Chapter 2 Flashcards
What is the Economic Cycle?
A continuous two-way movement where goods/ services are exchanged for money so that needs/wants can be satisfied.
Circular flow of money.
What is the basic economic problem?
Everyone has unlimited needs and wants, but the resources and solutions required, are limited as money is limited.
The Participants
Households, Businesses, Government, Foreign Sector
Households
Possess all factors of production and sell these to the businesses which use them to manufacture goods and services. The money earned bu households are used to satisfy their needs and wants.
Characteristics of needs
Needs are unlimited.
Needs have a limited intensity.
Different people have different needs.
Needs are often determined by a person’s location.
Needs change over time.
Sometimes needs are complementary.
Some needs can become a habit.
Businesses
Businesses buy the factors of production and manufacture goods/services that they will sell at a profit to households or other businesses.
Different types of products/services businesses sell
Convenience goods
Select goods
Speciality goods
Services are intangible.
Government
Receives taxes from Households and Businesses and uses this revenue to create an infrastructure in order to promote economic activities in the country.
Type of infrastructure
Collective goods, which is public schools
Foreign Sector
Involved in the open market where goods/services are imported from other countries and exported to other countries.
Reasons for international trade
Improved transport and communication.
Not equipped with specialized expertise.
International tourism.
Country’s climate not suited to farm certain products.
Consumers with luxury power can buy stuff overseas.
Problems of international trade
Vast distance between countries create difficulties in trade.
Different laws in different countries.
The creditor and debtor are in different countries, adds to complexity of trade.
Different currencies.
SADC
(Southern African Development Community)
South Africa is a member of the SADC.
Consists of 15 countries in Southern Africa.
Formed in 1980.
Aim is sustainable economic development of countries which are members of SADC.
NEPAD
(The New Partnership for Africa’s Development)
The goal of helping Africa, as a continent to develop.
AU
(African Union)
Formed in 2001.
Has tried to get international aid for African countries from the rest of the world to develop economic growth on the continent.
Support the countries in West Africa with the Ebola Crisis.
New chairperson 2020 - Cyril Ramaphosa
