basic concepts, population and labour force Flashcards
What are the factors of production
Natural resources: the factor of production land
Human resources: the factor of production labour
Human made resources: the factor of production capital
Entrepreneural talents: the factor of production entrepreneurship
Land (characteristic)
their supply is fixed
-our forests, wildfire, fish and freshwater cannot be restored once destroyed we cannot import them from elsewhere but it is not impossible to use scientific technology to improve the productivity of some of our resources for example farmers can use fertilisers to increase production on a fixed piece of soil, however to apply technology is expensive and some people have reservations about health effects that technologically manipulated food may have in the long run. In the end the supply is limited we cannot change it
they are gifts of nature
- minerals, gas , timber, fish and clean air and water are all parts of the earth, sea and atmosphere and are provided to free by nature. When producers want
To use them as inputs in production processes they must apply capital and labour
they have to be transformed
- most natural resources on their own and in their natural state cannot satisfy human wants. They have to be transformed and processed. Producers have to transform them into raw materials or other useful goods before they can satisfy our wants
they are exhausible and destructible
- mineral resources and fossil fuels are exhausted when they are mined known as Jon renewable resources. If farmers do not use manure and fertilisers, agricultural lands will become fertile. It’s ability to produce crops will diminish and ultimately be destroyed. Without controls, commercial, fishing, timber and hunting will inevitably destroy our fish and wildlife resources
importance of land
Natural resources sustain economic activity
soil and water provide raw materials for production of economic goods. The land and skies provide minerals and room for buildings and plants. The atmosphere provides a highway for air transport and communications
natural resources sustain the operation of primary
industry
Natural resources enrich our lives
Land also gives us space for walking and the
enjoyement of natural surroundings
Water is also a source of recreation and relaxation
The atmosphere provides space to fly aeroplanes and
to communicate electronically as well as oxygen rich
air and clean skies
When we exploit our natural resources for economic reasons, we destroy things that enrich our lives. But if we do not exploit them we may find it difficult, if not impossible, to survive and improve our standard of living
payement of land (remuneration)
Economic rent is the remuneration, or payement, made
for the use of a factor of production which is limited or
fixed in supply.
When natural resources are used in commerial activities,
a minimum price must be paid to use them as input in
the production process (supply price)
If a resource receives more than the supply price the surplus payement is known as (economic rent)
What is Labour?
Labour surrounds what people bring to the production process
Labour characteristics
labour cannot be separated from the worker.
Labour is provided by people and cannot be separated from their humanity. The quality of peoples work is affected by their feelings.
Labour cannot be stored or hoarded. People cannot lock away their labour, you cant sell health.
Labour varies in quality. The quality of the work done by identically trained people, or even the same person at different times, can differ. The more comprehensive and complicated a task, the greater the difference in the quality of the work will be.
Importance in Labour
Labour is the most important factor of production because workers receive most of the total income earned in the South Africa economy.
Labour is complementary to other factors of production meaning that the quantity of labour employed depends on the quantities of the other factors of production available and vice versa
Lack of capital is the main reason for SAs unemployement level
IN SA the level of individual saving is low
Quantity of labour
economically active population
another term for the workforce is the economically active population (EAP) includes formally and informally employed and people between age 15 to 64 who work and who want to work
In SA, unemployment numbers are obtained through the Quarterly Labour Force Surveys of SSA in each quarter of each year
Who are the unemployed
the unemployed are people who did not work during the seven days prior to the interview
wanted to work
taken steps to look for a job
The main reason for the increase in
employement is the improvement in the efficiency of South African business
Quality of Labour
(The skills development act of 1998)
School education
to be employed is to have education
Work-related training
Training means to be taught particular job or skill at university, college, FET
The skills development Act of 1998 provides for a national skills training strategy. Its aims are to improve the quality of the working life of workers and to encourage employers to make their work available as active learning environments
Health
The quality of labour is impaired by poor health
In SA, the Occupational Health and Safety Act requires that healthy working conditions prevail
the gov must ensure a healthy environment
workers should not be exposed to diseases carried by animals
the greatest threat to workers in SA in HIV and Aids
consequences are poverty will increase, production will be lost and life expectancy will drop
Payment of labor (remuneration)
Wages are remuneration earned by labour as a factor of production money for the work that you do
Capital
capital is all the goods that are needed to satisfy future wants like factory buildings, macinery and vehicles. I is embodies in private and public assets
Characteristics of Capital
Capital is possessed
It belongs to someone or the state. The fact that everyone uses bridges, schools, and roads does not mean that they belong to everyone. They belong to the state
Capital is consumed
This happens in the production process. SOm capital, such as intermediary goods, is consumed in one process. Others such as buildings are consumed over many years
Capital formation requires a sacrifice
The production of capital goods is called capital formation or investment and it is denoted by the letter I in the mathematical equation. The finances for producing or buying capital goods are obtained from saving. Savings are current incomes that are sacrificed
Capital increases production efficiency
Capital goods, particularly machines, make specialisation possible. The modern production process consisting of elements of human labour and machine labour is immensely more efficient than the labour of humans alone. Efficiency is the condition of production taking place with the least cost, and with wastage at a minimum. Efficiency results in resources being stretched mch further
Importance of capital
capital lies in its relationship with economic growth (gdp)
Capital widening
the existing labour capital ratio must be maintained as the number of workers increase
Capital deepening
Capital deepening is required for real economic growth to happen at a rate that is higher than the growth rate of the population and results in the standard of living of the population that is increased. Capital deepening has a result that real per capita GDP increases.
