University of Venda
Faculty of Management, Commerce and Law
Department of Economics
ECO 1141: Basic Microeconomics
Assignment: Economic Systems
Total: 50 Marks
Instructors: Dr T Munzhelele
Dr M Dagume
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Instructions
Answer ALL questions.
Support your answers with relevant economic concepts and
examples.
Marks will be awarded for clarity, depth of explanation, and critical
engagement.
This paper consists of TWO assessments; please answer both
assessments in two separate sections. Dr Dagume will mark the
math note, and Dr Munzhelele will mark the assignments.
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A: Assignment
Question 1: The Traditional Economic System (25 Marks)
a) Define a traditional economic system and explain the role of customs
and traditions in economic decision-making. (5)
b) Critically analyse how a traditional economic system answers the three
central economic questions. (9)
c) Discuss three major limitations of the traditional economic system in
the context of economic growth and development. (6)
d) Explain why traditional economic systems tend to resist technological
change and innovation, and assess the implications of this resistance for
productivity. (5)
[Total: 25 Marks]
Question 2: Market, Mixed Economies, and Economic Thought (25
Marks)
a) Discuss the main characteristics of a market economic system. (8)
b) Explain Adam Smith’s concept of the “invisible hand” and evaluate its
relevance in modern economies. (7)
c) South Africa is regarded as a mixed economy.
i) Explain what is meant by a mixed economy. (5)
ii) Provide one example of government intervention in South Africa and
explain its economic justification. (5)
[Total: 25 Marks]
GRAND TOTAL: 50 MARKS
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B: Math note.
Question 1: Price Elasticity of Demand (Point Method) (8 Marks)
The price of a product increases from R20 to R24 per unit. As a result,
quantity demanded decreases from 500 units to 420 units.
a) Calculate the price elasticity of demand using the percentage (point)
method. (6)
b) State whether demand is elastic, inelastic, or unit elastic. (2)
Question 2: Price Elasticity of Demand (Arc Method) (7 Marks)
The price of a commodity falls from R50 to R40, and the quantity
demanded increases from 200 units to 260 units.
a) Calculate the arc elasticity of demand. (5)
b) Interpret the result in terms of consumer responsiveness. (2)
Question 3: Total Revenue and Elasticity (5 Marks)
A firm sells 100 units of a product for R10 each.
a) Calculate the total revenue. (2)
b) If the price increases to R12 and the quantity demanded falls to 90
units, calculate the new total revenue. (2)
c) Based on your answers, determine whether demand is elastic or
inelastic. (1)
Question 4: Income Elasticity of Demand (5 Marks)
A consumer’s income increases from R8 000 to R10 000 per month.
During the same period, demand for a good increases from 40 units to 50
units.
a) Calculate the income elasticity of demand. (4)
b) Identify whether the good is normal, a luxury good, or an inferior
good. (1)
Question 2: Market Structures (Quantitative Questions) (25
marks)
Question 2.1: Perfect Competition – Profit Calculation (8 Marks)
A perfectly competitive firm faces a market price of R30 per unit. The
firm’s cost function is given by:
2
TC=200+10 Q+Q
where Q is output.
a) Calculate the firm’s total cost (TC) when output is 10 units. (3)
b) Calculate total revenue (TR) at this level of output. (2)
c) Calculate the firm’s profit or loss. (3)
Question 2.2: Monopoly – Revenue and Marginal Revenue (7 Marks)
A monopolist faces the following demand function:
P=100−2 Q
a) Derive the total revenue (TR) function. (3)
b) Derive the marginal revenue (MR) function. (2)
c) Calculate the value of MR when Q = 10. (2)
Question 2.3: Profit Maximisation (MR = MC Rule) (6 Marks)
The monopolist’s marginal cost (MC) function is given by:
MC=20+ 2Q
a) Determine the profit-maximising level of output using the MR = MC
condition. (4)
b) Calculate the price charged at the profit-maximising level of output. (2)
Question 2.4: Average Cost and Market Structure Interpretation (4 Marks)
The average cost (AC) at the profit-maximising output is R40, while the
market price is R60.
a) Calculate the firm’s economic profit per unit. (2)
b) State whether the firm is making economic profit, normal profit, or a
loss, and identify the market structure most consistent with this outcome.
(2)
Grand Total:50.