
Tutorial letter 201/1/2013
MICROECONOMICS
ECS1501
Semester 1
Department of Economics
IMPORTANT INFORMATION:
Solutions to Assignment 1
Examination guidance.
, CONTENTS
1 General ............................................................................................................................... 3
2 Solutions to Assignment 01 of the first semester – unique number 307781................ 3
3 Study guidelines .............................................................................................................. 10
Study Unit 1...................................................................................................................... 11
Study Unit 2...................................................................................................................... 12
Study Unit 3...................................................................................................................... 13
4 Appendix A - Examination guidelines............................................................................ 15
2
, ECS1501/201
Dear Student
1. General
The purpose of this tutorial letter is to provide you with the correct answers to the questions contained in
Assignment 01 of the first semester (unique number 307781), which was included in Tutorial Letter
101/3/2013. We also include the examination tutorial letter for the May 2013 examination as Appendix A.
The aim of assignments is to force you to make an early start with your studies and to keep it up by
submitting the assignments on time. You will appreciate the benefits of this once you start preparing for
your examination.
The study units on which Assignment 01 was based will feature as multiple-choice questions in the
examination paper. This implies that you will not be required to reconstruct any of the graphs form these
study units. However, we will provide graphs and ask questions about them. You should therefore be
able to interpret and understand the graphs in these study units.
2. Solution to Assignment 01 with unique number 307781
[1.1] 1 [1.6] 4 [1.11] 4 [1.16] 3
[1.2] 4 [1.7] 3 [1.12] 3 [1.17] 3
[1.3] 3 [1.8] 4 [1.13] 4 [1.18] 3
[1.4] 2 [1.9] 1 [1.14] 3 [1.19] 3
[1.5] 4 [1.10] 3 [1.15] 3 [1.20] 2
Explanations:
QUESTION 1.1 THE CORRECT OPTION IS 1.
Economics is the study of the use of scarce resources to satisfy unlimited human wants. This implies
that the factors of production (scarce resources) are limited, while the wants are unlimited and therefore
individuals need to make choices.
Statement a is correct. The economic problem is one of scarcity.
Statement b is correct. See the above explanation
Statement c is correct. Page 17 in the textbook indicates that the three central economic
questions are: What goods and services will be produced, How
will these goods and services be produced and For whom will the
goods and services be produced.
Therefore the only option that is correct is option 1.
3
, QUESTION 1.2 THE CORRECT OPTION IS 4.
The production possibilities curve (PPC) indicates the combinations of any two goods or services that
are attainable when the community‟s resources are fully and efficiently employed.
Statement a is correct. See the above definition of a PPC.
Statement b is incorrect. The PPC is concave to the origin (see page 9 of textbook).
Statement c is correct. Opportunity cost is illustrated by the negative slope of the PPC,
which means that more of one good can only be obtained by
sacrificing the other good. Opportunity cost therefore involves a
trade-off between the two goods.
Statement d is incorrect. See the explanation at statement c above.
Therefore only option 4 is correct.
QUESTION 1.3 THE CORRECT OPTION IS 3.
If a production possibilities curve is a straight line then the economic resources can be shifted perfectly
between the production of the two goods. This implies that the two goods produced must make use of
the inputs in similar proportions.
Therefore only option 3 is correct.
QUESTION 1.4 THE INCORRECT OPTION IS 2.
In microeconomics we focus on individual parts of the economy. This implies that we study the price of a
single product like tomatoes, or study the decisions of an individual consumer, the decisions of an
individual firm or the market for individual goods. Considering this definition, options 1, 3 and 4 are all
microeconomic topics.
Option 2 is a macroeconomic topic since macroeconomics focus on the economy as a whole and studies
topics such as the consumer price index (see page 10 of the prescribed textbook).
QUESTION 1.5 THE CORRECT OPTION IS 4.
A positive statement is an objective statement or fact, while a normative statement involves an
opinion or value judgement.
Statement a is incorrect. This is a normative statement since it is an opinion and a
debatable issue.
Statement b is correct. This is a positive statement since it can be proved by visiting
FIFA‟s website to determine who was the winner of the
tournament.
4
