⋆
]]
⋆
ECS2601: Intermediate Microeconomics
OCT/NOV Examination 2026 Revision Guide
Covers Past Papers: 2023, 2024 & 2025
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
[ Economics / Commerce [
_ Exam Revision Guide
ECS2601
Module Code:
Intermediate Microeconomics
Module Name:
Oct/Nov 2023, 2024 & 2025
Papers Covered:
Oct/Nov 2026 Examinations
Prepared For:
≈100 marks per paper
Total Marks:
Focus on understanding the theory. Work through every calculation. Diagrams earn
marks – practise drawing them clearly.
Exam Revision Notes | ECS2601 | 2026
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
SECTION A: OCT/NOV 2025 EXAMINATION
Page 2 of 21
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Question 1 – Consumer Theory and Indifference Curves [25 marks]
(a) [8 marks]
Question: Explain, using an indifference curve diagram, how a consumer reaches utility
maximisation subject to a budget constraint. Your answer must clearly show and explain
the optimum point and the conditions that must hold at that point.
Answer:
Utility Maximisation: A consumer maximises utility at the point where the highest attain-
able indifference curve is tangent to the budget line.
The budget constraint shows all combinations of goods X and Y the consumer can afford:
P X · X + PY · Y = I
where PX and PY are prices and I is income. Written in slope form: Y = I
PY − PX
PY X.
Indifference curves show all combinations of X and Y that give equal utility. They slope
downward, are convex to the origin, and higher curves mean higher utility.
The optimum condition. At the tangency point, the slope of the indifference curve (the
MRS) equals the slope of the budget line (the price ratio):
∆Y PX
MRSXY = − =
∆X PY
Equivalently, marginal utility per rand spent must be equal across both goods:
M UX M UY
=
PX PY
Page 3 of 21
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Good Y
I
PY
E ∗ (Optimum)
∗
Y
U3
U∗
U1
Good X
X∗ I Budget Line
PX
⋆ Exam Tip
Always state both the tangency condition (MRS = PX /PY ) and the budget line equa-
tion. Draw the diagram with the optimum point labelled E ∗ and read off X ∗ and Y ∗
from the axes.
(b) [10 marks]
Question: Distinguish between the income effect and the substitution effect of a price
change, using the Slutsky decomposition. Illustrate your answer with a diagram for a
normal good when the price of Good X falls.
Answer:
When the price of good X falls, total quantity demanded increases. This total change can be
decomposed into two parts.
• Substitution effect: holds real income constant (keeps consumer on same indifference
curve) but adjusts relative prices. Because X is now cheaper relative to Y , the consumer
substitutes toward X. This effect always moves in the opposite direction to the price
change – for a price fall, substitution effect always increases quantity demanded.
• Income effect: the price fall makes the consumer better off (purchasing power rises).
If X is a normal good, higher real income increases demand for X further. If X is an
inferior good, the income effect works in reverse but is usually outweighed by the substi-
tution effect.
Page 4 of 21
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Total Effect = Substitution Effect + Income Effect
For a normal good:
∆Qtotal = ∆QSE + ∆QIE > 0
| {zX } | {zX } | {zX}
Total ≥0 ≥0
Good Y
A C
B U2
U1
XA XB XC1
BL BLS BL2
Good X
SE
IE
Total Effect
A → B = substitution effect (along U1 ); B → C = income effect (shift to U2 ).
(c) [7 marks]
Question: Define the following types of goods and explain what the sign of the cross-
price elasticity of demand tells us about the relationship between two goods: (i) Substi-
tutes, (ii) Complements, (iii) Independent goods.
Answer:
Cross-price elasticity of demand:
%∆QD
X ∆QX PY
EXY = = ·
%∆PY ∆PY QX
Page 5 of 21
, ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Type Sign of EXY Meaning SA Example
Substitutes EXY > 0 Rise in PY increases demand Petrol and diesel vehicles
for X (they compete)
Complements EXY < 0 Rise in PY reduces demand Cars and tyres
for X (used together)
Independent EXY = 0 Price of Y does not affect Bread and motor oil
demand for X
. Watch Out
Do not confuse cross-price elasticity with own-price elasticity. Cross-price compares two
different goods; own-price measures how quantity of the same good responds to its price
change.
