EKN 120 Economics 120 Comprehensive Study Guide

Economics 120 (EKN 120) is a foundational module that builds your ability to understand how markets allocate resources, how macroeconomies operate, and how policy choices affect outcomes such as inflation, unemployment, growth, and exchange rates. This study guide is designed to help you master the core concepts, apply them to real economic scenarios common in South Africa, and practise the kind of exam-style reasoning expected in University of Pretoria (UP) BCom Economics Study Material. It focuses on the syllabus skills—definitions, model-based thinking, diagram interpretation, and coherent argumentation—so you can convert knowledge into marks.

1. EKN 120 at a Glance: What You Must Be Able to Do in the Exam

EKN 120 examinations typically reward candidates who can: (1) define economic concepts precisely, (2) explain mechanisms (how one variable affects another), (3) use graphs and models correctly, (4) interpret policy implications, and (5) apply theory to contexts relevant to South Africa’s economic environment. Even if the exam questions differ year to year, the underlying competencies usually remain consistent: clear reasoning, correct assumptions, accurate calculations, and well-structured arguments.

1.1 Core skills that earn marks

Your answers should show that you can do the following consistently:

Translate words into economics
- Example: “Firms charge higher prices” → “A price increase shifts along the demand curve (or shifts demand depending on what causes the price change).”
- Example: “Interest rates rose” → “Higher real interest rates reduce consumption and investment via the intertemporal substitution effect and cost of capital channel.”
Identify what is changing
- Many marks are lost when students confuse changes in quantity demanded/supplied with changes in demand/supply.
- In diagrams:
  - Movement along the curve is due to a change in the variable on the axes (usually price).
  - Shift of the curve is due to changes in other determinants (income, preferences, technology, taxes, input prices, number of firms).
Explain cause-and-effect, not just correlations
- If exchange rates weaken, you must link it to expected changes in imported inflation, export competitiveness, capital flows, and monetary policy responses.
Apply models to plausible South African contexts
- South African exam questions may reference real institutions and sectors like:
  - SARB (South African Reserve Bank)
  - inflation measured by CPI
  - unemployment and labour market outcomes
  - fiscal policy and public debt issues
- Even when names are not given, the scenario will reflect South Africa: energy costs, exchange-rate sensitivity, unemployment/inequality concerns, and policy trade-offs.
Use correct algebra/logic in calculations
- Many EKN 120 problems include formulas for elasticities, growth rates, government budget constraints, and basic macro identities.
- You should practice doing computations quickly and checking plausibility (e.g., a tax rate cannot be negative if it’s described as a percentage tax).

1.2 How EKN 120 content typically maps to exam themes

Even without the exact year’s syllabus document in front of you, EKN 120 generally covers two broad blocks:

Microeconomics (resource allocation in markets)
- demand and supply
- elasticity
- consumer/producer decisions under constraints
- market efficiency and market failure
- taxation and price controls
- externalities, public goods, and information problems
Macroeconomics
- national income accounting (GDP, unemployment, inflation concepts)
- aggregate demand and aggregate supply (in simplified frameworks)
- money, interest rates, and banking basics
- fiscal and monetary policy tools
- open economy elements (exchange rates, net exports, capital flows basics)

1.3 Exam-style question patterns you should expect

Here are common structures and how to approach them.

Pattern A: “Explain” questions

These require a mechanism plus a conclusion.

Start with a definition.
Then state the mechanism (e.g., “Higher interest rates reduce spending… because…”).
Finally interpret implications (e.g., “This tends to lower inflation but may increase unemployment in the short run.”).

Pattern B: Diagram questions

You must get:

the correct axis labels
the correct direction of shift or movement
the correct new equilibrium
the correct qualitative effect (price up/down, quantity up/down)

Pattern C: Elasticity and tax incidence

The exam may ask:

compute elasticity
infer who bears the burden of a tax depending on elasticities

A strong answer includes:

computation (with units where relevant)
interpretation (“inelastic demand means consumers bear more”)

Pattern D: Macro identities and policy trade-offs

Questions like:

“Using GDP identity and consumption/investment functions, show how … changes.”
“Discuss effects of a fiscal stimulus under different output gaps.”

