GRADE 10

ECONOMICS
PAPER 2
MICROECONOMICS
CONTEMPORARY ECONOMIC
ISSUES

CORE NOTES

Adapted by Economic Subject Advisors 2022

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Table of Contents
TOPIC 5: DYNAMICS OF MARKETS 4
TOPIC 6: PRODUCTION POSSIBILITY CURVE 20
TOPIC 7: PUBLIC SECTOR INTERVENTION 27
TOPIC 11: UNEMPLOYMENT 31
TOPIC 12: LABOUR RELATIONS 37
TOPIC 13: ECONOMIC REDRESS 46

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 GRADE 10 ECONOMICS

PAPER 2

MICROECONOMICS – TERM 2

MAIN TOPIC 1: MICROECONOMICS

TOPIC CONTENT SCOPE AND DEPTH OF EXAMINABLE
CONTENT
5. Dynamics of The market as a phenomenon (demand Define and explain the relevant concepts.
Markets and supply). Use graphs to illustrate the Explain the factors that will determine the
establishment of prices and quantities. existence of a market

Description
Briefly explain the composition of markets
Definition
Briefly discuss the characteristics of
Factors determining the
Markets (perfect or imperfect)
existence of a market.
Composition
Distinguish between national and
Buyers and sellers international markets
Factor and product market Distinguish between perfect- and imperfect
Generic markets markets

Types of markets HOT QUESTION: Group FOUR examples

perfect markets of businesses of both perfect and
imperfect markets imperfect markets
world markets (the effects of
HOT QUESTION: Under which market
electronics) structure would you like to operate a
world markets (conditions business
needed to access world
HOT QUESTION: Under which market
markets) structure would you like to operate as a
Prices: consumer
Demand
Discuss price formation in the market by
Supply
using graphs to illustrate the establishment
Price formation of prices and quantities
Value, price and utility Discuss the supply side of the market
Value Discuss the demand side of the market
factors affecting value Use a fully labelled graph and explain the
exchange value following:
value in use Equilibrium point, price & quantity
Price Over supply/surplus
Relationship between: Under supply / shortage
utility Change in demand/change in
value supply
price Change in quantity
demanded/supply
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 Utility: (Characteristics of utility)
Utility changes from person to
person
Utility changes from place to
place
Utility changes from time to
time
Utility cannot be measured
Factors that cause change
HOT QUESTION: Differentiate between an:
industry, market and individual firm
Define and explain the relevant concepts
Distinguish between value and utility
Distinguish between value in use and
exchange value

Concepts: total utility and marginal

utility
Functions of markets:
bringing supply and demand together
allocating resources self-regulatory
HOT QUESTION: Analyse the
relationship between value, price and
utility
Briefly explain the characteristics of utility
Define and explain the relevant concepts
Draw a graph and explain TU and MU
Briefly discuss the following concepts with
the aid of tables and/or graphs: total utility
and marginal utility

Briefly explain the functions of markets

Analyse the functions of the market

TOPIC 5: DYNAMICS OF MARKETS

Definition:
● A market is any place or any circumstance where buyers and sellers make contact or
communicate with each other about the buying and selling of goods and services.
OR
● A market is an institution or mechanism that brings the buyers and sellers of a good or a service together.
OR
● A market is a place where buyer and sellers exchange goods and services.

Activities that happen within a market:

1. Buyers and sellers exchange information.
2. Price and quantities are determined.
3. The amounts of goods and services that will be bought or sold are determined.

Value, price and utility:

Value
● Value is the maximum amount of money a person is willing and able to pay for goods or services.
● Value is expressed in Rand and cents.
● Value of goods or services equals Price multiplied by Quantity (Value = P x Q).

Price
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 ● Price is the amount that is actually paid for a goods and/or services.
● The price is determined by both the demand for and supply of the goods and service.

Utility
● Utility is the degree of satisfaction that a household or consumer derives or expects to derive from the
consumption of a good or service.

Characteristics of Utility:

Utility differs from person to person

● Tastes and preferences differ from person to person and this mean that people get different satisfaction
from the same good.
● Person A likes burgers and derives more satisfaction from it. Person B who does not like burgers but
like chicken derives less satisfaction from burgers but more satisfaction form chicken.

Utility is subjective
● Utility cannot be measured in numerical terms.

Utility differs from time to time

● A light gives more utility in the night than in the day because the utility for a light decreases during the
day.

Utility differs from place to place

● A consumer may derive a higher or lower utility for the same good at different places.
● The consumer may find more utility from a woollen jersey in cold areas but less utility for it near the
equator.

Utility does not necessarily mean usefulness.

E.g. cigarettes have utility to the smoker because it satisfies a want but it lacks usefulness because it is
injurious to the health.

Measuring utility:

Total Utility
Total utility is the utility derived from all the units that were consumed in succession.

Number of slices of bread Total utility Marginal utility

1 16 16
2 28 12
3 36 8
4 40 4
5 40 0
6 36 -4

John is consuming bread and he eats 7 slices of bread consecutively.

When he eats his 1 slice he derives 16 units of utility, 2 slices he derives 28 units of utility, 3 slices = 36 units of
utility, 4 slices = 40, 5 slices = 40 and 6 slices = 36 units of utility.

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Marginal utility

Marginal utility is the utility derived from the additional (extra) unit of a given good that were consumed by the
consumer.

● From the above it is clear that up to the fourth slice of bread Marginal utility is positive and Total utility
increases.
● When the fifth slice of bread is consumed the Marginal utility is ZERO and the increase in Total utility
stops. This is the point of complete satisfaction.
● All the extra slices of bread consumed from six slices onwards will cause dis-utility and this means that
there is a negative marginal utility.
● Total utility starts to diminish (decrease).

