ECO_2B_Eng_Suppl_Exam_paper_Jan_2008_MEMO.doc - DEPARTMENT OF ECONOMICS AND ECONOMETRICS ECONOMICS 2B SUPPLEMENTARY ASSESSMENT JANUARY 2008 APK AND

# ECO_2B_Eng_Suppl_Exam_paper_Jan_2008_MEMO.doc - DEPARTMENT...

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DEPARTMENT OF ECONOMICS AND ECONOMETRICS ECONOMICS 2B SUPPLEMENTARY ASSESSMENT: JANUARY 2008 APK AND SOWETO CAMPUSES DATE: January 2008 ATTENDANCE SLIP Surname: MEMORANDUM Initials: …………………………………………… ................ ........ Student number: …………………………… ..............................
Economics 2B Supplementary Assessment: January 2008 Cell number: .............................................. ............................... This paper consists of 9 pages. You may use a noiseless calculator. Switch your calculator to 4 decimal points. DEPARTMENT OF ECONOMICS AND ECONOMETRICS ECONOMICS 2B SUPPLEMENTARY ASSESSMENT: JANUARY 2008 APK AND SOWETO CAMPUSES DATE: JANUARY 2008 TIME: 2 HOURS MARKS: 100 ASSESSORS: Prof G van Zyl, Dr MR Maleka, Ms JMM Viljoen MODERATOR: Prof G van Zyl 2
Economics 2B Supplementary Assessment: January 2008 Surname: MEMORANDUM Initials: …………………………………………… .......... Student number :…………………………… ................... Cell number: ..................................................................... Mark schedule Mark Mark Mark A1 [10] B1 [7] C1 [10] A2 Ignore B2 [7] C2 Ignore B3 [10] C3 [5] B4 [5] C4 [4] B5 [5] C5 Ignore B6 [5] B7 [6] Total mark : [74] SECTION A: CONSUMER BEHAVIOUR & MARKETING STRATEGY [20] A. 1 Indicate with an X which of the following statements are correct or incorrect. (10) Statement Correct Incorre ct 1. The slope of the budget line is equal to the price ratio of the two products. X 2. In the case of unitary price elasticity the cross elasticity between the two products is zero. X 3. Inferior goods are represented by IC curves that have negative slopes. X 4. The Engel curve indicates the pattern of demand changes as income changes. X 5. The hypothetical income change is a technique to examine the real price effect of an income change. X 6. The sign of the substitution effect is always negative. X 7. In the case of a Giffen product there is a direct relationship between price and quantity changes, ceteris paribus. X 8. In the Nelson model consumers face the problem of searching over homogeneous goods that differ in quality. X 9. The quality of credence goods can be evaluated X 3
Economics 2B Supplementary Assessment: January 2008 before and after the purchase. 10. Advertising should be undertaken until the net discounted present value of the last advertisement is equal to 1. X A.2 Illustrate with the aid of a fully-annotated figure the income and substitution effects of a price change for a normal product. (10) IGNORE SECTION B: MICROECONOMIC DECISION MAKING IN THE BUSINESS ENVIRONMENT [45] B.1 Sunsmile Bakeries Pty (Ltd) is the major supplier of fresh baked bread in the Erkuhuleni area. The firm is currently considering a pricing strategy and most probable an expansion program. The firm needs the help of an economist to advice it on various issues. The following information applies.

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