A strong answer includes:

stating identities clearly (Y = C + I + G + NX)
linking policy to components (C, I, G, NX)
acknowledging feedback loops (crowding out, exchange-rate effects, inflation responses)

1.4 Study strategy specific to EKN 120

To succeed, your revision should follow a cycle:

Learn definitions and assumptions
Practise diagrams until they are automatic
Solve at least 2–3 computation problems per topic
Write short structured explanations
Simulate full exam questions under time pressure

A good rule: for every topic, prepare:

1 diagram
2 numerical practice questions
1 written “explain” question with a mechanism

This guide supports that rhythm throughout.

2. Microeconomics Core: Demand, Supply, Elasticity, and Efficiency (with South African application)

Microeconomics in EKN 120 usually forms a large share of the exam because it tests both conceptual understanding and graph-based reasoning. The core is the demand-supply framework and how it predicts equilibrium outcomes and welfare effects.

2.1 Demand: the consumer side of the market

2.1.1 The demand function and law of demand

Demand describes the relationship between the price of a good and the quantity consumers are willing and able to buy, holding other factors constant.

Law of demand: as price rises, quantity demanded falls (ceteris paribus).
Key determinants of demand besides price:
- income
- tastes/preferences
- prices of substitutes
- prices of complements
- expectations about future prices/income
- number of buyers

2.1.2 Movement along vs shift of the demand curve

If the price of bread increases, and consumers buy less bread because bread became more expensive, that is typically a movement along the demand curve.
If consumer tastes change toward healthier foods, demand for health-friendly bread may rise at every price: that is a shift of the demand curve.

A common exam trap: confusing:

“Price changed” (movement along)
vs
“Other determinants changed” (shift).

2.1.3 Demand in a South African context

South Africa has distinctive features that influence demand patterns:

income constraints: unemployment and inequality can make demand sensitive to income changes.
import exposure: for tradable goods, exchange-rate movements can affect domestic prices, indirectly influencing demand.

Example scenario:

Exchange rate depreciation raises prices of imported consumer goods.
Consumers respond by reducing quantity demanded (movement along demand) and possibly shifting to substitutes (shift if substitute goods become relatively more attractive).

2.2 Supply: the producer side of the market

2.2.1 The supply function and law of supply

Supply describes the relationship between price and quantity producers are willing to sell.

Law of supply: as price rises, quantity supplied rises (ceteris paribus).
Key determinants besides price:
- input prices (labour, energy, raw materials)
- technology
- taxes/subsidies
- regulation
- expectations
- number of sellers

2.2.2 Supply changes in practice

Supply shifts can result from:

electricity cost changes (affecting production costs)
wage negotiations affecting labour costs
oil price changes affecting transport and inputs

In exam terms:

if input costs rise, supply shifts left (upward), raising equilibrium price and lowering equilibrium quantity.

2.3 Equilibrium, comparative statics, and welfare basics

2.3.1 Market equilibrium

Equilibrium is where:

quantity demanded equals quantity supplied.

Graphically:

downward-sloping demand curve intersects upward-sloping supply curve.

2.3.2 Comparative statics: predicting direction of change

When a determinant of demand or supply changes:

Determine the direction of the shift.
Then determine what happens to equilibrium price and quantity.

A strong answer explicitly states:

“Demand shifts right → equilibrium price increases and quantity increases.”
“Supply shifts left → equilibrium price increases and quantity decreases.”

2.3.3 Consumer and producer surplus

Welfare analysis often uses:

consumer surplus (CS): area above the price line and below the demand curve.
producer surplus (PS): area below the price line and above the supply curve.
Total surplus (TS) = CS + PS.
In efficiency terms (under standard assumptions), competitive markets maximize total surplus.

2.3.4 Why welfare matters in exam questions

If a market outcome is distorted (taxes, price controls, externalities), total surplus falls. Many “evaluate” questions require:

identifying the distortion,
describing who gains/loses,
assessing whether the policy improves welfare overall.

2.4 Elasticity: the bridge between theory and policy

Elasticity measures responsiveness of quantity to changes in a determinant.

2.4.1 Price elasticity of demand (PED)

PED = (% change in quantity demanded) / (% change in price).

If |PED| > 1: demand is elastic (quantity responds strongly).
If |PED| < 1: demand is inelastic (quantity responds weakly).
If |PED| = 1: unit elastic.

Determinants of demand elasticity:

availability of substitutes
necessity vs luxury
time horizon (elasticity often increases over time as consumers adjust)
share of income spent on the good

2.4.2 Interpreting elasticity for taxation

Tax incidence depends on relative elasticities:

more elastic side bears less burden because it can adjust quantity more easily.
less elastic side bears more burden.

