Fall Semester 2025 – ECS1501 Economics IA |
November/December Portfolio COMPLETE
ANSWERS | Updated 2025/2026 Edition |
Verified UNISA Study Guide | Due 12 December
2025 | 100% Exam-Ready Resource for
University of South Africa Students
Question 1:
What is the primary goal of economic policy?
A) To increase government revenue
B) To achieve full employment
C) To reduce inflation
D) To enhance the quality of life
Correct Option: B) To achieve full employment
Rationale:
The primary goal of economic policy is to achieve full employment, as it is essential for
maximizing the productive capacity of an economy. While reducing inflation and
increasing government revenue are important, they are typically considered secondary
objectives. Enhancing the quality of life can be a broader outcome of achieving full
employment.
Question 2:
Which of the following describes the law of demand?
A) As the price of a good increases, quantity demanded increases.
B) As the price of a good decreases, quantity demanded decreases.
C) As the price of a good increases, quantity demanded decreases.
D) Price and quantity demanded are unrelated.
Correct Option: C) As the price of a good increases, quantity demanded decreases.
Rationale:
The law of demand states that there is an inverse relationship between the price of a
good and the quantity demanded. When prices rise, consumers tend to buy less of that
good, while lower prices generally increase demand.
Question 3:
What is Gross Domestic Product (GDP)?
,A) The total value of all goods and services produced in a country in a year.
B) The total income earned by residents of a country.
C) The total expenditure on final goods and services in a country.
D) Both A and C.
Correct Option: D) Both A and C.
Rationale:
GDP can be measured in two ways: by the total value of all goods and services
produced (production approach) or by total expenditure on final goods and services
(expenditure approach). Both methods yield the same GDP figure, making option D the
correct answer.
Question 4:
What is meant by "opportunity cost"?
A) The cost of producing one additional unit of a good.
B) The cost of the next best alternative foregone when a choice is made.
C) The total cost of all resources used in production.
D) The cost of inflation over time.
Correct Option: B) The cost of the next best alternative foregone when a choice is
made.
Rationale:
Opportunity cost refers to the value of the next best alternative that is given up when a
choice is made. It is a crucial concept in economics because it emphasizes the trade-
offs that individuals and businesses face when making decisions.
Question 5:
Which of the following is a characteristic of a monopoly?
A) Many sellers in the market
B) Homogeneous products
C) High barriers to entry
D) Perfect information
Correct Option: C) High barriers to entry
Rationale:
A monopoly is characterized by a single seller dominating the market, often due to high
barriers to entry that prevent other firms from entering. This lack of competition allows
the monopolist to control prices and supply.
Question 6:
,What does the term "inflation" refer to?
A) A decrease in the overall price level
B) A sustained increase in the overall price level
C) An increase in demand for goods
D) A decrease in demand for goods
Correct Option: B) A sustained increase in the overall price level
Rationale:
Inflation is defined as a sustained increase in the overall price level of goods and
services in an economy over time. It indicates a decrease in the purchasing power of
money.
Question 7:
Which of the following is a tool of monetary policy?
A) Taxation
B) Government spending
C) Open market operations
D) Price controls
Correct Option: C) Open market operations
Rationale:
Open market operations involve the buying and selling of government securities by the
central bank to control the money supply. It is a key tool of monetary policy used to
influence interest rates and liquidity in the economy.
Question 8:
What is a positive externality?
A) A negative impact on third parties
B) A benefit to third parties
C) An increase in production costs
D) A decrease in demand for goods
Correct Option: B) A benefit to third parties
Rationale:
A positive externality occurs when a third party benefits from an economic transaction
they are not directly involved in, such as education, which can lead to a more informed
society.
, Question 9:
In a competitive market, what happens to the price when there is excess supply?
A) The price increases
B) The price decreases
C) The price remains unchanged
D) The price fluctuates unpredictably
Correct Option: B) The price decreases
Rationale:
In a competitive market, excess supply indicates that the quantity supplied exceeds the
quantity demanded, leading sellers to lower prices to attract buyers, thus restoring
equilibrium.
Question 10:
What is the primary purpose of taxation?
A) To provide public goods
B) To redistribute income
C) To influence economic behavior
D) All of the above
Correct Option: D) All of the above
Rationale:
Taxation serves multiple purposes, including funding public goods and services,
redistributing income to reduce inequality, and influencing economic behavior through
incentives and disincentives.
Question 11:
What is meant by "market equilibrium"?
A) When supply exceeds demand
B) When demand exceeds supply
C) When quantity supplied equals quantity demanded
D) When prices are fixed
Correct Option: C) When quantity supplied equals quantity demanded
Rationale:
Market equilibrium occurs when the quantity of goods supplied equals the quantity
demanded, resulting in a stable market price where there is no tendency for change.
