ECS2601 EXAM PACK
• With memos from 2013
till 2015
• About 150 Multiple Choice
Questions
• Well explained answers
, ECS2601 MAY 2015 MEMORANDUM
SECTION A
Candidates must answer QUESTION 1 and then EITHER QUESTION 2 OR QUESTION 3. All
questions carry equal marks, namely 20 marks per question. Section A therefore counts 40
marks out of a total of 100.
QUESTION 1 (20 marks)
1a. Consider the following baskets of goods:
FOOD CLOTHING
A 8 3
B 6 6
C 3 8
If preferences satisfy all requirements, is A preferred to C or C to A? Explain your answer.
(4 marks)
Basket A has more food than basket C.
Basket C has more clothing than basket A.
Therefore, basket A and C cannot be compared without additional information.
1b. An island economy produces only two goods – coconuts and pineapples. There are five
people (A, B, C, D and E) living on the island, with these preferences:
A has a strong preference for pineapples.
B has a strong preference for coconuts.
C doesn’t care for pineapples (assigns no value to them).
D doesn’t care for coconuts (assigns no value to them).
E will only consume pineapples and coconuts in the fixed proportion of one pineapple
to one coconut.
For each of these five individuals, construct a representative indifference curve with
pineapples on the horizontal axis and coconuts on the vertical axis.
(10 marks)
Person A: (2 marks each.)
Coconuts
A
Person B:
, Coconuts
B
Pineapples
Person C:
Coconut
C
Pineapple
Person D:
Coconut
D
Pineapple
, Person E:
Coconuts
E
Pineapples
1c. The diagram below depicts the change in optimal consumption bundles for Kgomotso when
the price of bread decreases. Decompose the change into the income and substitution effects.
Indicate the total effect, income effect and substitution effect in the diagram. (6 marks)
Food
bread
• With memos from 2013
till 2015
• About 150 Multiple Choice
Questions
• Well explained answers
, ECS2601 MAY 2015 MEMORANDUM
SECTION A
Candidates must answer QUESTION 1 and then EITHER QUESTION 2 OR QUESTION 3. All
questions carry equal marks, namely 20 marks per question. Section A therefore counts 40
marks out of a total of 100.
QUESTION 1 (20 marks)
1a. Consider the following baskets of goods:
FOOD CLOTHING
A 8 3
B 6 6
C 3 8
If preferences satisfy all requirements, is A preferred to C or C to A? Explain your answer.
(4 marks)
Basket A has more food than basket C.
Basket C has more clothing than basket A.
Therefore, basket A and C cannot be compared without additional information.
1b. An island economy produces only two goods – coconuts and pineapples. There are five
people (A, B, C, D and E) living on the island, with these preferences:
A has a strong preference for pineapples.
B has a strong preference for coconuts.
C doesn’t care for pineapples (assigns no value to them).
D doesn’t care for coconuts (assigns no value to them).
E will only consume pineapples and coconuts in the fixed proportion of one pineapple
to one coconut.
For each of these five individuals, construct a representative indifference curve with
pineapples on the horizontal axis and coconuts on the vertical axis.
(10 marks)
Person A: (2 marks each.)
Coconuts
A
Person B:
, Coconuts
B
Pineapples
Person C:
Coconut
C
Pineapple
Person D:
Coconut
D
Pineapple
, Person E:
Coconuts
E
Pineapples
1c. The diagram below depicts the change in optimal consumption bundles for Kgomotso when
the price of bread decreases. Decompose the change into the income and substitution effects.
Indicate the total effect, income effect and substitution effect in the diagram. (6 marks)
Food
bread