John will derive no further satisfaction from eating six slices of bread or more consecutively because
consuming too much bread at the same time will cause negative utility.

Composition of Markets:

Buyers Sellers
Buyers are the people who buy goods and Sellers are the business enterprises who sell
services at a price to satisfy their needs and goods and services at a price.
wants. Sellers determine the supply of goods and
Buyers determine the demand for goods and services on the market.
services.

Types of markets:

Perfect markets Imperfect Markets World Markets

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Perfect markets:

Definition of a perfect market

A perfect market is a market structure which has a large number of buyers and sellers who are not able to
influence the price.
OR
A perfect market is a market where prices are determined by demand and supply.
OR
Perfect competition occurs when none of the individual market participants can influence the price of the
product.

Examples of perfect markets

● Stock exchanges
● Foreign currency markets
● Central grain market
● Markets for agricultural product
● Wool markets

Characteristics of a perfect market

Buyers and Sellers:

● There are many buyers and sellers in the market.

Nature of the product:

● All the products sold in this specific market are homogenous (identical/the same), that is, they are
exactly the same regarding quality, appearance, size, etc.
● It makes no difference to a buyer where or from whom he/she buys the product.

Control over price:

● The market is very large, and no individual buyer or seller can influence the market price.
● Buyers and sellers are price takers.

Entry and exit to the market:

● Buyers and sellers are completely free to enter or to leave the market.
● There are no legal, financial, technical, and other restrictions which can prevent market entry.

Market Information:
● Both buyers and sellers have full knowledge of the market conditions.
● Buyers know what each seller is offering as well as the price of the goods.

No collusion:
● Collusion between sellers do not exist.
● Each buyer and seller react independently in a perfect competitive market.
● Collusion activities is illegal in South Africa, according to the Competition Act of 1998.

Unregulated markets:
● No government intervention exist which can influence buyers and sellers.
● Decisions are left to the individual sellers/producers and buyers.

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Imperfect Markets:

Definition of imperfect markets

An imperfect market is a market where no perfect conditions exist, one or a few sellers sell heterogeneous
products and can thus influence the price of a product.

Examples of Imperfect Markets

Oligopolies Monopolistic competition Monopolies

● MTN ● Steers ● Eskom
● Vodacom ● KFC ● Transnet
● Cell C ● Edgars
● SAL ● Foschini
● Toyota / Ford / BMW

Monopoly:

Definition
A monopoly is a market structure in which there is only one seller of a good or service that has no close
substitutes.

Examples:

Eskom
Transnet

Characteristics of a Monopoly

Number of businesses:
● There is only one seller of the good and/or service.

Nature of the product:

● Products are unique. Monopolies manufacture a variety of products which are difficult for other
companies to copy.

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Market Information:
● Both buyers and sellers are fully aware of what is happening in the market.

Entry and exit to the market:

● Entry to the market is blocked which prevent people from starting a business.
● Examples of barriers are licenses, permits, patents, etc.

Control over price:

● The monopolist has complete control over the price of the product.
● The monopolist is regarded as a price maker.

They may exploit consumers:

● A monopolist is the only supplier of a product and there is always the
possibility that the consumer may be exploited.

Oligopolies:

Definition
The oligopoly is a type of imperfect market in which only a few producers dominate the market.

Examples
● MTN
● Vodacom
● Cell C
● SAL
● Toyota / Ford / BMW

Characteristics of an Oligopoly

Buyers and sellers:

● This is a market with a few sellers but many buyers.

Nature of product:
● The product is homogeneous (the same) and heterogeneous (differentiated).

Market Information:
● There is incomplete market information.

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Entry and exit to market:
● Entry to the market is easy to difficult.

Control over price:

● An oligopolist can influence price but not as much as the monopolist.
Monopolistic competition:

Definition
● Monopolistic competition is a market structure which combines certain features of monopoly and
perfect competition.

Examples
● Steers
● KFC
● Edgars
● Foschini

Characteristics of monopolistic competition

Number of businesses:
● There are a large number of businesses.

Nature of product:
● Products are similar but not identical – it is called differentiated products.

Market Information:
● Both buyers and sellers have incomplete information about the market.

Entry and exit to market:

● Businesses can freely enter and exit the market.

Control over price:

● The business has little control over the prices of products.

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World markets and effects of technologies:

Description of the term: World markets

The activity of buying or selling of goods and services in all the countries of the world.
OR
It is the value of the goods and services sold world-wide.

Examples of commodities that are sold on the world market

● Coffee
● Oil
● Gold
● Foreign Currency
All the consumers around the world pay the same price for these goods.

The role of technology in world markets

● Technology in communication and transport link the world.

● Communication sources are the computer (internet and Wi-Fi), telephone, faxes, cellular phones (smart
phones), etc.
● Communication enables us to distribute knowledge both locally and internationally.
● Communication made trade around the world easier.
● Sellers and buyers are linked and can get quickly in touch with each other.
● Information about prices changes in one part of the world and can easily be seen in other parts of the
world.

Price:

Description of Price:

Price is the value at which goods and services will be sold and purchased.
Price is determined by the interaction of demand and supply.

Demand:

Definition of Demand
Demand refers to the quantity of goods and services that prospective buyers are willing to purchase at the
given price within a given period of time.

Types of demand

Individual demand:
● Individual demand is the demand of one person or one firm.

Market demand:
● Market demand is the total quantity demanded by all consumers.

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Complementary goods and substitute goods:

Complementary goods are goods that are combined together to satisfy a need, e.g. CD and a CD player. They
cannot be used independently.

