South African Economy & Production Factors

• Production varies across countries and changes over time.

South African Economy

• Services constitute the largest part of South Africa's production today.
• Goods make up a smaller part of total production
• In 1946, 33% of the South African economy was in the primary sector (agriculture/mining), but it has decreased to 11% today.
• The secondary sector (manufacturing, construction, utilities) increased from 11% to 20% over the same period.
• The tertiary/services sector expanded from 55% to nearly 70% during that time.
• In comparison, services in the United States make up 80% of total output.
• Choices determine the quantities of goods/services produced in South Africa and worldwide, like maize, cars, clothing, accounting services, etc.

Factors of Production

• Production is described by the technologies and resources used.
• Resources used for producing goods and services are called factors of production.
• These are grouped into four categories:
  • Land
  • Labour
  • Capital
  • Entrepreneurship

Land

• Gifts of nature used to produce goods and services.
• In economics, land refers to natural resources.
• Includes land and what is found on it like minerals, oil, gas, coal, water, air, forests, and fish.
• Land surface and water resources are renewable, and some mineral resources can be recycled.
• Resources used to create energy (oil/coal) are non-renewable and can only be used once.

Labour

• Work time/effort people devote to producing goods/services
• Includes the physical/mental efforts of people working on farms, construction sites, factories, shops, and offices.
• The quality of labour relies on human capital: knowledge/skills from education, training, and work experience.
• Human capital expands over time.
• 29% of South Africa's population has completed high school and 14% has a tertiary qualification.

Capital

• Tools, instruments, machines, buildings, and constructions that businesses use to produce goods/services.
• In everyday language, "capital" refers to money, stocks, and bonds, which is known as financial capital.
• Financial capital enables businesses to borrow for buying actual capital
• Financial capital itself does not produce goods/services or is a factor of production.

Economics

• Economics studies the choices made to cope with scarcity and incentives that influence/reconcile choices.
• Economics has two parts:
  • Microeconomics
  • Macroeconomics

Microeconomics

• The study of choices made by individuals and businesses, how these choices interact in markets, and the influence of governments.
• Examples include:
  • Why are people downloading more movies and TV series?
  • How would a tax on e-commerce affect Takealot?

Macroeconomics

• The study of the performance of the national and global economies.
• Examples include::
  • Why is South Africa's unemployment rate one of the highest in the world?
  • Can the South African Reserve Bank grow the economy by cutting interest rates?

Economic Questions

• How do choices determine what, how, and for whom goods/services are produced?
• When do self-interested choices promote the social interest?

Goods and Services

• Goods/services are objects that people value and produce to satisfy human wants.
• Goods are physical objects (cell phones and cars).
• Services are tasks performed for people (cell phone and car repair services).

Self-Interest

• A choice made if one thinks it's the best choice that is available to them
• Made about how to use time and other resources
• Choices are influenced by how one feels
• I.e., ordering a pizza because one is hungry and not because the delivery driver needs a job

Social Interest

• An outcome that is best for society as a hols
• Requires assessment of one`s self-interest
• I.e., Considering Thatho, who creates a pharmaceutical business, hires workers, and increases his own earnings
  • This business is in his self-interest because he gains $1m a week
  • Employees also work in their self-interest because they gain an extra $R1 an hour
  • Also, customers benefit, else they would not be his customers

Efficiency and Social Interest

• Economists say a resource is efficient if it is not possible to make someone better off without making someone else worse off
• In Thatho's case, everyone is better off, so improves efficiency and the outcome is in the social interest
• Even if the workers and the customers gained nothing and Thatho had gained more that $R1m a week, it would be efficient; but it would be against social interest.
• Some people believe that the social interest requires Thatho to share some of his gain with the workers or customers.

Fair Shares

• The idea that the social interest requires 'fair shares' is a deeply held
• Consider game theory and dividing $R1000, and what would one think is a fair split

Efficiency and Fairness

• There is no clear definition of fairness and varies from person to person
• Everyone may agree that there is too much inequality, but they will not agree on what amount is too much

Issues in Today's World.

• Globalisation
• Information-age monopolies
• Climate change
• Economic instability

Globalisation

• Expansion of international trade, borrowing, lending, and investment.
• Nike produces shoes in Malaysia, creates jobs for Malaysians; South African Airways buys planes, creates jobs for French Airbus workers.
• Manufacturing workers often have to learn new skills or take lower paying service jobs
• Benefits those who buy low-cost goods and services or produce in low-cost regions and sell in high-price regions. Not necessarily in the interest of the low-wage worker or displaced textile worker.

Information-Age Monopolies

• The technological change of the past forty years.
• Bill Gates (Microsoft), held a privileged position Years Windows was the only operating system for PCs.