Exam logic shortcut:

“Inelastic demand → consumers bear larger share of tax.”

2.4.3 Numerical practice structure (how to compute)

When you compute elasticity, follow a consistent process:

Compute percentage change in quantity.
Compute percentage change in price.
Divide to get elasticity magnitude.
State interpretation in words.

2.4.4 Example calculation template

Suppose:

price rises from 100 to 110 (a 10% increase),
quantity demanded falls from 50 to 45 (a -10% change).
Then PED = (-10%)/(+10%) = -1 → elastic magnitude equals 1 (unit elastic).

In exam writing:

“PED = -1, hence demand is unit elastic; quantity changes proportionally with price.”

2.5 Taxation, price controls, and deadweight loss

2.5.1 Specific vs ad valorem taxes (conceptual)

Specific tax: fixed amount per unit (e.g., R2 per litre).
Ad valorem tax: percentage of price (e.g., 10% tax).

Incidence outcomes depend on elasticities in both cases, but the algebra and graph interpretation may differ.

2.5.2 Tax effects in a supply-demand diagram

A tax effectively creates a wedge between:

price paid by consumers and
price received by producers.

Graphically:

tax shifts supply up by the tax amount (in a standard linear diagram).

Outcome:

equilibrium quantity decreases,
consumer price increases,
producer price decreases,
government collects revenue = tax × quantity sold after tax.

2.5.3 Deadweight loss (DWL)

Deadweight loss arises because:

some mutually beneficial trades no longer occur.
Total surplus decreases.

In exam answers, always distinguish:

government revenue (transfers, not necessarily welfare loss by itself)
DWL (efficiency loss)

2.5.4 Price ceilings and floors

Price ceiling (binding, below equilibrium) → shortage, rationing.
Price floor (binding, above equilibrium) → surplus, potential government purchase.

South African relevance:

Price ceilings are sometimes discussed in relation to essential goods.
Price floors show up in agricultural policy discussions.

Your exam answer should state:

the direct effects (quantity demanded/supplied mismatch)
the secondary effects (queues, black markets, administrative burdens)

2.6 Market failure: externalities and public goods

2.6.1 Externalities

An externality occurs when the production or consumption of a good affects a third party without compensation.

Negative externality: e.g., pollution.
- socially optimal quantity is less than market quantity.
- market fails to internalize external costs.

Policy tools:

Pigouvian tax (tax equals marginal external cost)
regulation and standards
tradable permits
Positive externality: e.g., education.
- socially optimal quantity exceeds market quantity.
- market under-provides the good.

Policy tools:

subsidies
public provision
incentives and grants

2.6.2 Public goods and free rider problems

Public goods are:

non-excludable and non-rivalrous (or close).
In competitive markets:
individuals have incentive to free ride.
under-provision occurs.

Policy response:

government provision or funding mechanisms.

2.6.3 South African institutional framing (conceptual)

In South Africa, real-world examples often include:

environmental impacts related to industry
investments in education and training
public health programmes
Even when EKN 120 does not ask directly about South African laws, exam questions often expect you to link policy tool selection to externalities’ nature (cost vs benefit, measurable vs unmeasurable).

2.7 Information problems (brief but important)

If the syllabus includes information economics:

adverse selection and moral hazard can distort markets.
Typical policy responses:
regulation
insurance design
monitoring and incentives

If information problems appear in an exam question, your task is to:

identify the specific information failure
state why the market outcome is inefficient
propose a policy remedy consistent with that failure

3. Macro Core: GDP, Inflation, Unemployment, AD-AS, and Policy Trade-offs (South Africa lens)

Macroeconomics questions in EKN 120 test your ability to connect aggregates (GDP, inflation, unemployment) with policy instruments (fiscal and monetary), using coherent reasoning and basic models.

3.1 National income accounting: building intuition for GDP

3.1.1 GDP as a measure of production

GDP is commonly measured as total production within an economy during a period (usually a year or quarter).

A standard identity:

Y = C + I + G + NX
- Y = GDP (output/income)
- C = consumption
- I = investment
- G = government spending
- NX = net exports (exports − imports)

3.1.2 Linking components to economic behaviour

When consumption falls:

GDP falls unless offset by increases in investment, government, or net exports.
When investment rises:
GDP rises through direct demand plus multiplier effects (in more advanced frameworks).