Substitute goods are goods that can replace other goods to satisfy the same need, e.g. butter and margarine.
Usually, the substitute good is cheaper.

Demand schedule for Coca Cola at a school tuckshop

PRICE OF ONE CAN OF COCA- COLA QUANTITY DEMANDED

(CANS OF COCA COLA)
R1.00 100
R2.00 80
R3.00 60
R4.00 40
R5.00 20

A graphical presentation of the demand for Coca Cola

Demand Curve

The law of demand

● As the price of a product increases the demand for the product decreases and as the price of the
product decreases the demand for the product increases.
● This inverse relationship is known as the law of demand.

The Principle of Ceteris Paribus

● The demand curve is a simplified way of indicating the relationship between quantity demanded and
price.
● This is based on the assumption that all other determinants are constant (Ceteris Paribus).

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Factors that influence demand

● The price of the product

● The price of related products
● The income of the consumer
● Tastes and preferences of the consumer
● The size of households
● The weather conditions

Movement ALONG the demand curve

● Show the price - quantity demand relationship.

● If the price is R5, the demand for the product is 20 units, if the price drops to R3 the quantity demand
will increase to 60 units and if the price decreases further to R1 the quantity demand will increase to
100 units.
● This represents a movement along the demand curve.

SHIFT of the Demand Curve

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 ● A change in any factor other than price will cause the demand curve to shift to the right or the left.

Shift to the right – Quantity Demanded increase

● For example: The market demand for umbrellas increases due to the winter rainy weather. This will
cause an increase in the quantity demand for umbrellas. The demand curve will shift to the right.

Shift to the left = Quantity Demanded decrease

● For example: The market demand for umbrellas decreases in the summer. This will cause a decrease
in the quantity demand for umbrellas. The demand curve will shift to the left.

Reasons why the QUANTITY DEMANDED increase – Shift to the right

● An increase in the income of consumers
● An increase in the size of the population
● Quantity demanded increase because of advertising, fashion, climate change, consumer tastes.

Reasons why a QUANTITY DEMANDED decrease – Shift to the left

● A decrease in income
● Population size decreases
● Demand decreases as a result of advertising, fashions, climate change, consumer tastes.

Supply:

Define the term “Supply”

Supply is the quantity of a good or service that producers plan to sell or are willing to sell at each possible price
during a specific period of time.

Supply Schedule

PRICE OF ONE CAN OF COCA COLA QUANTITY SUPPLIED

(CANS OF COCA COLA)
R1.00 20
R2.00 40
R3.00 60
R4.00 80
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 R5.00 100

A graphical presentation of the Supply of Coca Cola at the school tuckshop

Supply curve

The law of supply:

● As the price of the product increases the supply of the product will increase, and as the price of the
product decreases the quantity supply will decrease.
● This direct relationship is known as the law of supply.

The Principle of Ceteris Paribus:

● The supply curve is a simplified way of indicating the relationship between quantity supplied and price.
● This is based on the assumption that all other determinants are constant (ceteris paribus).

Factors that influence Quantity Supplied:

● The price of the goods or services

● The price of alternative goods and services
● The price of factors of production
● The state of the technology

Movement ALONG the Supply curve

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● A change in the price of a product leads to a movement along the supply curve.
● Show the price - quantity supplied relationship.
● If the price is R1, the quantity supplied of the product is 20 units. If the price increase to R3 the quantity
supplied increase to 60 units and if the price increase to R5 the quantity supplied will increase to 100 units.
● This represents the movement along the supply curve.

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SHIFT of the Supply Curve

● A change in any factor other than price will cause the supply curve to shift to the right or the left.

Shift to the right – Quantity Supplied increases

● For example: More businesses enter the market. More goods and services on the market. There is an
increase in the quantity supplied of goods and services.
● The supply curve shifts to the right.

Shift to the left – Quantity Supplied decreases

● For example: Business closes down and leaves the market. Less goods and services. There is a
decrease in the quantity demanded.
● The supply curve shifts to the right.

Reasons why the QUANTITY SUPPLIED increases – Shift to the right

● More businesses enter the market.
● The cost of factors of production decreases (e.g. wages, natural resources, etc. becomes cheaper).
● The use of new cost-saving and improved technology.
● Stable workforce with no political and workers’ disruptions.
● Fertile soil, favourable weather conditions, etc.

Reasons why a QUANTITY SUPPLIED decreases – Shift to the Left

● Business exits the market.
● The cost of factors of production increases (e.g. wages, natural resources, etc become more
expensive).
● The use of old and inefficient and cost increasing technology.
● Unstable work force with many disruptions, work stoppages, labour unrest, shortage of raw materials,
etc.
● Extreme weather conditions, e.g. droughts, storms, floods.

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Price Formation:

Demand and supply schedules

PRICE OF COCA COLA QUANTITY DEMANDED QUANTITY SUPPLIED

(CANS OF COCA COLA) (CANS OF COCA COLA)
R1.00 100 20
R2.00 80 40
R3.00 60 60
R4.00 40 80
R5.00 20 100

Demand and supply curves

● The vertical axis indicates Price, and the horizontal axis indicates Quantity.
● D = Quantity demanded for goods and services and S = Quantity supplied of goods and services.

● e = Equilibrium point, is where Quantity Demanded is equal to Quantity Supplied

● The equilibrium price = R3 and the Equilibrium quantity = 60 units of the goods.

● At R2 the quantity demanded for the good is 80 units and the quantity supplied of the good is 40 units.
The quantity supplied is more than the quantity demanded.
At R2 there is an excess demand (market shortage) on the market.

● At R4 the quantity demanded is 40 units of the good and the quantity supplied of the goods is 80 units.
The quantity supplied is more than the quantity demanded.
At R4 there is an excess supply (market surplus) on the market.

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Functions of Markets:

Markets bring demand and supply together

● BUYERS represent the DEMANDSIDE of the market and SELLERS represent the SUPPLYSIDE of the
market.
● The three basic economic questions are WHAT? HOW? and FOR WHOM? will be produced.
● Markets are one way to solve the basic problem of scarcity.

Markets assist to redistribute resources

● Prices serve as a direction indicator for both the producer and the consumer.
● Businesses want to maximize profits; thus, they choose what to produce and sell.
● Households want to buy goods and services at the lowest possible prices; therefore, they influence
what businesses can as well as the price it will be sold at.

Markets are self-regulatory

● Market prices are determined by the interaction of supply and demand.
● There is an “invisible hand” in the economy.
● If prices of products increase, the demand for the product will decrease (consumers will buy less), and
sellers want to sell more to increase profits.
● If the price of a product decreases, the demand for the product will decrease (consumers want to buy
more products), and sellers will sell less because it influences their prices negatively.

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TOPIC
6. Production Possibility Curve
GRADE 10 ECONOMICS
PAPER 2
MICROECONOMICS – TERM 2
CONTENT
Description of the production
possibility curves (reflecting on
efficiencies) and explaining how
they reconcile choice and
scarcity.
Rationale
Definition
Assumptions
Purpose
The position of the production
possibility curve
determined by internal
factors
determined by external
factors
Maximising satisfaction from
limited resources by means of
indifference curves:
Definition of indifference curves
Characteristics/properties of
indifference curves
Consumption:
The single indifference curve
Characteristics:
Are downward sloping
Higher indifference curves are
preferred to lower ones
They do not intersect (cross)
They bent inwards
Budget line:
Maximizing consumer satisfaction
Changes in income and prices
SCOPE AND DEPTH OF
EXAMINABLE CONTENT
Define and explain the relevant
concepts
Briefly explain the purpose of a
production possibility curve
Draw a comparison between the
PPC and opportunity cost
Draw a fully labelled PPC and
explain the properties of the curve
Construct a PPC curve from a
given table
Draw a fully labelled graph and
explain the 4 possibilities for
changes to the PPC
Explain the factors which may
cause a movement of the PPC
Define the indifference curve
Draw a fully labelled indifference
curve and explain the properties of
the curve
Explain the value of the
indifference curve to the
economist
Analyse the characteristics of the
indifference curve
HOT QUESTION: How can the
indifference curve be used to
ensure maximum satisfaction?
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 Production:
Definition (production efficiency)
Allocative efficiency
Productive efficiency
Paretto efficiency
Effects of inefficiencies:
Allocative inefficiency
Productive inefficiency
Paretto inefficiency
Draw a fully labelled graph and
explain the budget line/properties
of the budget line
Draw a fully labelled graph and
explain the following: allocative
efficiency, Productive efficiency
and Pareto efficiency

Examine the effects of productive

inefficiencies

Examine the effects of allocative

inefficiencies

Examine the effects of Pareto

inefficiencies

TOPIC 6: PRODUCTION POSSIBILITY CURVE

Description of the production possibility curves (reflecting on efficiencies) and explaining how they
reconcile choice and scarcity.

Definition:
The Production Possibility Curve shows the alternative combination of any two goods or services that can be
attained if all the available resources are fully and efficiently employed (used).

The purpose of the PPC

It shows all possible combinations of goods that can be produced with a given set of resources.

The shape of the PPC

● The production possibility curve is the boundary between attainable and unattainable output
combinations.
● The production possibility curve is concave to the origin (0).

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The different combinations:

Possibilities Walka’s Cellphones

A 0 600
B 175 575
C 450 275
D 500 0

The Curve
● The production of Walka’s is measured on the horizontal axis.
● The production of Cellphones is measured on the vertical axis.
● The different attainable combinations in the table are represented by points A, B, C and D.

● When we move from point A to point B, from Point B to point C, from C to point D, etc. the production of
Walka’s increases while the production of Cellphones decreases.

● If the business produces 600 Cellphones then 0 Walka’s can be produced.

● To produce the first 175 Walka’s there is a sacrifice of 25 Cellphones (move from 600 to 575) (Point B).
● To produce the 450 Walka’s there is a further sacrifice of 300 Cellphones (move from 575 to 275) (Point
C).
● If the business produces 500 Walka’s then 0 Cellphones can be produced.
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 ● This curve shows that more Walka’s can only be produced by sacrificing more Cellphones or producing
less Cellphones.

Unattainable position
● Production at point H is impossible with the given resources.
● It is outside the Production Possibility Curve.
● To produce at H the business needs more resources.

Inefficient position
● Production at point G is regarded as inefficient because it is inside the Production Possibility Curve.
● If production occurs at point G then there is a waste of resources.
● Production can be increased up to any point on the Production Possibility Curve.

The Possibility Frontier Curve (Production Possibility Curve) illustrates the following:

Choice
Sacrifice
Opportunity cost

Choice
Choice is illustrated by the need to choose among the available combinations along the curve.

Scarcity
Scarcity is illustrated by point H because all the points to the right of the curve are unattainable.

Opportunity Cost
This is illustrated by the negative slope of the curve.
More of one good can only be obtained by sacrificing some of the other good.
Opportunity cost is the trade-off between two goods.
The opportunity cost of increasing the output of Walka’s from 175 units to 450 units is the decreasing output of
Cellphones by 300 units (575 -275).
The opportunity cost of decreasing Cellphones from 575 units to 275 units is the increasing output of 300
Walka’s.

