PMIC02-5 Exam Overview
20-04-2023
Presentation outline
• Important sources
• Structure of the exam
• PMIC02-5 review
• Questions
Important Sources
• Prescribed textbook
• Lecture slides
• Revision exercises.
• Study guide exercises
• Recordings on your online page
• Textbook solutions
• Revise your assignment
Structure of the exam
• Exam out of 70
• In-Moodle exam
• 20 MCQs
• 50 marks writing questions
• You answer ALL QUESTIONS
• You study everything in the syllabus
• Closed proctored online exam
• 2 hours 20 mins
PRODUCTION, INCOME AND SPENDING
Figure 2-1 The three major flows in the economy
THE INTERDEPENDENCE BETWEEN HOUSEHOLDS AND FIRMS
• Goods market vs. factor market
• The circular flow of goods and services
Figure 2-2 The circular flow of goods and services
ILLUSTRATING SCARCITY, CHOICE AND OPPORTUNITY
COST: THE PRODUCTION POSSIBILITIES CURVE
Figure 1-1 A production possibilities curve for the Wild Coast community
DEMAND
Let Qd = quantity of good demanded in a particular period
Px = price of the specific good
Pg = prices of related goods
Y = households’ income during the period
T = taste of the consumers concerned
N = number of consumers in the market concerned
… = allowance for other possible influences
The law of demand states:
Other things being equal (ie ceteris paribus), the higher the price
of a good, the lower the quantity demanded.
SUPPLY
Market supply
Determinants of market supply
• The price of the product
• The price of alternative products
• Prices of factors of production and other inputs
• Expected future prices
• The state of technology
The quantity of a good supplied in a particular period is a function
of the price of the good, the prices of alternative outputs, the
prices of the factors of production, the expected future prices of
the good and the state of technology.
MARKET EQUILIBRIUM
• Equilibrium (quantity demanded = quantity supplied)
• Excess demand (market shortage)
• Excess supply (market surplus)
MARKET EQUILIBRIUM
Figure 3-10 Demand, supply and market equilibrium
CONSUMER SURPLUS AND PRODUCER SURPLUS
• Consumer surplus and producer surplus
Figure 3-13 Consumer surplus and producer surplus at market equilibrium
GOVERNMENT INTERVENTION
Maximum prices (price ceilings, price control)
Figure 4-6 Maximum prices
GOVERNMENT INTERVENTION
Minimum prices (price supports, price floors)
Figure 4-8 A minimum price
A general definition of elasticity
• Elasticity – a measure of responsiveness or sensitivity
• Elasticity coefficient – the percentage change in a dependent
variable if the relevant independent variable changes by one
per cent
THE PRICE ELASTICITY OF DEMAND
Calculating price elasticity of demand
Elasticity calculations..
• If the price of apples decreases from R1.50 to R1.00 per apple, and the
quantity demanded increases from 2000 to 4000 apples sold per day.
Calculate the price elasticity of demand using the point formula.
∆𝑄 𝑃 4000−2000 1.50
• × = × = -3 = 3 (take the absolute value)
∆𝑃 𝑄 1.00−1.50 2000
• Elastic demand.
Elasticity calculation
Example
• If the price of apples decreases from R1.50 to R1.00 per apple, and the
quantity demanded increases from 2000 to 4000 apples sold per day.
Calculate the price elasticity of demand using the arc formula.
• Calculate the revenue before and after the price change
Solution
𝑸𝟐−𝑸𝟏 𝑷𝟐−𝑷𝟏 𝟒𝟎𝟎𝟎−𝟐𝟎𝟎𝟎 𝟏.𝟎𝟎−𝟏.𝟓𝟎
• ( )/( )= ( )/( ) =-1.67=1.67
𝑸𝟏+𝑸𝟐 𝑷𝟏+𝑷𝟐 𝟐𝟎𝟎𝟎+𝟒𝟎𝟎𝟎 𝟏.𝟓𝟎+𝟏.𝟎𝟎
Revenue before price increase = 1.5*2000 = R3000
Revenue after price increase = 1*4000 = R4000
THE PRICE ELASTICITY OF DEMAND
Different categories of price elasticity of demand
Price elasticity of demand: a summary
Utility
• Utility – the degree of satisfaction that a household or consumer
derives or expects to derive from the consumption of a good or
service
• Utility approach (Chapter 6) Cardinal utility – assumption: utility can
be measured
• Indifference approach (Chapter 7) Ordinal utility – assumption:
bundles of goods and services can be ordered
• The aim – achieve the highest attainable level of total utility
• When is the consumer at equilibrium?