In exam reasoning, you should explicitly mention the channel:

“C rises due to higher disposable income”
“I rises due to lower interest rates or improved business expectations”
“NX rises due to currency depreciation improving price competitiveness”
“G rises due to government fiscal expansion”

3.2 Inflation and unemployment: definitions and relationships

3.2.1 Inflation: concept and measurement

Inflation refers to sustained increases in the general price level.

In practical South African discussion, inflation is often measured using CPI (Consumer Price Index), and the central bank typically targets inflation within a band. For exam purposes, what matters most is:

how inflation responds to demand and supply shocks,
how policy reacts.

3.2.2 Unemployment: types and relevance

Unemployment can be discussed as:

cyclical (related to business cycle downturns),
structural (mismatch between skills and jobs),
frictional (time to match workers and vacancies).

EKN 120 exam answers often require:

understanding that unemployment can persist even when GDP recovers quickly,
linking labour market rigidity and education/training issues to structural unemployment.

3.2.3 Trade-off thinking (without overcomplicating)

If your syllabus includes a short-run Phillips Curve logic:

higher inflation may be associated with lower unemployment in the short run,
but in the long run, the relationship weakens when expectations adjust.

A strong exam answer balances:

short-run benefits vs long-run costs
policy credibility and expectations effects

3.3 Aggregate demand (AD) and its determinants

AD represents total spending at different price levels.

In simplified terms:

AD components are C, I, G, NX.
As the price level rises:
real money balances fall (if money supply is fixed),
interest rates rise,
investment falls,
consumption may fall,
net exports may rise or fall depending on real exchange rate effects.

Your exam goal:

demonstrate direction of change and justify based on the model’s mechanism.

3.4 Aggregate supply (AS): short run vs long run thinking

In many intro macro frameworks:

Short-run AS may slope upward due to nominal rigidities (prices/wages adjust slowly).
Long-run AS is vertical at potential output where resources are fully utilized (or near full employment).

Exam technique:

When asked to “discuss impact of an oil price shock,” show:
- AS shifts (often left if costs rise),
- price level increases,
- output decreases in short run.

3.5 Policy instruments: fiscal policy and monetary policy

3.5.1 Fiscal policy

Fiscal policy refers to government spending (G) and taxes (T).

Expansionary fiscal policy:
- increase G or cut T → increases aggregate demand → higher output (short run) and potentially higher inflation.
Contractionary fiscal policy:
- decrease G or increase T → lowers aggregate demand.

Trade-offs:

Higher output may increase imports → NX falls.
Larger deficits may raise interest rates (depending on model).
If monetary policy responds, outcomes depend on coordination.

3.5.2 Monetary policy

Monetary policy affects interest rates and the money supply.

Common channels:

Central bank changes policy rate → affects market interest rates.
Changes interest rates → affects consumption and investment.
Changes money conditions → influences exchange rate and inflation expectations.

In South African contexts, monetary policy decisions are often framed through inflation targeting logic. In an exam answer, it is sufficient to explain:

how policy tightening reduces demand pressure,
how policy easing supports output.

3.6 Open economy basics: exchange rates and net exports

3.6.1 Why exchange rates matter

If the currency depreciates:

imports become more expensive → imports decrease (NX increases, all else equal).
exports may become more competitive → exports rise.
However, depreciation can also:
raise imported input costs → higher inflation,
affect expectations and risk premiums.

A good exam answer mentions both:

demand channel (NX improves),
inflation cost channel (import prices rise).

3.6.2 Capital flows and interest differentials (conceptual)

Differences between domestic and foreign interest rates can attract or repel capital.

Higher domestic real interest rates can attract inflows, supporting the currency.
Lower rates can lead to outflows, pressuring depreciation.

Even if the exam does not require equations, you must link:

interest rates → exchange rate → net exports → GDP/inflation.

3.7 Worked “reasoning frameworks” for typical exam scenarios

Scenario 1: Demand stimulus causes inflation

Question style:

“Government increases spending. Discuss effects on GDP, inflation, and unemployment.”

A structured response:

Increase in G → AD increases.
Output rises in the short run (move along short-run AS).
Price level rises → inflation increases.
Unemployment may fall if output rises and labour demand increases.
If inflation expectations adapt or if long-run AS is fixed at potential output:
- output returns to potential,
- inflation remains higher.