Movement of the Production Possibility Curve

● The quantity of the available resources can increase, or production techniques can improve.
● If this happen the PPC will shift outwards.
● If the PPC shift outward, then it illustrates economic growth.

Increase in the quantity of available factors of production and an improvement in the production of Walka’s.

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● An increase in the quantity of available factors of production and an improvement in the production of
Walka’s make it possible to produce more Walka’s.
● It is possible to produce more Walka’s with the available resources.
● The PPC for Walka’s shift outward from point AM to point AN.

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Increase in the quantity of available factors of production and an improvement in the production of Cellphones.

● An increase in the quantity of available factors of production and an improvement in the production of
Cellphones make it possible to produce more Cellphones.
● It is possible to produce more Cellphones with the available resources.
● The PPC for Cellphones shift outward from curve LO to curve LP.

Increase in the quantity of available factors of production and an improvement in the production to produce
more Cellphones and Walka’s.

● An increase in the quantity of available factors of production and an improvement in the production to
make it possible to produce more Cellphones and Walka’s.
● The PPC shift outward from curve AB to curve CD.

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Internal factors which determine a shift in the PPC

● Improved production techniques

Factories shift from a labour-intensive production process to a capital-intensive production process.
(Replace manual labour with machines)
PPC will shift to the right.

● New and improved technology

This leads to more efficient production methods which will increase output.
PPC will shift to the right.

● The improvement of skills of workers through training and motivation.

Increased training and motivation will improve productivity and shift the PPC to the right.

External factors which determine a shift in the PPC

● The quality of factors of production

● Efficient transport services
● Efficient communication systems
● Health care which leads to healthier workers

Effects of inefficiencies in the market:

Describe the term Market inefficiency

Market inefficiency refers to a market that functions inefficiently if it does not produce the maximum output with
the minimum input, or if the income generated in the market is not fairly distributed among the participants as a
whole.

The effects of inefficiencies in the market

Uneven distribution of income

● Many people live in absolute poverty.
● The government then steps in and pays welfare grants and pensions to help poor people.
● These payments create a larger market and more consumers.
● More firms can therefore enjoy economies of scale and the PPC therefore moves
to the right.

Monopolies
● If there is not enough competition in the market, monopolies may develop.
● A monopoly exists when there is only one supplier of a product.
● The monopolies can dictate the prices of certain products or groups of goods and services in the
marketplace.
● This may exploit consumers, particularly if monopolies develop around the supply of
essential goods and services such as basic foodstuffs.
● The government steps in to prevent monopolies by making laws to forbid monopolies.
● If established firms cannot form monopolies, it is easier for new competitors to enter the market.
● More competition creates better efficiency. More efficient firms can therefore produce more with the
same resources. This moves the PPC to the right.
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Inflation and extreme fluctuations in business cycles
● High rates of inflation cause unstable economic conditions.
● The Reserve Bank tries to control inflation to stabilise the economy.
● Wild swings between troughs and peaks in the business cycle also cause instability,
which undermines confidence in the economy.
● The state can spend or save to counteract the ordinary business cycle and to limit its
impact.
● If producers know that demand will remain fairly stable, and that inflation will not get
out of hand, they can plan better. A stable economy moves the PPC to the right,
because producers can produce more with the same cash resources as the cost of
borrowing remains stable.

Pollution and exhausted natural resources

● Many businesses do not care what they do to make profit and they will pollute the environment and
waste natural resources if that brings more profit.
● The state puts in place and enforces laws to control the use of natural resources.
● These laws can make production more expensive for producers.
● More expensive production processes move the PPC to the left; producers can produce less with the
same resources as production is more expensive.

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TOPIC
7. Public Sector Intervention
GRADE 10 ECONOMICS
PAPER 2
MICROECONOMICS – TERM 2
CONTENT
The effects (in terms of prices
and quantities) of the public
sector’s involvement and
intervention in the market, with
the aid of graphs.
Definition
Levels of public sector
Reasons for public sector
involvement and intervention
Methods of involvement:
- indirect taxes
- subsidies
Kind of subsidies:
⮚ producer
⮚ consumer
⮚ export
⮚ employment
⮚ income
- maximum and minimum
prices (with a graph)
- production (without graph)
- minimum wages (without
graph)
- welfare (without graph)
SCOPE AND DEPTH OF
EXAMINABLE CONTENT
Define and explain the relevant
concepts
Identify the different levels of the
public sector
Briefly discuss the reasons of
market failures
Briefly discuss the impact of
market failures
Discuss indirect taxation as
method of public sector
involvement
Discuss subsidies as method of
public sector involvement
Discuss maximum and minimum
prices as method of public sector
involvement
Briefly discuss production,
minimum wages and welfare as
methods of involvement into the
economy
Discuss in detail the methods
government use to intervene in the
economy
HOT QUESTION: Debate some
arguments in favour of
minimum wages
28
TOPIC 7: PUBLIC SECTOR INTERVENTION
Government involvement in the market:

Description of market intervention

The government intervenes in the economy because the market is failing to meet the needs of the people.

Reasons why the government intervenes in the economy

● The private sector does not provide enough services.
● Provide public services, such as hospitals and schools.
● Government wants to protect consumers against unfair practices by monopolies.
● To promote fair treatment of workers and prevent exploitation.
● To control strategic enterprises, e.g. electricity & water provision.
● To guard against market prices that may be damaging to the economy's economic health.