Climate Change

• The burning of fossil fuels to generate electricity and to power transportation pours billions of tons of carbon dioxide into the atmosphere each year.
• A large portion of the emissions comes from the US, China, the EU, Russia, and India, bringing on global warming and climate change.
• Can lessen your footprint by walking, riding a bike, taking a cold shower, or planting a tree.
• Can rely on one of us to protect the earth?

Choice

• Because of scarcity, we make choices
• Select from alternative to allocate resources
• The highest-valued alternative that must be given up to get something

Rational Choice

• Economic choices
• Compares costs and benefits.
• Achieves the greatest benefit over cost for person.
• Can determine what goods and services are produced and in what quantity.

Benefit: What You Gain

• Gain or pleasure that it brings.
• Determined by preferences (what a person likes/dislikes and intensity of feelings)
• Easy or hard to identify.
• Measure benefit as most person is willing to give up.

Cost: What You Must Give Up

• Opportunity cost is the highest-valued alternative that must be given up to get it.
• Think about components (things that have value).
• Can’t afford to buy to the things you cannot do with your time.
• Spent all Income on tuition residence, fees books and laptop
• Cannot do with your time includes leisure activity leisure and other activities you would have
• Examples are opportunity cost all or nothing costs.
• In choosing to study versus relax you are participating with a choice.
• The benefit that arises from an increase in an activity is called marginal benefit.

Activity Opportunity

• The opportunity cost is the marginal cost.
• To make decisions, must compare marginal benefit and marginal cost.
• If marginal benefit is greater than marginal cost, then the activity proceeds, and vice versa.

Incentives

• Economists take human nature to show their self-interest
• Self-Interested Actions
• Not action is the most useful to the individual.
• Predict self-interest choices.
• Look at the activities and rejected/declined activities.
• If activity exceeds the marginal cost.
• Examples are like giving a test.
• Some people think in self & social interests

Reconciliation To Be

The main point that economists want people to take away is, Economists try to see these types of interests & fix the imbalance through Incentives or Social Interests

• incentives are key.
• reconcile that for both parties involved

Economist's role

• institutions role is to influence,
• ex Private Property, voluntary exchanges enable fundamental transactions.
• If Economic studies are put in place, both Social & Self Interests could both coincide

Social/Policy & Tool

• Economists, Social Scientists seek to discover how Economic World Works.
• Economic Policy is used to advise for decisions

Positive Statements

• A positive view is what's happening based on current beliefs.
• Planet is warming, coal statement used is positive statement.
• Able to decide if it's right from wrong, so It needs testing.
• In the 1700's, the use of science and economy grew
• Compared to other countries, it's very young & needs lots to discover
• Statement based on "What Ought to Be" relies on the values you value.

Normative Statements

• Example, "Cut 50% of coal, because of normative views"
• Able to find the the truth so you can prove it with statements
• Particularly interested in statements around an economy.
• Used with testing
• Example, getting a computer vs price increasing, is a factor.
• To figure it what it is, we compare Economic Models.
• Example is used with Cell Phones/Towers, Cell Phone use and volume.
• Can test them out and view outcomes/test simultaneously.
• Look for differences.

As An Advisor

• Tool Kit is useful for the advising governments
• Blend of the positive, but never with goal.
• Clarify for the better and help with finding better views. There are three different lines with all the lines being called different curves.
• Any line regardless if straight is called a curve still.

With a Straight Curve.

Linear Relationships

There are Relationships shown but they are all on what Speed is being told with all parts being time.

• Time on graph on Horizontal
• Part B is Sprint time V.S (Vertical) Graph being shown
• Y,upwards that starts but gets steeper because Recovery takes less than 5 minutes, but takes more than 10 Minutes.
• Relationship shows more the relationship between 2 different directional points.

Negative Relationships

• inverse & Total Play Time is 5 Hours.
• Also how we keep going but the increase & decreasing which has a link to relationships.
• Also that Journey time increases, Cost decreases with relationships with less steep as the axis increases.
• Leisure Time increases, but it changes the amount it decreases the steeper the graph is
• Has Maximum Profit. Maximum Output can be achieved.

Graphs

Show this relationship of the following Graphs Each are based on something & how it does has a specific Maximum & minimum point.

• 10 Days as Wheat increases as rain continues +1 days as Yield also increases vs (Wheat Yield)

In Excess as Relationship Changes

Relationship is different so it starts down falls to a minimum and slopes upwards .

Appendix Graphs In Economics

• The Cost Per Kilometre V.S Trip is low (Speeds), if it’s jamming and slow at low levels with very low amounts.

Kilometre Vs High Speed.

• Quantity increases & again there are numbers and amount. At 55 the levels are at its minimum, so starts higher downwards as it starts going.