Scenario 2: Supply shock (oil/energy price increase)

Input costs rise → AS shifts left/up.
Price level increases → inflation rises.
Output falls → unemployment rises (in short run).
Policy dilemma:
- tightening reduces inflation but worsens output,
- easing supports output but risks higher inflation.

This “policy dilemma” point often earns extra marks.

Scenario 3: Currency depreciation

Imports become costlier → NX increases (exports relative).
AD may rise through improved NX.
But inflation rises due to higher import prices.
Monetary policy may respond to inflation → may offset output gains.

An excellent answer distinguishes:

immediate effect on NX vs inflation/monetary retaliation.

3.8 South Africa emphasis: turning macro theory into relevant arguments

South Africa is often characterized in macro discussions by:

inflation dynamics influenced by exchange rates,
unemployment and labour market challenges,
fiscal and growth constraints.

In exam writing, you should avoid overly specific claims (like exact growth numbers) unless the question provides them. Instead:

connect structural features (inequality/unemployment, exchange-rate sensitivity, energy costs, policy credibility) to model mechanisms.

A strong conclusion phrase:

“The impact of policy depends on expectations and the magnitude of supply-side constraints.”

4. Exam Problem-Solving Toolkit: Diagrams, Calculations, and Argument Writing for EKN 120

This section is a practical toolkit. The goal is to ensure your exam responses consistently meet mark-schemes: correct diagrams, correct algebra, and correct economic interpretation.

4.1 Diagram precision checklist (do this every time)

When drawing demand-supply or macro AD-AS diagrams, verify:

Axes
- Horizontal axis: quantity (Q) or output (Y)
- Vertical axis: price level (P) or price (p)
Curve slope
- Demand downward
- Supply upward
- AD downward in many setups
- AS upward in short run; vertical in long run (if using that model)
Shifts vs movements
- shift due to changes in determinants (income, tastes, technology, input costs)
- movement due to price change on the curve
Correct labels
- equilibrium point(s) labelled
- new equilibrium point(s) labelled
Qualitative predictions
- state price up/down and quantity up/down
- state output up/down and inflation up/down

Even a correct mechanism loses marks if the diagram is ambiguous or unlabelled.

4.2 Common diagram tasks and how to structure answers

4.2.1 Tax on a good (micro)

Answer structure:

Show tax wedge between what consumers pay and producers receive.
Show supply curve shift (up by the tax amount).
Mark new equilibrium quantity.
Mention consumer price increases and producer price decreases.
Identify government revenue region.
Identify deadweight loss region.
Conclude using elasticities: who bears more burden depends on relative elasticity.

4.2.2 Externality (negative externality)

Answer structure:

Show market demand as private benefit.
Show private marginal cost and social marginal cost.
Show socially optimal quantity where SMB = SMC (or MB = SMC).
Indicate that market overproduces.
Propose Pigouvian tax equal to marginal external cost.

4.2.3 Inflation and unemployment with policy

If asked in AD-AS style:

show AD shift
show resulting output and price movements
link to unemployment via labour market demand
mention expectations adjustments (if long-run effects discussed)

4.3 Calculation toolkit: elasticities and basic growth rates

Even when exam questions are not purely computational, students must show quantitative competence.

4.3.1 Elasticity formula basics

PED = (%ΔQd)/(%ΔP)

A consistent method reduces errors:

Use absolute values for magnitude when stating “elastic/inelastic.”
Keep sign conventions clear:
- PED is often negative due to inverse relationship.
- You can interpret magnitude for elasticity classification.

4.3.2 Growth rate interpretation

If growth is part of the exam:

use correct percentage change.
Example template:
growth rate = (new − old)/old × 100%

Interpretation:

“X grows by 5%” means new is 1.05 times old (not “adds 5% of original and then misapplies it”).

4.3.3 Sanity checks

Before finalizing:

If quantity increases when price increases (in a demand curve), check whether you mistakenly treated supply as demand or sign errors occurred.
If elasticity magnitude > 1, ensure you see a “strong” response.
If elasticity magnitude < 1, ensure response is weak.

4.4 Writing economics answers that score marks

A mark scheme often rewards structure and clarity. Use a consistent writing formula:

Define
Explain mechanism
Use model/diagram reference
Conclude
Add policy implication or welfare effect

Example: taxation answer writing template (micro)

Definition: “Tax creates a wedge…”
Mechanism: “Supply curve shifts up by the tax…”
Diagram: “Equilibrium moves from E0 to E1…”
Welfare: “Deadweight loss arises due to reduced trades…”
Incidence: “Tax burden depends on elasticities…”
Conclusion: “Hence the policy reduces quantity and lowers total surplus.”

