QUESTION ONE (35 MARKS)
Read the below case study and answer the question that follows:

Fashion companies will face economic headwinds, technology shifts, and an evolving competitive landscape in 2024. However, shifting consumer priorities will continue to offer opportunities.

Storm clouds are gathering, but the experience of recent years shows how the fashion industry may ride out the challenges ahead. In 2022, the industry again showed its resilience, almost equalling the record economic profit of 2021, the McKinsey Global Fashion Index shows. Echoing the pattern of the previous year, the luxury sector outperformed, with a 36 percent rise in economic profit that offset weakness in other segments. Yet even the non-luxury sector was ahead of its long-term average. Strong margin performance meant the industry in 2022 achieved more than double the economic profit than in all years between 2011 and 2020, except for one.

In 2023, the industry faced challenges that were both persistent and deepening. On a regional basis, Europe and the United States saw slow growth throughout the year, while China’s initially strong performance faded in the second half. Though the luxury segment initially fared well, it too began to feel the effects of weaker demand in the latter part of the year, leading to slowing sales and uneven performance.

Looking toward 2024, the most prominent sentiment among fashion industry leaders is uncertainty, reflecting the prospect of subdued economic growth, persistent inflation, and weak consumer confidence. Against this backdrop, businesses will be challenged to identify pockets of value and unlock new drivers of performance.

According to McKinsey’s analysis of fashion forecasts, the global industry will post top-line growth of 2 to 4 percent in 2024 (exhibit), with regional and country-level variations. Once again, the luxury segment is expected to generate the biggest share of economic profit. However, even there, companies will be challenged by the tough economic environment. The segment is forecast to grow globally by 3 to 5 percent, compared with 5 to 7 percent in 2023, as consumers rein in spending after a post pandemic surge. European and Chinese growth is set to slow, while US growth is expected to pick up after a relatively weak 2023, reflecting the slightly more optimistic outlook there.
Source: https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion-2024

Questions:
Provide a detailed analysis of the market structure in which the fashion industry operates. [10 Marks]

Additionally, discuss the impact of technology on competition and the sustainability of businesses within this market structure. [25 Marks]

QUESTION TWO (25 MARKS)
Production Possibility Curve
Explain how the Production Possibility Curve (PPC) illustrate the trade-offs and opportunity costs faced by the South African economy when allocating resources towards education and health?
In your explanation provide a detailed graph and discuss how factors such as efficiency, underutilization, and economic growth impact the position and shape of the curve.

QUESTION THREE (30 MARKS)

Elasticity

Read the scenario and answer the question that follows:

Price elasticity of demand measures how sensitive the quantity demanded of a good is to a change in its price. The price elasticity of demand is the percentage change in the quantity demanded if the price of the product changes by one per cent, ceteris paribus. This is obtained by dividing the percentage change in the quantity demanded by the percentage change in the price of the good or service concerned.

Illustrating from the provided scenario, critically discuss the five main categories of price elasticity of demand. Include analysis of graphs in your discussions.

Answers to Above Case Study Questions

Answer 1: