Fall SemeSter 2025 – eCS1501 eConomiCS ia |
november/DeCember PortFolio ComPlete
anSWerS | UPDateD 2025/2026 eDition | veriFieD
UniSa FirSt-Year StUDY GUiDe | DUe 12 DeCember
2025 | 100% exam-reaDY reSoUrCe For
UniverSitY oF SoUth aFriCa StUDentS
Question 1: Supply and Demand
A sudden increase in the price of oil leads to a rise in transportation costs. What is the
most likely effect on the market for airline tickets?
A) Increase in demand for airline tickets
B) Decrease in demand for airline tickets (Correct Option)
C) Increase in supply of airline tickets
D) Decrease in supply of airline tickets
Rationale:
The rise in transportation costs increases the overall cost of air travel, leading
consumers to seek alternatives or reduce their travel plans. This results in a decrease in
demand for airline tickets.
Question 2: Elasticity
If the price of a product increases by 10% and the quantity demanded decreases by
20%, what is the price elasticity of demand?
A) 0.5
B) 1.0
C) 2.0 (Correct Option)
D) 5.0
Rationale:
Price elasticity of demand is calculated as the percentage change in quantity
demanded divided by the percentage change in price. Here, it is -20% / 10% = -2. The
absolute value, 2.0, indicates that demand is elastic.
Question 3: Market Structures
Which market structure is characterized by a few large firms that dominate the market
and engage in strategic decision-making?
A) Perfect competition
B) Monopoly
,C) Oligopoly (Correct Option)
D) Monopolistic competition
Rationale:
An oligopoly is defined by a small number of firms whose decisions regarding pricing
and output affect each other. This leads to strategic behavior among the firms.
Question 4: Gross Domestic Product (GDP)
Which of the following would be included in the calculation of a country's GDP?
A) Sale of used goods
B) Government spending on infrastructure (Correct Option)
C) Transfer payments
D) Stock market transactions
Rationale:
GDP measures the total value of all final goods and services produced within a country
during a specific time period. Government spending on infrastructure contributes to
this total.
Question 5: Opportunity Cost
If a student chooses to spend an hour studying instead of working a part-time job, what
is the opportunity cost of their decision?
A) The knowledge gained from studying
B) The wages they would have earned from the job (Correct Option)
C) The cost of tuition
D) The value of leisure time
Rationale:
Opportunity cost refers to the benefits lost when choosing one alternative over another.
In this case, it is the wages foregone from not working.
Question 6: Inflation
Which of the following is most likely to occur during a period of high inflation?
A) Increased purchasing power
B) Decreased interest rates
C) Uncertainty in the economy (Correct Option)
D) Stable prices
Rationale:
High inflation often creates uncertainty as consumers and businesses cannot predict
future costs, leading to altered spending and investment behaviors.
,Question 7: Comparative Advantage
Country A can produce 10 cars or 5 trucks, while Country B can produce 6 cars or 4
trucks. Which country has a comparative advantage in producing trucks?
A) Country A
B) Country B (Correct Option)
C) Neither country
D) Both countries
Rationale:
Country B has a lower opportunity cost for producing trucks compared to Country A,
giving it a comparative advantage in truck production.
Question 8: Fiscal Policy
Which of the following is an example of expansionary fiscal policy?
A) Increasing taxes
B) Reducing government spending
C) Increasing government spending (Correct Option)
D) Decreasing interest rates
Rationale:
Expansionary fiscal policy involves increasing government spending or reducing taxes to
stimulate economic activity.
Question 9: Market Failures
What is a common cause of market failure?
A) Perfect competition
B) Externalities (Correct Option)
C) High demand
D) Low supply
Rationale:
Externalities occur when a third party is affected by a transaction, leading to market
outcomes that do not reflect true costs and benefits, resulting in market failure.
Question 10: Money Supply
Which of the following best describes the function of money as a store of value?
, A) Money must be accepted as payment
B) Money can be saved and retrieved in the future (Correct Option)
C) Money must be durable
D) Money must be divisible
Rationale:
As a store of value, money maintains its value over time, allowing individuals to save
and use it in the future.
Question 11: Monopolistic Competition
Which of the following is a characteristic of monopolistic competition?
A) Identical products
B) Single seller
C) Product differentiation (Correct Option)
D) Barriers to entry
Rationale:
Monopolistic competition features many firms selling differentiated products, allowing
them to have some control over pricing.
Question 12: Demand Curve Shifts
What might cause a leftward shift in the demand curve for a product?
A) Increase in consumer income
B) Increase in the price of a substitute good
C) Decrease in consumer preferences for the product (Correct Option)
D) Increase in the number of consumers
Rationale:
A decrease in consumer preferences for a product leads to a reduced quantity
demanded at all price levels, causing a leftward shift in the demand curve.
Question 13: Price Floors
What is the effect of a price floor set above the equilibrium price?