The ways in which the government intervenes in the economy:

Indirect tax
● An indirect tax is paid indirectly by consumers through the purchase of goods and service.
● There are three kinds of indirect tax, e.g. VAT, excise duties –charged on locally produced goods and
custom duties which are charged on imports.
● By imposing the tax, the government directly influences the price which increases the price the
consumer pays.

Subsidies
● The government provides subsidies to producers in order to encourage them to increase the production
of goods. Supply increases.
● Producer subsidies are often given to suppliers of agricultural products such as milk, wheat and maize.
● Subsidies lower the cost of producing goods and thus the market price of these goods is lowered
(product are sold cheaper).
● In South Africa there are four types of subsidies:
o production, employment, export and income subsidies

● The market price of rice is P and the corresponding quantity is Q.

● If the government subsidises the production of rice, the market price will decrease to P1 with
corresponding quantity Q1.
29
 ● The lower price, P1, allows the poor to purchase more rice.

Welfare
● Due to the uneven distribution of wealth, welfare grants are provided for people to meet their basic
needs.
● The government provides merit goods and also supplements the income of poor people.
● Cash grants e.g. old-age pensions, disability and childcare grants are used.

Maximum prices (Price ceilings)

● The government sets a maximum price (ceiling price) below the market price to make goods more
affordable.
● Maximum prices allow the poor greater access to certain goods and services.
● In South Africa the price of petrol, diesel fuel and paraffin are controlled at their maximum prices.
● In times of war prices may be controlled to prevent inflation.
● It helps to protect the CONSUMER.

Graph and explanation

● Initially the market equilibrium price is P and equilibrium quantity is Q, determined by the market.
● The government intervenes and passes a law that milk cannot be sold for more than P1.
● The effect of this maximum price is that quantity supplied decreases to Q1 and quantity demanded
increases to Q2.
● There is a shortage of milk equal to the difference between Q1 and Q2.
● A shortage creates a problem of how to allocate milk to consumers.
● Black markets often develop where people can obtain milk. A black market is an illegal market in which
either illegal goods are bought and sold, or illegal prices are charged.
● Maximum prices may cause a shortage of goods, but they do improve the welfare of some consumers
since goods can be purchased at lower prices.

Minimum prices (Price floors)

● The government sets a minimum price at a point above the market price.
● It is generally used in agricultural sector where incomes are believed to be low.

30
 ● This is done to enable producers to make a comfortable profit and thus encourages them to supply
important essential goods.
● This helps to protect the PRODUCER.

Graphical illustration and explanation

● Consider the market for wheat.

● The market equilibrium price is P and the equilibrium quantity is Q.
● If the government sets a minimum price at P1, farmers will earn greater profits and supply more wheat.
Quantity supplied will therefore increase to Q2.
● However, quantity demanded will decrease to Q1.
● There would be a surplus of wheat equal to the difference between Q2 and Q1.
● A surplus means the government will have to buy the extra wheat and dump it locally or abroad.
● Although minimum prices may cause a surplus, they do encourage the supply of important food stuffs.

Production

● Government provides goods and services which are not provided by the private sector.
● These goods are non-rival and non-excludable, e.g. protection services, parks, streets, refuse removal,
etc.

Minimum wages
● When the government enforces a minimum wage, it means workers have to be paid a certain wage
amount and not anything less than this.
● The reason for this is that workers should earn wages which is enough to cover the basic cost of living.
● This helps to protect workers and re-allocate resources.
● In 2002 minimum wages were introduced for domestic workers.
● This was also extended for farm workers and also to non-unionised industries.

31
Graphical illustration and explanation

● The figure above shows that if the wage rate is set at W, the corresponding demand and supply of
labour will be Q.
● If a minimum wage of W1 is set, the demand for labour will decrease from Q to Q1. Some people may
become unemployed due to the introduction of a minimum wage.
● However, the quantity of labour supplied will increase from Q to Q2.
● More people will offer their labour because of the higher wage.

32
 GRADE 10 ECONOMICS

PAPER 2

CONTEMPORARY ECONOMIC ISSUES – TERM 4

MAIN TOPIC 4: CONTEMPORARY ECONOMIC ISSUES

TOPIC CONTENT SCOPE AND DEPTH OF

EXAMINABLE CONTENT
11. Unemployment Unemployment and the various
approaches to solve the problem. Take
cognisance of the economically
marginalised. Discuss unemployment

The nature of unemployment

- the numbers
- unemployment rates
- characteristics of South Africa’s
unemployment Discuss the methods to combat
- causes of unemployment unemployment
- effects of unemployment

Approaches to solve unemployment

- growth of production
- public works programs
Briefly discuss the economically
- unemployment insurance marginalised groups
Economically marginalized
groups

TOPIC 11: UNEMPLOYMENT

The nature of unemployment:

A person is UNEMPLOYED when:

He / she is part of the EAP – (Economically Active Population)

Unable to find work

Labour Force = comprises of people between the ages of 15 – 65 who are willing and able to work.

33
South Africa’s unemployment rate 2021

Unemployment figures are obtained through the following ways:

● Census
● Population survey
● Registrations of unemployed with the Department of Labour
● Sample survey (the Quarterly Labour Force Survey) by Statistics South Africa (STATSSA).

The Department of Labour is responsible for monitoring unemployment.

There are TWO definitions of unemployment

NARROW DEFINITION OF UNEMPLOYMENT BROAD DEFINITION OF

● People who are part of the EAP, UNEMPLOYMENT
● are not working ● People who are part of the EAP,
● have been looking for work in the past not working,
four weeks and ● even if they have given up looking
● are available to work within a week for work

Difference : discouraged job-seekers are included in the broad definition of unemployment

but NOT in the narrow definition
INTERESTING FACTS…
● The Dept of Labour uses the narrow definition.
● They are more interested in making policies to help active job-seekers find a job
● Statistics SA provides unemployment figures according to both the narrow and broad
definitions of unemployment.

