Planned Economies PDF

# Planned Economies Planned economies are those where the government makes all decisions about what goods and services are produced, how they are produced and for whom they are produced. ## Types of Economies ### Market Economy * **Controlled by:** Entrepreneurs and businesses * **Ownership of p...

# Planned Economies Planned economies are those where the government makes all decisions about what goods and services are produced, how they are produced and for whom they are produced. ## Types of Economies ### Market Economy * **Controlled by:** Entrepreneurs and businesses * **Ownership of production factors:** Entrepreneurs and businesses own land, natural resources, factories and farms. * **Prices:** Determined by competition (demand and supply). * **Examples:** USA ### Planned Economy * **Controlled by:** The government. * **Ownership of production factors:** The government owns land, natural resources, factories and farms. * **Prices:** Set by the government. * **Examples:** North Korea, Iran, China ### Mixed Economy * **Controlled by:** A mixture of private and government. * **Ownership of production factors:** A mixture of private and government property (e.g. Education/Electricity) * **Prices:** Some prices are determined by demand and supply, others are set by the government (e.g. petrol is fixed). * **Examples:** South Africa, Britain ## Key Points * Market economies emphasize individual freedom and competition. * Planned economies prioritize government control and social equality. * Mixed economies combine elements of both, aiming for a balance between efficiency and social welfare. ## Characteristics of Planned Economies * The government owns all the land, natural resources, factories and farms. * People are not allowed to own property. * The government decides what and how much should be produced and to whom it is sold. * Workers do not have a choice about which profession they want to follow. * The government gives workers everything they need to live, including food. ## Advantages: * **Main goal:** Improving the welfare of all citizens. * **Emphasis is placed on:** health, education and production quantities. * **All citizens receive:** equal education. * **Low levels of unemployment** are experienced. * **Prices are controlled by the government.** This means everyone can afford to consume goods and services. * **Income is determined by the government.** It narrows the gap between rich and poor. * **There is no duplication of resources.** This means there is less waste production and less competition between businesses. ## Disadvantages: * **Lack of economic freedom.** * **Inefficiency**. * **Suppression of individual initiative.** # Market Economic System * **Definition:** A market economy is also called a capitalist or free market system * **Private individuals and businesses own the factors of production:** and make decisions about what to produce, how to produce it and for whom to produce it. ## Characteristics: * **Businesses are motivated by profit.** * **Entrepreneurs decide what to produce.** * **Businesses and people borrow money from banks.** * **Workers choose their jobs and employers.** * **Consumers, businesses and the government spend money on goods and services.** * **Workers and businesses earn money by producing goods and services.** * **The government collects taxes.** ## Advantages: * **Responds quickly to people's needs.** * **Wide variety of goods and services.** * **Encourages innovation and efficiency.** * **Consumers have freedom of choice.** ## Disadvantages: * **Inequality of wealth and opportunity.** * **Public goods and services may not be adequately provided.** * **Workers may be exploited for profit.** # Planned Economic System * **Definition:** A planned economy is a system where the government makes all decisions about what goods and services are produced, how they are produced and for whom they are produced. ## Characteristics: * **The government owns all factors of production.** * **The government decides what and how much to produce.** * **Workers have no choice in their profession.** * **The government provides for all needs.** ## Advantages: * **Focus on social welfare.** * **Equal education and employment.** * **Price control for affordability.** * **Reduced inequality.** * **Less waste due to resource allocation.** ## Disadvantages: * **Lack of innovation.** * **Poor quality goods.** * **No consumer choice.** * **Inefficiency.** # Mixed Economic System * **Definition:** A mixed economy combines elements of planned and market economies. * **Both the government and private sector play roles in production and distribution.** ## Advantages: * **Balances economic freedom and social welfare.** * **Provides essential public services.** * **Can address market failures.** ## Disadvantages: * **Potential for inefficiency.** * **Conflict between public and private interests.** # Globalization * **Definition:** Refers to the interconnectedness of economies worldwide. * **Acknowledges production and consumption happening across global markets.** * **The world has become a single market for trade.** * **Labor and capital are more mobile due to market forces.** * **Prices of products have become more equal globally.** ## Advantages: * **Consumers have a wider choice of imported goods.** * **More equal pricing of products worldwide.