A) Surplus of goods (Correct Option)
B) Shortage of goods
C) Equilibrium price
D) No effect
november/DeCember PortFolio ComPlete
anSWerS | UPDateD 2025/2026 eDition | veriFieD
UniSa FirSt-Year StUDY GUiDe | DUe 12 DeCember
2025 | 100% exam-reaDY reSoUrCe For
UniverSitY oF SoUth aFriCa StUDentS
Question 1: Supply and Demand
A sudden increase in the price of oil leads to a rise in transportation costs. What is the
most likely effect on the market for airline tickets?
A) Increase in demand for airline tickets
B) Decrease in demand for airline tickets (Correct Option)
C) Increase in supply of airline tickets
D) Decrease in supply of airline tickets
Rationale:
The rise in transportation costs increases the overall cost of air travel, leading
consumers to seek alternatives or reduce their travel plans. This results in a decrease in
demand for airline tickets.
Question 2: Elasticity
If the price of a product increases by 10% and the quantity demanded decreases by
20%, what is the price elasticity of demand?
A) 0.5
B) 1.0
C) 2.0 (Correct Option)
D) 5.0
Rationale:
Price elasticity of demand is calculated as the percentage change in quantity
demanded divided by the percentage change in price. Here, it is -20% / 10% = -2. The
absolute value, 2.0, indicates that demand is elastic.
Question 3: Market Structures
Which market structure is characterized by a few large firms that dominate the market
and engage in strategic decision-making?
A) Perfect competition
B) Monopoly
,C) Oligopoly (Correct Option)
D) Monopolistic competition
Rationale:
An oligopoly is defined by a small number of firms whose decisions regarding pricing
and output affect each other. This leads to strategic behavior among the firms.
Question 4: Gross Domestic Product (GDP)
Which of the following would be included in the calculation of a country's GDP?
A) Sale of used goods
B) Government spending on infrastructure (Correct Option)
C) Transfer payments
D) Stock market transactions
Rationale:
GDP measures the total value of all final goods and services produced within a country
during a specific time period. Government spending on infrastructure contributes to
this total.
Question 5: Opportunity Cost
If a student chooses to spend an hour studying instead of working a part-time job, what
is the opportunity cost of their decision?
A) The knowledge gained from studying
B) The wages they would have earned from the job (Correct Option)
C) The cost of tuition
D) The value of leisure time
Rationale:
Opportunity cost refers to the benefits lost when choosing one alternative over another.
In this case, it is the wages foregone from not working.
Question 6: Inflation
Which of the following is most likely to occur during a period of high inflation?
A) Increased purchasing power
B) Decreased interest rates
C) Uncertainty in the economy (Correct Option)
D) Stable prices
Rationale:
High inflation often creates uncertainty as consumers and businesses cannot predict
future costs, leading to altered spending and investment behaviors.
,Question 7: Comparative Advantage
Country A can produce 10 cars or 5 trucks, while Country B can produce 6 cars or 4
trucks. Which country has a comparative advantage in producing trucks?
A) Country A
B) Country B (Correct Option)
C) Neither country
D) Both countries
Rationale:
Country B has a lower opportunity cost for producing trucks compared to Country A,
giving it a comparative advantage in truck production.
Question 8: Fiscal Policy
Which of the following is an example of expansionary fiscal policy?
A) Increasing taxes
B) Reducing government spending
C) Increasing government spending (Correct Option)
D) Decreasing interest rates
Rationale:
Expansionary fiscal policy involves increasing government spending or reducing taxes to
stimulate economic activity.
Question 9: Market Failures
What is a common cause of market failure?
A) Perfect competition
B) Externalities (Correct Option)
C) High demand
D) Low supply
Rationale:
Externalities occur when a third party is affected by a transaction, leading to market
outcomes that do not reflect true costs and benefits, resulting in market failure.
Question 10: Money Supply
Which of the following best describes the function of money as a store of value?
, A) Money must be accepted as payment
B) Money can be saved and retrieved in the future (Correct Option)
C) Money must be durable
D) Money must be divisible
Rationale:
As a store of value, money maintains its value over time, allowing individuals to save
and use it in the future.
Question 11: Monopolistic Competition
Which of the following is a characteristic of monopolistic competition?
A) Identical products
B) Single seller
C) Product differentiation (Correct Option)
D) Barriers to entry
Rationale:
Monopolistic competition features many firms selling differentiated products, allowing
them to have some control over pricing.
Question 12: Demand Curve Shifts
What might cause a leftward shift in the demand curve for a product?
A) Increase in consumer income
B) Increase in the price of a substitute good
C) Decrease in consumer preferences for the product (Correct Option)
D) Increase in the number of consumers
Rationale:
A decrease in consumer preferences for a product leads to a reduced quantity
demanded at all price levels, causing a leftward shift in the demand curve.
Question 13: Price Floors
What is the effect of a price floor set above the equilibrium price?
A) Surplus of goods (Correct Option)
B) Shortage of goods
C) Equilibrium price
D) No effect