34
Unemployment rates:

The unemployment rate is the percentage of the EAP that is unemployed within a specific area or demographic
group.

UNEMPLOYMENT RATE = number of unemployed X 100

EAP 1

In 2017 South Africa’s EAP was estimated at 22.4 million and the unemployed at 6.2 million people. Use
formula to calculate the current unemployment rate. (round off to one decimal)

Characteristics of South Africa’s unemployment:

Gender
In general more women are unemployed compared to males.

Urban and rural/ Province

Rural unemployment is higher than urban unemployment.
Rural employment is in most instances seasonal
Western Cape has the lowest level of unemployment in South Africa while the Free State has the highest

Age
The 25-34 years age has the highest unemployment rate
A large percentage of the15- 24 years age group is voluntary unemployed because they pursue further studies

Level of education
The more qualified a person is the less likely he/she is to be unemployed.

Causes of unemployment:

Frictional unemployment

● Unemployment that occurs when a worker is changing jobs or has resigned in order to search for a new
job.
● There are always unemployed people as well as vacancies at any given time.
● However it takes time to find the workers to fill the vacancies.
● Time to fill posts can be reduced further by improving market information and placement services.
● Tipes of unemployment also occurs under conditions of full employment.

Seasonal unemployment

● Unemployment that occurs at certain times of the year.

● Employment and unemployment depend on the coming and going of seasons.
● This is typical of the agricultural and services sector of the economy.
● It appears and disappears on a regualr, predictable basis.
● It lasts for months at a time

35
Cyclical unemployment

● Unemployment due to a lack of demand for labour during the downswing of the business cycle.
● During such periods, aggregate demand is low, and as a result there is a reduced demand for labour.
● During recession few or no jobs are created for people entering the labour market.
● Even existing workers may lose their jobs through retrenchment.
● Once the economy improves the cyclical unemployed are employed again and people entering the market
find work more easily.
● Is not the result of the inability or inefficiency of individuals to find employment.

Structural unemployment

● Unemployment caused by a mismatch between the skills the employers require and the skills that
employees offer.
● Refers to the oveall inability of the economy to provide employment for its total labour force.
● Even during periods of high economic growth , employment opportunities do not increase fast enough to
absorb people who are already unemployed and those newly entering the labour market.
● Causes unemployment rates to remain high for periodes longer than the downswing of the business cycle

The major reason for unemployment in South Africa is structural.

Effects of unemployment:

Unemployment has grave consequences for the economy and the citizens of a country.

Impact on the economy

The economy is effected by unemployment in two broad ways:

Opportunity cost
Output that could have been produced is lost.
Government does not benefit from income taxes, VAT, etc.
A country with unemployed workers is not using all its resources, i.e. not producing maximum output.
Such a country produces inside it production possibility curve.

Real cost
Unemployed people claim welfare, which is paid out of taxpayers contributions.
Eg include child-support grants, rebate on electricity and housing annd UIF
Knowledge and skills are also acquired at great cost but lost quickly through disuse.

Impact on the indivudual

Unemployment causes people’s living standards to fall.
Main cause of poverty in SA.
People with no income may be forced into a lifestyle of crime in order to survive.
Unemployed people suffer from poor physical and mental health.
It affects individuals’ dignity and pride.
Loss of confidence reduces the chances of finding employment again.

Political impact

36
In SA, unemployment affects our perception of the success or failure of the market economy.
There is a perception that the market economy is responsible for unemployment.
Heightened frustrations may lead to unrest.
This perception can have political effects.
Approaches to solving unemployment:

● growth of production
● public works programs
● unemployment insurance

Economically marginalised groups:

● In South Africa, rural people, women, handicapped persons, older people and school leavers are
marginalised groups.
● These groups find it difficult to access employment.
● If they do have some kind of employment, they are the first to be effected when cyclical downswings
occur.
● Their numbers are such that government intervention is necessary.
● Therefore, some incentive schemes in South Africa favour those businesses that are likely to employ
persons from these groups.
● For instance, compensation for export promotion costs (such as research, overseas visits and
exhibitions) is bigger for previously disadvantaged, small, medium and micro businesses than for
other businesses.
● The government's public works programmes give preference to rural people, women, post-school
youth and handicapped persons.

37
 GRADE 10 ECONOMICS

PAPER 2

CONTEMPORARY ECONOMIC ISSUES – TERM 4

TOPIC CONTENT SCOPE AND DEPTH OF

EXAMINABLE CONTENT
12. Labour Labour relations, dispute resolutions and Discuss Labour relations, dispute
Relations dispute resolution mechanisms. Include resolutions and dispute resolution
labour rights and conventions within the mechanisms
context of the South African labour market.
The labour market in the South African
context:
demand for labour
supply of labour
interaction of supply and demand
The objectives of the Labour Relations Act
self-government
majorification
consultation
Labour rights and conventions
conventions
labour rights
labour rights in South Africa
the Labour Relations Act (LRA)
the Basic Conditions of Employment Act
(BCEA)
Compensation for Occupational for
injuries and Diseases Act (COiDA)

The collective bargaining/dispute resolution

process:
labour unions
workplace forums
bargaining councils
Commission for Conciliation
mediation and Arbitration (CCMA)

The labour courts

powers of the Labour Court
Representation before the Labour Court.