Example: monetary policy expansion answer writing template (macro)

Definition: “Expansionary monetary policy lowers interest rates…”
Mechanism: “AD rises via consumption/investment, output rises in short run…”
Inflation: “Price level increases, raising inflation…”
Labour: “Unemployment falls if output exceeds potential…”
Conclusion: “In the long run, output returns to potential but inflation may remain higher depending on expectations.”

4.5 Counter-arguments and evaluation: how to score “discuss” questions

Many EKN 120 questions are not “calculate and stop.” You earn more by including at least one counter-argument or limitation.

Example themes:

fiscal stimulus may face crowding out
monetary easing may be limited by low demand for credit
external shocks can dominate domestic policy
elasticities determine who bears tax burden
information problems can undermine policy effectiveness

A good evaluation includes:

mention of conditions under which the policy might work or fail
a brief statement of why (based on model mechanisms)

4.6 Mini practice set (self-test prompts)

Use these prompts to practise exam reasoning without needing additional data.

Draw demand and supply; show effects of:
- an increase in income for a normal good,
- an increase in the price of substitutes.
Calculate a PED using given percentage changes (choose numbers that produce elasticity > 1 and < 1).
Explain who bears tax burden when demand is more inelastic than supply.
Explain negative externalities using MB/MC reasoning and show a diagram.
In AD-AS, show the effect of a supply shock on output and inflation.
Discuss the policy dilemma: reducing inflation vs maintaining output during supply shocks.

5. Institution-Linked Study Approach: UP BCom Economics (EKN 120) with Course-Targeted Practice Modules

This final section strengthens your revision by mapping study methods to course-style performance—how you should prepare for specific question types. Because this guide is part of a University of Pretoria (UP) BCom Economics Study Material collection, it emphasizes a UP-typical study approach: disciplined diagram practice, coherent micro-to-macro reasoning, and targeted writing for exam questions.

5.1 Course-targeted preparation: build a “question bank mindset”

A common reason students underperform is that they practise content but not the format of questions. Build a question bank approach:

For each micro topic, create 3 question types:
1. Explain (2–4 marks)
2. Diagram + explanation (6–10 marks)
3. Computation or incidence (10–15 marks)
For each macro topic, create 3 question types:
1. Identity/definition (short)
2. AD-AS change (diagram)
3. Policy discussion and trade-offs (long)

Then, for each question type, practise writing:

a “minimum” answer that is complete but short,
and a “maximum” answer that includes welfare, elasticities, or counter-arguments.

5.2 Micro module: problem sets you should be able to do quickly

Module M1: Demand-supply comparative statics

You must be able to answer:

“If supply decreases, what happens to equilibrium price and quantity?”

Write the response:

supply shifts left
price increases
quantity decreases

Add one sentence on welfare:

total surplus falls if markets are distorted by policy or externalities; otherwise competitive equilibrium is efficient.

Module M2: Elasticity interpretation

Practise:

distinguish elastic vs inelastic
interpret absolute values
connect to tax incidence

A strong exam answer includes:

“Because demand is inelastic, consumers reduce quantity less, so they bear more of the tax.”

Module M3: Tax with welfare

Practise identifying:

consumer surplus region
producer surplus region
government revenue region
deadweight loss triangle

Even if the exam does not ask you to label regions explicitly, describing them shows understanding.

Module M4: Externality policy choice

Practise:

negative externality → tax/standard/permits
positive externality → subsidy/education funding

Write:

identify externality
show private vs social costs/benefits
show market over- or under-provision
propose remedy consistent with the distortion

5.3 Macro module: problem sets you should be able to do quickly

Module A1: GDP identity reasoning

Practise answering questions like:

“If investment increases, what happens to GDP in the identity?”

Write:

Y increases through I, assuming other components unchanged.
Then discuss second-round effects (if included):
output may rise further through multiplier effects.

Module A2: AD shift mechanics

Practise:

policy changes affecting C, I, G, NX.
You must:
link the policy to a specific spending component,
then translate into GDP and inflation.

Module A3: AS shock reasoning

Practise:

supply shock causes higher prices and lower output (short run),
discuss unemployment rising.