** ## Disadvantages: * **Exploitation of workers in poor countries (e.g. sweatshops).** * **Potential for unemployment in poorer countries.** # Circular Flow Model The notes summarize the circular flow model of an economy. This model shows the interactions between the key players in an economy: households, businesses and the government. ## Households * **Make economic decisions and consume goods and services.** * **Own the factors of production:** (capital, labor, entrepreneurship and natural resources). * **Provide factors of production to businesses.** * **Receive income from businesses in exchange for their factors of production.** * **Pay taxes to the government.** ## Businesses * **Produce goods and services.** * **Sell goods and services to households and the government.** * **Buy factors of production from households.** * **Pay taxes to the government.** ## Government * **Provides public goods and services:** (e.g. education, healthcare, infrastructure). * **Buys goods and services from businesses.** * **Collects taxes from households and businesses.** The circular flow model shows how money and goods flow between these three groups. Households provide factors of production to businesses, who use them to produce goods and services. Businesses then sell these goods and services to households and the government, who in turn pay businesses for these goods and services. The government also collects taxes from households and businesses, which it uses to fund public goods and services. The circular flow model is a simplified representation of a real economy, but it helps to illustrate the basic relationships between the key economic players. # Price Theory The text summarizes the concept of price theory, which explains how the price of a product is determined by the relationship between demand and supply. ## Key Points: * **Demand:** The quantity of a product that consumers are willing and able to buy at a specific price. * **Law of demand:** As the price of a product increases, the quantity demanded decreases, and vice versa. * **Factors affecting demand:** * New technology. * Changes in consumer preferences. * Changes in population. * **Supply:** The quantity of a product that producers are willing and able to sell at a specific price. * **Law of supply:** As the price of a product increases, the quantity supplied increases, and vice versa. * **Factors affecting supply:** * Cost of production. * Technology. * Number of producers. * **Market equilibrium:** The point where the quantity demanded equals the quantity supplied. * **Price elasticity of demand:** Measures the responsiveness of quantity demanded to a change in price. The text also includes a demand schedule, which shows the quantity demanded of a product at different prices. # Supply in Economics The notes summarize the concept of supply in economics. ## Key Points: * **Supply:** The quantity of a product that suppliers are willing and able to supply at different price levels. * **Law of supply:** As the price of a product increases, the quantity supplied increases, and vice versa. * **Supply schedule:** A table showing the quantity of a good or service supplied at different price levels. The notes also include diagrams illustrating the relationship between price and quantity supplied. # Primary, Secondary and Tertiary Sectors The notes summarize the primary and secondary sectors of the economy. ## Primary Sector * **Extracts raw materials from nature.** * **Includes farming, forestry, fishing, mining and extraction of oil and gas.** * **Businesses in this sector form the first level of the economy.** * **Located outside cities.** ## Secondary Sector * **Processes raw materials into finished goods.** * **Includes food and beverage factories, clothing manufacturers, construction, motor factories, textile factories, chemical plants and car factories.** * **Businesses in this sector form the second level of the economy.** * **Located just outside cities.** The notes summarize the primary, secondary and tertiary sectors of the economy. ## Primary Sector * **Extracts raw materials from nature.** * **Includes farming, fishing, mining and forestry.** * **Located outside cities.** * **Supplies raw materials to the secondary sector.** ## Secondary Sector * **Processes raw materials into finished goods.** * **Includes manufacturing industries like food processing, textile manufacturing and car manufacturing.** * **Located just outside cities.** * **Supplies finished goods to the tertiary sector and other industries.** ## Tertiary Sector * **Provides services to consumers and other industries.** * **Includes retail, education, healthcare, finance and transportation.** * **Located in cities.** * **Supplies services to primary and secondary industries.** The notes also highlight the interrelationships between the three sectors. For example, the primary sector supplies raw materials to the secondary sector, which then processes these materials into finished goods. The tertiary sector then distributes these finished goods to consumers. Additionally, the tertiary sector provides services to both the primary and secondary sectors, such as transportation, finance and education. # Sustainable Use Of Resources The notes summarize the concept of sustainable use of resources in the three sectors of the economy: primary, secondary and tertiary. ## Key Points: * **Sustainable use of resources:** Using resources in a way that allows them to last. * **Healthy ecosystems and environments:** Provide important resources. * **Managing the impact on ecosystems:** One approach is to manage our consumption of resources. * **Resource scarcity:** Many resources are precious and will run out if not used responsibly. * **Reducing consumption:** The way we use goods and services should be analyzed, managed and reduced wherever possible. ## Ways to Ensure Sustainable Use of Resources: * **Recycle:** Sending goods back to factories to be reprocessed into new products. * **Reuse:** Recovering certain parts of products for use in new products. * **Reduce:** Finding ways to minimize usage of raw materials. The notes emphasize the importance of sustainable resource use to ensure the long-term health of the planet and the economy. # South African Economy The notes summarize the role of the three sectors (primary, secondary and tertiary) in the South African economy. ## Primary Sector: * **Vital for producing food for the population.** * **Agriculture has been declining and contributes less to GDP.** * **Mining is a major industry, employing many people and contributing to GDP and exports.** ## Secondary Sector: * **Manufacturing has declined over the past 20 years.** * **South Africa is the only country manufacturing oil from coal.** * **Manufacturing has declined in many developed countries due to competition from cheaper imports.** * **Textile and footwear industries have also suffered.** ## Tertiary Sector: * **Growing fast and creating jobs.** * **Contributes the most to GDP.** * **IT, electronics and financial services are world-class.** * **Cellular phone market has grown since 1994.** * **These services improve efficiency and decision-making.** * **Tourism contributes 7% to GDP and employs over a million people.** # Types of Skills The notes summarize the types of skills required in each sector of the economy: primary, secondary and tertiary. ## Primary Sector: * **Unskilled labor:** Requires low levels of skill and training, often involving physical labor. Examples include mining, fishing and forestry. * **Semi-skilled and highly skilled jobs:** Fewer in number, but may require some training and independent judgment. Examples include farm managers and supervisors in oil companies and gold mines. ## Secondary Sector: * **Semi-skilled labor:** Requires training and independent judgment, often involving the operation of machinery. Examples include assistant plumbers and factory workers. * **Skilled jobs:** Available in supervisory and managerial positions. ## Tertiary Sector: * **Unskilled labor:** Requires low levels of skill and training, often involving routine tasks. Examples include cleaning and carrying positions. * **Semi-skilled and highly skilled jobs:** Requires skill, training, and independent judgment. Examples include specialized retail and service-oriented enterprises. * **Highly skilled jobs:** Requires a high level of skill, thorough training, and independent judgment. Examples include doctors, lawyers, and engineers. The notes emphasize that the level of skill required in each sector varies, with primary sector jobs often requiring less skill and training than secondary or tertiary sector jobs. Additionally, the notes highlight the increasing importance of skilled labor in all sectors as technology advances and industries become more complex. # Administration Function The notes summarize the administration function of a business. ## Key Points: * **Definition:** The administration function involves recording and organizing information important for managing the business. * **Characteristics:** * Performing daily tasks like answering calls and emails. * Paying accounts. * Handling, recording, and filing information. * Planning, scheduling, record-keeping, and organizing. * **Employees:** Secretaries, administration assistants, personal assistants, and administrators. The notes emphasize that the administration function is essential for the efficient operation of a business. # Public Relations and Risk Management Functions The notes summarize the public relations function and the risk management function of a business. ## Public Relations Function: * **Definition:** Concerned with the internal and external image of the business. * **Characteristics:** * **Ensure that customers are satisfied with the products or services they receive.** * **Have good communication channels between all people inside and outside the business.** * **Encourage staff to be friendly and helpful to customers.** * **Show social responsibility by participating in social community projects.** * **Improve employee morale by offering social activities.** ## Risk Management Function: * **Definition:** Responsible for identifying and evaluating the potential risks associated with things such as natural disasters, financial investments, credit risk, workplace accidents, legal obligations, and project failure. * **Characteristics:** * **Identification of risk in the business operations and its projects.** * **Assessment of the degree of risk.** * **Planning and implementation of risk management for any identified risks.** * **Evaluation and testing of risk management decisions.** * **Risk management audits.** Both functions are crucial for a business's success, as they help maintain a positive image, build strong relationships with stakeholders, and mitigate potential risks. # Business Plans The notes summarize the importance of a business plan and the questions an entrepreneur must ask when developing one. ## Key Points: * **Importance of a business plan:** * **A formal written plan that describes how a business will achieve its objectives.** * **Helps identify ways to achieve goals.** * **Anticipates problems and facilitates quick action when opportunities arise.** * **Convinces others of the business's potential for success.** * **Facilitates access to loans and government assistance.** * **Useful for both new and existing businesses.** ## Questions an Entrepreneur Must Ask When Developing a Business Plan: * **What needs to be done to establish the business?** * **How much capital is required?** * **Who will be responsible for carrying out activities?** * **How will the target market learn about the business?** * **How to ensure the business's success?** * **How many people will be involved in the business?** * **How much money is needed to start the business?** * **Who is responsible for the business's debts?** * **What is the vision for the business?** * **How does tax affect different forms of ownership?** * **Will personal funds be needed for the business?** * **Will responsibility be shared?** The notes emphasize the importance of a well-developed business plan for the success of any business. It guides the entrepreneur in making informed decisions and helps secure necessary resources. # Product or Service Description, Business Objectives The text emphasizes the importance of clearly defining the product or service a business will offer and setting both short-term and long-term goals. ## Product or Service Description: * **Provide a detailed description, including materials, packaging, branding, and the value it brings to customers.** ## Business Objectives: * **Set both short-term and long-term goals.** ### Short-term goals might include: * Staff recruitment. * Production start date. * Marketing activities. * Business opening date. ### Long-term goals could be: * Upgrading equipment. * Hiring more staff. * Expanding the business location (e.g., moving to a mall) # Production and Marketing Plans The notes summarize the key components of a business plan, with a focus on the production and marketing plans. ## Production Plan: * **Outlines how the business will produce goods and services.** * **Includes details about:** * Where to buy materials. * What equipment and machinery is needed. * How to manage production effectively. ## Marketing Plan: * **Outlines how the business will market its goods and services to the public.** * **Addresses questions like:** * Who will buy the products? * Where will the business sell its products? * How can it attract customers? * **Includes a marketing mix strategy, which involves:** * **Product:** Understanding the product's unique selling points. * **Price:** Determining pricing strategies based on factors like cost, competition, and demand. * **Place:** Choosing distribution channels. * **Promotion:** Using various marketing tools to reach the target audience. Both the production and marketing plans are crucial for the success of a business. The production plan ensures efficient and effective production, while the marketing plan helps attract customers and generate sales. # SWOT Analysis The notes summarize the concept of SWOT analysis, which is a tool used to identify a business's strengths, weaknesses, opportunities, and threats. ## Strengths: * **Internal factors that give the business an advantage.** * **Examples include:** * Unique product. * Ideal location. * Previous experience. * Strong management skills. * High productivity. * Low costs. ## Weaknesses: * **Internal factors that may hinder the business's success.** * **Examples include:** * Lack of experience. * Insufficient funds. * Weak management skills. * High costs compared to competitors. ## Opportunities: * **External factors that could benefit the business.** * **Examples include:** * Emerging markets. * Technological advancements. * Changes in government regulations. * Economic growth. ## Threats: * **External factors that could harm the business.** * **Examples include:** * Increased competition. * Economic downturn. * Changes in consumer preferences. * Natural disasters. By understanding its strengths, weaknesses, opportunities, and threats, a business can make informed decisions about how to improve its performance and achieve its goals. # Financial Section The notes summarize the financial section of a business plan. ## Key Points: * **Financial details are crucial for securing capital from investors and banks.** * **The financial plan should include estimates of initial and future operating expenses.** * **Financial details can provide insights into profits and expenses.** * **Profitable businesses can still run out of cash and face bankruptcy.** * **The financial plan should include information on fixed and variable costs, break-even point, mark-up on sales, and profit percentage.** ## Fixed Costs: * **Costs that remain constant regardless of the business's output.** * **Examples include rent, short-term insurance, and interest payments on loans.** ## Variable Costs: * **Costs that are directly linked to the production process.** * **Examples include raw materials and labor costs.