U1 - SA Economy Flashcards
Economics Definition
Social Science -> studies processes:
producing goods and services from limited resources
Dividing goods and services
Using goods and services to satisfy unlimited needs
-> To reach max prosperity
*Prosperity = Economic growth - risings profits & full employment
Economic Literacy Definition
Knowledge of Economy
Don’t have to be expert -> primary school -> know enough to be prepared for work & to survive.
Learn basic economic concepts.
Production x3
What needs to be produced
- Study needs of consumers.
- Product for consumers no for producer.
- Sell product -> process of exchange - consumer wants product & will pay for it.
How to produce
- Material needed limited
- Careful choices -> production techniques
- Production process -> efficient but also economical -> cost of production & prices consumers pay must balance.
For whom to produce
Directed at specific area in market
Study potential clients’ needs -> how differ from others.
What things do they prefer.
Price over quality or quality over price?
Make cheaper -> sacrifice quality.
Coordinating Mechanisms
Traditional Mechanism
- Produce same products
- Use same inputs & production techniques
- Divide outcomes
A Command Mechanism
Authority makes economic decisions of community
- What is produced
- How it is produced
- How it is divided
A Market Mechanism
- Free to own own property
- Trade freely
- Spend money freely
- Government not control price
7 Facts about a Market Economy
- Market economies (capitalist)- Countries where Individual property rights & price system functions correctly normally wealthier than countries with other system.
- Prices indicate what to produce, how much to produce and what skills are needed
- Act in self-interest = act in someone else’s interest even if not intention
4.Make money for themselves & families
Seller convince consumers to buy from them
Compete
Search better way to produce & sell product more cheaply
Make mistakes -> Close down
5.Competition very important - who act in own interest improve products & services so consumers rather buy from them.
Find better ways of satisfying consumers
6.Price system - very important in modern society where people buy and sell products & services
Not forced to buy or sell.
- Individual property rights
Allows price system to operate freely & no unnecessary interference from government.
Economic Growth
Without Economic Growth - unemployment grows and profits stay the same.
Assess how economy is doing -> check economic growth (determined by total production of goods and services over period of time (usually year).
GNP (Gross National Profit ) - total value of all goods & services produced in specific year in country -> 1st step to assess how economy is doing.
Priced adjustments made to get real GNP.
Inflation Definition
From Latin = Blow up -> Blow up prices
Prices rise & value of money drops over time.
Characteristics of Inflation
A lot of money & not a lot of products & services -> more money into circulation -> prices rise.
Rising prices -> salary increase -> more money into circulation -> prices rise
Rising prices lower value of money
Rising prices expectation -> spend money quickly -> prices rise
Results of Unemployment
- Affects individual & family -> pride, human dignity, standard of living - have to sell property.
- Affects society -> increase crime & frustration -> violence -> uncertainty & anarchy.
- Loss of potentially valuable and skilled labourers.
- Affects general confidence, mutual respect, tolerance & peace.
- Perceive market economy negatively -> cannot solve unemployment problem & responsible for it.
- Macroeconomic problems - Country cannot reach its full potential in production of products and services: gross domestic product lower, fewer products, less investment, lower level of prosperity.
- Microeconomic problems - unemployed depend on employed, machinery left unattended
- Stress of unemployment can shorten life by 5 years
Causes of Unemployment
- South Africa - developing country but lowest productivity in world.
- Population growth one of highest in Africa.
- Manual labour being replaced by machinery too quickly -> wage increases, strikes & not enough skilled workers.
- Huge part of people looking for work are unqualified and under skilled -> little schooling & training, little career focused education.
- More supply for jobs than demand -> consumers’ needs changed or gone for certain products and services.
- Seasonal workers with no other training who are bound to specific place are usually unemployed at end of season.
- Students choose subjects that do not help prepare them for careers.
Solutions to Unemployment Problem
Teach to have current knowledge of economic world -> teach knowledge to students to prepare them.
Teach to make students aware of -> Future -> Less job opportunities & more competition -> need dedication & values to succeed.
Teach to identify needs of their own community -> potential job opportunities when enter work world.
Teach job strategies - how to find, get, keep, change, survive and get ahead jobs.
Make aware of training or education available after school including entrepreneurial education.
Teaching job strategies includes:
-Turn abilities into skills
-Cope with unemployment
-Cope with underemployment
Tax Definition
+ 2 types of taxes
Compulsory payment to government
Most important source of income for government
Direct taxation
Largest source of income for government
Personal taxation - most important form of direct taxation
Taxes paid on taxable income of individuals, companies, partnerships & close corporations.
SA uses progressive personal tax system - higher income = more tax, lower income = less tax.
Indirect Taxation
VAT (value added tax), Customs & excise duties most important forms of indirect taxation
Second largest source of income for government
Fiscal Policy
Choices made and needs satisfied
How much government taxes and spends - government financial activities
What to spend it on
Whose needs are more important
How to get money for spending
Fiscal Policy used to combat inflation or unemployment & promote economic growth
Unemployment Definition
- Is between 15-65
- Is unemployed
- Available to do paid work
- Actively seeks paid work
