BUSS 110 L2.pptx

Economic Systems 1  Four Sectors of the Economy Secondar Quaternar Primary Tertiary y y PRODUCTION OPERATIONS Semi Retail...

Economic Systems 1  Four Sectors of the Economy Secondar Quaternar Primary Tertiary y y PRODUCTION OPERATIONS Semi Retail Research & Extractive Manufactured Development Goods Tourism Fully Knowledge Raw Materials Assembled Banking Economy goods Entertainment Fisheries Construction Education IT Farming Utilities Public Sector Communication 2 Economic Systems  An economy is the total value of production for all goods and services  An economy is measured in money terms  The value of all goods and services produced – Gross Domestic Product (GDP) 3 Economic Systems  Exercise  Search the internet and find the GDP of the following countries, for 2023/2022 1. USA 2. China 3. Japan 4. Germany 5. India 6. Taiwan 7. South Korea 4 Economic Systems  Search the internet and find the GDP of 1. Nigeria 2. South Africa 3. Kenya 4. Ethiopia 5. Egypt 6. Tanzania 5 Economic Systems  Search the internet and find the GDP of 1. Malawi 2. Burundi 3. South Sudan 4. Rwanda 5. Mozambique 6. Zambia 7. Zimbabwe 6 Economic Systems  Economic System – Determining how goods and services are produced  Types 1. Communism 2. Socialism 3. Capitalism 4. Mixed Economy 7 Economic Systems  Search the type of economic systems of the following countries 1. France 2. The Netherlands 3. Cuba 4. United Kingdom 5. China 8 Economic Systems  Free Enterprise System 1. Individuals have right to own property 2. Individuals have rights to make profits and use the profits as they wish 3. There is maximum freedom by businesses to make decisions as they see fit 4. Businesses have the right to choose what goods or services to produce and how and where 9 Economic Systems  Free Enterprise System  Benefits 1. Businesses are motivated to succeed 2. It encourages open exchange of goods and services 3. Businesses become better at doing what they do because of personal and financial incentives 4. Only good companies (firms) survive 10  TOPIC B FORCES THAT IMPACT BUSINESSES 11 Section Topics This Section will Cover 1. Market Systems 2. Demand and Supply 12 Market Systems  Markets refer to specific items that have demand and some businesses supply that specific item  Examples 1. Housing market 2. Financial market 3. Education/healthcare market 4. Commodity market (oil, wheat, fertilizer) 5. Public transport market 13 Market Systems  Characteristics of Markets 1. Supply 2. Demand 3. Competition 4. Price 5. Regulations 14 Market Systems – Demand & Supply 15 Classification of Markets  Markets Characteristics & Classification  Markets have structures 1. Many buyers and many sellers 2. One dominant seller 3. A few sellers compete in the market 4. A single buyer dominates the market 16 Classification of Markets Types of market structures 1. Perfect Competition 2. Monopoly 3. Oligopoly 4. Monopsony 17 Classification of Markets Perfect Competition  So many buyers and sellers  No one can influence the market price  The product is homogeneous (same, or identical)  Any business is free to start (enter) or exit the market  Buyers and sellers have complete information about prices, quality and production methods  Prices are determined by forces of demand and supply 18 Classification of Markets Monopoly  Single firm dominates the entire market  The product is unique and has no close substitute  It is very difficult for other businesses to enter the market  The monopolist has significant power to control the price 19 Classification of Markets Monopoly Types 1. Natural Monopoly – due to high fixed costs 2. Government granted monopoly 3. Coercive monopoly – use of force or business power to eliminate competition 20 Classification of Markets Monopoly Negative Consequence 1. High prices 2. Lack of innovation 3. Inefficient operations 4. Reduced output 21 Classification of Markets Monopoly Positive Consequence 1. Can invest capital in R&D 2. Can operate at low cost 22 Classification of Markets Oligopoly  Small number of businesses dominate the market (few sellers)  Action of one business impacts others (interdependence)  Difficult to start a business in the industry  Products are differentiated by branding (marketing)  Businesses compete using ways other than price  Businesses (firms) can have a collusive behaviour 23 Classification of Markets Monopsony  Only one buyer  Buyer can influence price  Many sellers 24