Then practise evaluation:

monetary policy trade-offs
fiscal policy might not fix supply constraints directly if costs rise.

Module A4: Exchange rate and inflation link

Practise explaining:

depreciation → imports expensive → inflation up
depreciation → NX up → AD up
policy response determines overall outcome

5.4 Course writing quality: coherent essays and paragraph discipline

Exams often include longer questions. The difference between a good and excellent student answer is frequently coherence, not just knowledge.

Use a paragraph discipline:

Paragraph 1: define and identify the market/macro issue.
Paragraph 2: explain mechanism with at least one model reference.
Paragraph 3: present outcomes (equilibrium, output, inflation, unemployment).
Paragraph 4: conclude with evaluation (efficiency, incidence, policy trade-offs).

A good “discuss” answer also includes:

a counter-argument: “This holds if expectations are anchored / if elasticities are such that…”
a condition: “In the short run… in the long run…”

5.5 A South Africa-oriented “scenario library” (adapt to any exam question)

Even when exams do not explicitly say “South Africa,” scenarios often resemble conditions relevant to the country. Prepare to adapt your reasoning quickly to such contexts:

Scenario S1: Higher energy costs for firms

Likely macro effect:

supply shock (AS left), inflation up, output down (short run).
Likely micro effect:
supply for energy-intensive goods shifts left.

Write both:

macro: AS shift
micro: supply shift and new equilibrium

Scenario S2: Currency depreciation

Likely macro effect:

AD via NX may rise,
inflation via import prices rises,
policy tightening may offset output gains.

Write:

mention both channels and policy response.

Scenario S3: Government increases spending

Likely macro effect:

AD rises → output up short run,
inflation up depending on slack and AS responsiveness,
unemployment potentially falls short run.

Then add:

evaluation: may crowd out private spending or worsen trade balance.

5.6 Suggested revision schedule (fit it to your exam date)

A typical UP BCom-style revision timeline could be:

Week 1: micro foundations (demand/supply, equilibrium, elasticities)
Week 2: micro policy (taxes, externalities, public goods)
Week 3: macro foundations (GDP identity, inflation, unemployment)
Week 4: macro policy and AD-AS (fiscal/monetary, shocks)
Week 5: mixed practice (full questions, diagram and essay writing)

During each week:

do at least 10 diagram practices,
solve at least 10 elasticity/tax incidence problems,
solve at least 10 macro AD-AS/policy explanation questions.

5.7 Master checklists: what to ensure on your final revision day

Before your EKN 120 exam, you should be able to do the following without hesitation.

Micro checklist

Define demand, supply, equilibrium
Explain shifts vs movements
Calculate and interpret PED
Explain tax incidence using elasticities
Draw tax diagram and identify CS/PS/government revenue/DWL
Explain negative and positive externalities and the correct policy tool
Explain free rider problem and under-provision of public goods

Macro checklist

State and interpret GDP identity Y = C + I + G + NX
Explain what happens to output and inflation when AD shifts
Explain supply shocks (AS shifts) on price and output
Distinguish short-run and long-run output/potential output logic
Explain fiscal policy channels and trade-offs
Explain monetary policy channels and inflation-output interaction
Explain exchange rate depreciation and its inflation and NX channels

5.8 Final exam strategy: how to maximize marks

Read the question twice
- identify which model is being tested
If a diagram is expected, draw it early
- use your first 2 minutes to sketch
Label everything
- equilibria, shifts, axes
Write conclusions explicitly
- “Therefore price increases and quantity falls…”
Time allocation
- spend enough time on diagrams and explanations
- don’t get stuck on one sub-question if you can move on and return

Closing Integration: The EKN 120 “One-Page Logic” Summary

To succeed in EKN 120, you must operate with one consistent logic:

Micro: markets reach equilibrium; policy and market failures distort equilibrium and reduce welfare. Elasticity determines quantities and incidence; externalities require intervention consistent with social vs private costs/benefits.
Macro: GDP identity links spending to output; inflation and unemployment interact through AD-AS and expectations logic. Fiscal and monetary policy change AD, while shocks change AS; exchange rates influence both inflation (imports) and net exports.

When your exam answers follow this integrated logic—diagram accuracy, correct mechanism, and clear evaluation—you convert understanding into marks.

If you want, provide your university’s exact EKN 120 syllabus breakdown or a past paper topic list, and this guide can be converted into a topic-by-topic UP BCom revision map with a matching set of practice questions per subtopic.