Assume you are the manager of a small South African firm which sells nails, identical to those supplied by many other firms. You are concerned about two eventualities: • That the overall market supply of nails will decrease by 2 percent due to foreign producers’ exit • That the overall market demand for nails will increase by 2 percent due to a growing economy. 2.1 Identify and justify the firm’s market structure. (5) 2.2 With the aid of a diagram, illustrate and explain the firm’s long-run equilibrium position. (10) 2.3 The schedule below shows the quantities of nails demanded at each price: Price Quantity Old 400 10000 New 380 12000 2.3.1 Calculate the elasticities of demand, using the point method and interpret your result. (6) 2.3.2 List any four (4) factors that could result in the nails having the elasticity calculated in 2.3.1

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Assume you are the manager of a small South African firm which sells
nails, identical to those supplied by many other firms. You are
concerned about two eventualities: • That the overall market supply
of nails will decrease by 2 percent due to foreign producers’ exit
• That the overall market demand for nails will increase by 2
percent due to a growing economy.

2.1 Identify and justify the firm’s market structure. (5)

2.2 With the aid of a diagram, illustrate and explain the firm’s
long-run equilibrium position. (10)

2.3 The schedule below shows the quantities of nails demanded at each
price:

Price Quantity Old 400 10000 New 380 12000

2.3.1 Calculate the elasticities of demand, using the point method and
interpret your result. (6)

2.3.2 List any four (4) factors that could result in the nails having
the elasticity calculated in 2.3.1

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