PRODUCTION IN THE SHORT RUN
The short-run production function
• In the short run, a firm can expand output only by increasing
the quantity of its variable input
TABLE 8-1 Production schedule of a maize farmer with one variable input
PRODUCTION IN THE SHORT RUN
The law of diminishing returns
• The law of diminishing returns or the law of diminishing
marginal returns – when more of a variable input is combined
with one or more fixed inputs in a production process, points
will eventually be reached where first the marginal product,
then the average product and finally the total product start to
decline
PRODUCTION IN THE SHORT RUN
Average and marginal product
TABLE 8-2 Marginal and average product of a maize farmer with one variable input
PRODUCTION IN THE SHORT RUN
Average and marginal product
Figure 8-2 Total, average
and marginal product of
labour
Formulas
𝑇𝐶
𝐴𝐶 = 𝑇𝐶 = 𝑇𝐹𝐶 + 𝑇𝑉𝐶 𝐴𝐶 = 𝐴𝐹𝐶 + 𝐴𝑉𝐶
𝑄
Δ𝑇𝐶 𝑇𝑉𝐶 𝑇𝑃 Δ𝑇𝑃
𝑀𝐶 = 𝐴𝑉𝐶 = AP= 𝑀𝑃 =
𝑄 𝑁
Δ𝑄 Δ𝑁
TC = Total Costs
AC=Average Costs
TFC= Total Fixed Costs
TVC=Total Variable Costs
MC=Marginal Costs
Q= Quantity
AP=Average Product
MP=Marginal Product
Equilibrium
• If MR > MC, output should be expanded
• If MR = MC, profits are maximised
• If MR < MC, output should be reduced
THE EQUILIBRIUM OF THE FIRM UNDER PERFECT COMPETITION
Figure 9-4 Different possible short-run equilibrium positions of the firm under
perfect competition
MARKET STRUCTURE: AN OVERVIEW
Market structures
TABLE 9-1 Summary of market structures
Examination
tips……..
• Start preparing if you haven’t started already
• Take your time in the examination
• Follow instructions
• Importance of room scan
• You are allowed 1 sheet of blank paper
• ALL THE BEST!!!!!
• QUESTIONS?????
Calm your nerves
Proper preparation prevents poor performance and calms the nerves
• Start at the beginning of the module and familiarise yourself with the exam
guidelines and requirements :
₋ Read the exam sections in the Student Handbook
Chapter 5: Examination rules for remotely (online) proctored exams
Chapter 7.22: What do I need to complete a remotely (online) proctored exam?
₋ Read the Assessment Guideline Document – open book, closed book or online
submission
₋ Read the Exam Instruction document
₋ Ensure you understand the format, structure and duration of the exam
• Ask questions up front if you need to clarify anything
Ensure your system is set up correctly
• Work through the Proctorio lessons on your course page:
⁻ What is Proctorio and why are we doing it
⁻ FAQ and Privacy Concerns documents
⁻ Step-by-step process on –
⁻ how to install the Proctorio Chrome Extension successfully
⁻ complete system and ID verification
⁻ do a room scan
⁻ access the exam
⁻ trouble shoot problems
⁻ complete the mock proctored online test
⁻ Use the opportunity to identify and iron out system problems before the exam
Exam preparation
• Use all the opportunities to get familiar with the online proctored exam environment:
₋ Proctored online mock test
₋ Proctored online test (formative assessment)
₋ Proctored online mock exam (mock summative assessment)
• Read the exam rules and requirements carefully and ensure you comply with the
requirements
• Ensure that your room is set up the day before the exam, that you have enough data and
a stable internet connection, that your computer is fully charged and that you have all
the equipment you need
• Sleep well the night before the exam
NOTE: You can relax, Milpark has a support team ready to assist on the day of the exam