Payement of Capital
the income that is earned when money is lent is called interest
money that is borrowed is money capital
Lenders to enterprises are banks, financial institutions, and the owners of the borrowing enterprises
Enterprises must make sure that they earn more income for their use of borrowed money, than the interest that they have to pay to the lenders
the entrepreneur
A true entrepreneur is a person who takes the initiative to start a business enterprise, organize its production, and carry the risk.
Characteristics of an entrepreneur
They take the initiative
They organise the production, capital-labour and land must be brought together
They take risk
Why is being an entrepreneur important?
Entrepreneurs create competition. They challenge those that are running profitable businesses. The supply of entrepreneurs to the market is therefore also dependent on the levels of profitability
Creating employment
Small businesses which belong to entrepreneurs create far more jobs in the economy than big businesses
Improving planning
Entrepreneurs
If new entrepreneurs with new ideas that control costs by using resources and who have a desire to succeed and be profitable are allowed to enter the market the general efficiency of the market and the overall efficiency of the economy improves
How do entrepreneurs create wealth?
Entrepreneurs entering a market for the first time use savings and money that they borrowed. They create new wealth
remuneration of entrepreneurs
The reward for risk-bearing is profit. It accrues to the owner who runs the business or to the shareholders in the event of salaried entrepreneurs. Profits differ from the remuneration of the other factors because they are uncertain and they flunctuate.
The skillfulness of the entrepreneur. Entrepreneurs who can control costs, produce efficiently and estimate their prices and sales are likely to have higher profit than others with the similar skill
Competition. Profits normally attract competition
Nature of the business. If the entrepreneur sells everyday goods, it won’t affect the economy, but if the entrepreneur sells luxury goods the economy will be affected
Competition. Profits normally attract competition. When one business enterprise decreases its price, other business enterprises have to do the same to keep their customers. When prices decrease, so do profits. It may end in losses
Investigation of community participation in local economic planning and activities (constitution)
Constitution provides the establishment and operation of provincial and local governments like taxing, spending and regulatory functions
Participation of people in communities
Ensure that they use their right to vote for the political party
They have to participate in councils, committees and forums
They make appeals through the media, civil society organisations like petitions and pickets
Citizens of SA are entitled to to get services that enable them to get their wants for a decent quality of life
Accessibility of economically marginalized groups (neglected)
Some people have less capacity to do things than others like
Discrimination: racial discrimination and gender discrimination, poor but unable to escape from the poor
Person with disabilities: physical and mental disabilities they battle to find employment. The disability Grant Act provides payment of pension to people who are 16 yrs or older so that they can earn a living
Ignorance and inexperience: people leave rural areas and school leavers
Displacement: refugees and poor people are victims
People who are discriminated against
The empowerment equity act first part
deals with the prohibition of unfair discrimination
requires employers to remove unfair discrimination practices and policies
employer must ensure that there is empowerment in the policies and practices
policies and practices correct social economic and educational imbalances are supported through the act
The empowerment equity act second part
requires that the employed workforce mirror the economically active profile of SA population
It is a powerful tool to create accessibility for the economically neglected group
Broad Based Black Economic Empowerment Act
provides the foundation for the transformation of the South African economy so that black people who own manage and control the country’s economy will increase and racial income inequalities will decrease substantially
serves as a guideline for businesses and other enterprises to transform
BBBEE code
explains ownership held by black people
the appointment of black people as senior managers and directors
skills development
providing credit shared capital working capital of black owned businesses (enterprise development)
to create a sustainable access to the economy for disadvantaged people (socio- economic development)
BBBEE code uses
businesses can use the code to calculate the score of how well they have transformed
Procurement
Preferential Procurement Policy Framework
The preferential Procurement Framework Act of 2000 provides for empowerment through procurement
Procurement is the method of acquiring goods or services by means of a tender process. Individuals or businesses submit a price at which they are prepared to provide the services or deliver the good
The PPPF applies only to procurement in the public sector
procurers have to use the preferential procurement formula, a math formula
applying the formula has the effect that the tender price of preferred tenders can be up to 20%
preferential procurement can play a role in
tax clearance certificate of the receiver of revenue
ability to render the desired quality of goods and services
the tenders workload
ability to execute the contract
honesty
experience
financial ability
Preferential procurement
is a powerful mechanism for empowerment
it is useful to empower SMMEs
figures a code in the BBBEE codes
The PPPF act prescribes a high ethical behavior in the handling of procurement transactions
Tenderpreneur
word coined by Mr Zwelinzima Vavi of Cosatu to describe to people who obtain tender contracts in a fraudulent manner
meaning of human capital formation
the investment in people, such as through education and training