Page 6 of 21
]]
⋆
ECS2601: Intermediate Microeconomics
OCT/NOV Examination 2026 Revision Guide
Covers Past Papers: 2023, 2024 & 2025
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
[ Economics / Commerce [
_ Exam Revision Guide
ECS2601
Module Code:
Intermediate Microeconomics
Module Name:
Oct/Nov 2023, 2024 & 2025
Papers Covered:
Oct/Nov 2026 Examinations
Prepared For:
≈100 marks per paper
Total Marks:
Focus on understanding the theory. Work through every calculation. Diagrams earn
marks – practise drawing them clearly.
Exam Revision Notes | ECS2601 | 2026
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
SECTION A: OCT/NOV 2025 EXAMINATION
Page 2 of 21
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Question 1 – Consumer Theory and Indifference Curves [25 marks]
(a) [8 marks]
Question: Explain, using an indifference curve diagram, how a consumer reaches utility
maximisation subject to a budget constraint. Your answer must clearly show and explain
the optimum point and the conditions that must hold at that point.
Answer:
Utility Maximisation: A consumer maximises utility at the point where the highest attain-
able indifference curve is tangent to the budget line.
The budget constraint shows all combinations of goods X and Y the consumer can afford:
P X · X + PY · Y = I
where PX and PY are prices and I is income. Written in slope form: Y = I
PY − PX
PY X.
Indifference curves show all combinations of X and Y that give equal utility. They slope
downward, are convex to the origin, and higher curves mean higher utility.
The optimum condition. At the tangency point, the slope of the indifference curve (the
MRS) equals the slope of the budget line (the price ratio):
∆Y PX
MRSXY = − =
∆X PY
Equivalently, marginal utility per rand spent must be equal across both goods:
M UX M UY
=
PX PY
Page 3 of 21
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Good Y
I
PY
E ∗ (Optimum)
∗
Y
U3
U∗
U1
Good X
X∗ I Budget Line
PX
⋆ Exam Tip
Always state both the tangency condition (MRS = PX /PY ) and the budget line equa-
tion. Draw the diagram with the optimum point labelled E ∗ and read off X ∗ and Y ∗
from the axes.
(b) [10 marks]
Question: Distinguish between the income effect and the substitution effect of a price
change, using the Slutsky decomposition. Illustrate your answer with a diagram for a
normal good when the price of Good X falls.
Answer:
When the price of good X falls, total quantity demanded increases. This total change can be
decomposed into two parts.
• Substitution effect: holds real income constant (keeps consumer on same indifference
curve) but adjusts relative prices. Because X is now cheaper relative to Y , the consumer
substitutes toward X. This effect always moves in the opposite direction to the price
change – for a price fall, substitution effect always increases quantity demanded.
• Income effect: the price fall makes the consumer better off (purchasing power rises).
If X is a normal good, higher real income increases demand for X further. If X is an
inferior good, the income effect works in reverse but is usually outweighed by the substi-
tution effect.
Page 4 of 21
,ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Total Effect = Substitution Effect + Income Effect
For a normal good:
∆Qtotal = ∆QSE + ∆QIE > 0
| {zX } | {zX } | {zX}
Total ≥0 ≥0
Good Y
A C
B U2
U1
XA XB XC1
BL BLS BL2
Good X
SE
IE
Total Effect
A → B = substitution effect (along U1 ); B → C = income effect (shift to U2 ).
(c) [7 marks]
Question: Define the following types of goods and explain what the sign of the cross-
price elasticity of demand tells us about the relationship between two goods: (i) Substi-
tutes, (ii) Complements, (iii) Independent goods.
Answer:
Cross-price elasticity of demand:
%∆QD
X ∆QX PY
EXY = = ·
%∆PY ∆PY QX
Page 5 of 21
, ECS2601 | Intermediate Microeconomics – Exam Revision Oct/Nov 2023–2025
Type Sign of EXY Meaning SA Example
Substitutes EXY > 0 Rise in PY increases demand Petrol and diesel vehicles
for X (they compete)
Complements EXY < 0 Rise in PY reduces demand Cars and tyres
for X (used together)
Independent EXY = 0 Price of Y does not affect Bread and motor oil
demand for X
. Watch Out
Do not confuse cross-price elasticity with own-price elasticity. Cross-price compares two
different goods; own-price measures how quantity of the same good responds to its price
change.
Page 6 of 21