** ## Break-even Point: * **The point at which the income and expenses of a business are equal, resulting in neither profit nor loss.** ## Mark-up on Sales: * **A percentage added to the cost of a product to determine the selling price.** * **The mark-up should cover overheads and generate a reasonable profit.** ## Profit Percentage: * **The percentage of profit made on a product or service.** * **It is calculated by dividing the profit by the selling price and multiplying by 100.** The financial plan is a critical component of a business plan. It provides a clear picture of the business's financial health and helps to ensure its long-term viability. # Trade Unions and Strikes The notes summarize the concept of trade unions and strikes. ## Trade Unions: * **An association of workers formed to protect and promote their interests.** * **Negotiate with employers on issues like wages and working conditions.** * **Protected by law in South Africa.** ## Strikes: * **A work stoppage by employees to pressure employers.** * **Two types:** * **Legal strike:** Approved by the employer, workers receive pay. * **Illegal strike:** Not approved, workers don't receive pay. ## Effects of Strikes on Businesses: ### Negative: * Disrupts business operations. * Damages property. * Increases costs. * Leads to job losses. ### Positive: * Can resolve workplace conflicts. * Improves working conditions. The notes emphasize the importance of trade unions in protecting workers' rights and the potential impact of strikes on businesses. # Roles and Responsibilities of Trade Unions The notes summarize the roles and responsibilities of trade unions. ## Roles of Trade Unions: * **Protect workers' rights:** This is the core function, ensuring fair treatment and good working conditions. * **Organize workers:** Uniting workers in a particular industry to increase their bargaining power. * **Engage in collective bargaining:** Negotiating with employers on issues like wages, benefits, and working hours. * **Take industrial action:** If negotiations fail, resorting to strikes or work stoppages. * **Influence government policies:** Advocating for policies that benefit workers, such as minimum wage increases or reduced working hours. * **Monitor workplaces:** Ensuring safe and fair working conditions. ## Responsibilities of Trade Unions: * **Look after members' interests:** Prioritizing the well-being of their members. * **Control labor supply:** Influencing the availability of workers in a particular industry. * **Promote skills development:** Ensuring members have the necessary skills for the job market. * **Prevent discrimination:** Combating discrimination in the workplace. * **Maintain good relations:** Fostering positive relationships with employers and workers. * **Provide advice:** Offering guidance and support to members. * **Engage in peaceful negotiations:** Avoiding disruptive actions and promoting dialogue. * **Contribute to business growth:** Supporting initiatives that create jobs and economic growth. * **Consider community impact:** Being mindful of the broader societal implications of their actions. These roles and responsibilities highlight the crucial role trade unions play in advocating for workers' rights, improving working conditions, and contributing to a fair and just workplace. # Trade Unions and Sustainable Growth The notes summarize the contribution of trade unions to sustainable growth and development. ## Key Points: * **Sustainable growth:** * **Requires ongoing economic growth to create jobs.** * **Involves increasing production of goods and services, leading to GDP growth.** * **Should be environmentally friendly and benefit communities.** ## Trade Unions' Contributions: * **Pressure on government:** Advocating for government spending on infrastructure projects to create jobs and improve transportation and communication. * **Skill development:** Urging the government to invest in worker training programs. * **Fair wages and working conditions:** Ensuring fair pay and safe working environments. * **Productivity:** Promoting worker satisfaction and productivity. * **Dispute resolution:** Facilitating peaceful negotiations between workers and employers. The notes highlight the positive impact of trade unions on economic growth and social development. # South African Trade Union Logos <start_of_image> Trade unions are an important part of the South African landscape and these images represent a few of the largest and most prominent trade unions in the country. The images show logos of different trade unions in South Africa. Here are some of the most prominent ones: * **COSATU (Congress of South African Trade Unions):** A large federation representing millions of workers across various sectors. * **FEDUSA (Federation of Unions of South Africa):** Another major federation representing workers in different industries. * **NUM (National Union of Mineworkers):** A powerful union representing workers in the mining industry. * **SAMATU (South African Municipal Workers' Union):** Represents workers in local government. * **NAPTOSA (National Professional Teachers' Organisation of South Africa):** Represents teachers in South Africa. * **SADTU (South African Democratic Teachers' Union):** Another major union representing teachers. These are just a few examples of the many trade unions operating in South Africa, each representing the interests of specific groups of workers.