November/December Portfolio COMPLETE
ANSWERS | Updated 2025/2026 Edition |
Verified UNISA Study Guide | Due 12 December
2025 | 100% Exam-Ready Resource for
University of South Africa Students
Question 1:
What is the primary goal of economic policy?
A) To increase government revenue
B) To achieve full employment
C) To reduce inflation
D) To enhance the quality of life
Correct Option: B) To achieve full employment
Rationale:
The primary goal of economic policy is to achieve full employment, as it is essential for
maximizing the productive capacity of an economy. While reducing inflation and
increasing government revenue are important, they are typically considered secondary
objectives. Enhancing the quality of life can be a broader outcome of achieving full
employment.
Question 2:
Which of the following describes the law of demand?
A) As the price of a good increases, quantity demanded increases.
B) As the price of a good decreases, quantity demanded decreases.
C) As the price of a good increases, quantity demanded decreases.
D) Price and quantity demanded are unrelated.
Correct Option: C) As the price of a good increases, quantity demanded decreases.
Rationale:
The law of demand states that there is an inverse relationship between the price of a
good and the quantity demanded. When prices rise, consumers tend to buy less of that
good, while lower prices generally increase demand.
Question 3:
What is Gross Domestic Product (GDP)?
,A) The total value of all goods and services produced in a country in a year.
B) The total income earned by residents of a country.
C) The total expenditure on final goods and services in a country.
D) Both A and C.
Correct Option: D) Both A and C.
Rationale:
GDP can be measured in two ways: by the total value of all goods and services
produced (production approach) or by total expenditure on final goods and services
(expenditure approach). Both methods yield the same GDP figure, making option D the
correct answer.
Question 4:
What is meant by "opportunity cost"?
A) The cost of producing one additional unit of a good.
B) The cost of the next best alternative foregone when a choice is made.
C) The total cost of all resources used in production.
D) The cost of inflation over time.
Correct Option: B) The cost of the next best alternative foregone when a choice is
made.
Rationale:
Opportunity cost refers to the value of the next best alternative that is given up when a
choice is made. It is a crucial concept in economics because it emphasizes the trade-
offs that individuals and businesses face when making decisions.
Question 5:
Which of the following is a characteristic of a monopoly?
A) Many sellers in the market
B) Homogeneous products
C) High barriers to entry
D) Perfect information
Correct Option: C) High barriers to entry
Rationale:
A monopoly is characterized by a single seller dominating the market, often due to high
barriers to entry that prevent other firms from entering. This lack of competition allows
the monopolist to control prices and supply.
Question 6:
,What does the term "inflation" refer to?
A) A decrease in the overall price level
B) A sustained increase in the overall price level
C) An increase in demand for goods
D) A decrease in demand for goods
Correct Option: B) A sustained increase in the overall price level
Rationale:
Inflation is defined as a sustained increase in the overall price level of goods and
services in an economy over time. It indicates a decrease in the purchasing power of
money.
Question 7:
Which of the following is a tool of monetary policy?
A) Taxation
B) Government spending
C) Open market operations
D) Price controls
Correct Option: C) Open market operations
Rationale:
Open market operations involve the buying and selling of government securities by the
central bank to control the money supply. It is a key tool of monetary policy used to
influence interest rates and liquidity in the economy.
Question 8:
What is a positive externality?
A) A negative impact on third parties
B) A benefit to third parties
C) An increase in production costs
D) A decrease in demand for goods
Correct Option: B) A benefit to third parties
Rationale:
A positive externality occurs when a third party benefits from an economic transaction
they are not directly involved in, such as education, which can lead to a more informed
society.
, Question 9:
In a competitive market, what happens to the price when there is excess supply?
A) The price increases
B) The price decreases
C) The price remains unchanged
D) The price fluctuates unpredictably
Correct Option: B) The price decreases
Rationale:
In a competitive market, excess supply indicates that the quantity supplied exceeds the
quantity demanded, leading sellers to lower prices to attract buyers, thus restoring
equilibrium.
Question 10:
What is the primary purpose of taxation?
A) To provide public goods
B) To redistribute income
C) To influence economic behavior
D) All of the above
Correct Option: D) All of the above
Rationale:
Taxation serves multiple purposes, including funding public goods and services,
redistributing income to reduce inequality, and influencing economic behavior through
incentives and disincentives.
Question 11:
What is meant by "market equilibrium"?
A) When supply exceeds demand
B) When demand exceeds supply
C) When quantity supplied equals quantity demanded
D) When prices are fixed
Correct Option: C) When quantity supplied equals quantity demanded
Rationale:
Market equilibrium occurs when the quantity of goods supplied equals the quantity
demanded, resulting in a stable market price where there is no tendency for change.