38
TOPIC 12: LABOUR RELATIONS
A labour market…
● is a market where labour is traded.
● is a factor market.
● is people-orientated.
● that only trades working terms and not the workers themselves

The income of people is largely determined by the jobs they do.

For example, a computer programmer earns more than a service station attendant.
Supply and demand within the labour market determines what wages are paid.

DEMAND FOR LABOUR

When the economy is growing more workers are employed.

The demand curve in Figure 1 shifts from DD to D1D1,
Employers are prepared to pay wages equal to W1.
When they have negative expectations, employers lower the wages and demand returns to DD.

Demand is determined by the following factors:

Performance of the economy

If the economy grows, more goods and services are sold, thus more labour is employed.
If the economy is in recession, fewer goods and services are sold and less labour is employed.
In the recovery phase, the opposite happens.

Productivity of labour
Productivity is the relationship between real output and the quantity of input used to produce that output.
Productivity is, therefore, a measure of input efficiency.
Labour productivity as the number of units of output obtained from a unit of labour input.

%𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑜𝑢𝑡𝑝𝑢𝑡 (𝑒.𝑔. 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛)

𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = % 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑖𝑛𝑝𝑢𝑡 (𝑒.𝑔. 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑜𝑟 𝑙𝑎𝑏𝑜𝑢𝑟 𝑜𝑟 𝑏𝑜𝑡ℎ)
×100

Individual employers continue to hire labour as long as the marginal cost of labour (wages) is lower than the
value of each additional worker’s contribution to the total revenue
Known as the marginal revenue product (MRP).

Improvement in technology
Technology is any instrument or technique, product or process, physical equipment or method whereby
something is made or done, which extends human ability.
Scientists and engineers are continuously thinking of new and better ways of doing things with
For example, better machines and faster computers.
Technological advances raise the marginal product of labour, which in turn increases the demand for labour or
for capital.

The supply of other factors

The quantity available of one factor may affect the use of the other factors.

39
If capital for investment, land for establishment, proper education or entrepreneurship is not available, workers
will not find employment.
Major reasons for the high levels of unemployment in South Africa are shortages of entrepreneurs and capital.

SUPPLY OF LABOUR
Within the economy, more people will give up their leisure time and work if wages are higher.
The labour supply curve slopes upward in Figure 1

Supply is affected by the following factors:

Population growth rate

The labour force (EAP) in South Africa is approximately 1/3 of the total population.
It grows at a rate that is more or less similar to the population growth rate.
A bigger population requires more goods and services which cause the demand for labour to shift to the right
(D1D1).
However, population growth causes a similar increase in the supply of labour.
That pushes the supply curve also to the right (S1S1).
The equilibrium wage (W) will, therefore, tend to remain at the same level.
Employment increases to Q3.
If the wage rate settles at a level that is too high, relative to the supply of labour, labour is in oversupply.
Employment may remain as low as Q1.
Unemployment of Q1-Q3 will prevail indefinitely.

Labour force participation rate

The extent to which labour is available for employment is expressed by the labour force participation rate
(LFPR).
The number of women available for employment has increased substantially over the years
An increase in the supply of labour pushes the supply curve to the right.
Such a shift of the supply curve is illustrated by S1S1.
When the supply curve moves to this position, wages may drop to W2.

Skills and other competencies

All the workers in the aggregate labour supply may not have the skills and other competencies.
Eg. if computer skills are required, typing skills are inadequate.
A workforce that lacks skills and other competencies is a “shadow” workforce and is not employable.

Migration
Supply of labour is affected by movement of workers from region to region, or country to country.
Regional development is used as a strategy to make use of workers at the places where the supply prevails.
There is resistance to undocumented (illegal) immigrants in SA because they inflate the supply of unskilled
workers.
Brain drain or the emigration of skilled workers from SA is of concern, because it dilutes the skills content of
the labour supply.

40
INTERACTION OF SUPPLY AND DEMAND

Wage rates are determined by the market demand and supply for labour.

Equilibrium wage rate

Curve DD represents the labour demanded, and curve SS represents the labour supplied.
W is the equilibrium wage.
At this wage the market should be cleared, with unemployment at its natural level.
If demand and supply shift, a new equilibrium is established at d.

Market failure
If unemployment is in excess of its natural level, it indicates market failure.
Labour market failure are shortages of skilled labour, workers that are in jobs that they are not best suited for,
lack of training, and wages that are above or below their equilibrium levels.

Immobility of labour
Geographic immobility-when workers find it difficult to move from one geographic area to another.
For example, this may be caused by a lack of accommodation in the urban areas.
Occupational immobility- where workers may not be trained for the kind of work that is available.
Their qualifications, skills and competencies may differ from what is in demand.

Oligopoly employers
In a labour market there are few employers, and they have the power to determine the wage rate and
employment,
Both are likely to be lower than in a free competitive market.

Trade unions
Trade unions may push the wage rate above the equilibrium which prevents market clearing.
This will worsen unemployment and undermine their position of power.
if there are fewer people employed, they would have fewer members.

Market inflexibility
Labour market fails to adjust to changing conditions because workers are overprotected (by laws)
Employers switch to the use of capital-intensive technology (machinery).

Lack of information
Workers may be unaware of vacancies with better benefits.
Employers may also not appoint the most productive workers because they are not in touch with all the
potential workers.

Attachment between workers and employers

Workers may stay in jobs that pay poorly because they like working for their present employers.

Lack of training.
Training has positive externalities
However, some workers and some firms take a short-term view and underestimate the benefits of training.

Discrimination
Occurs when workers are treated differently to others in the same job in terms of pay, employment, promotion,
training opportunities and work conditions.

41
42
 Objectives of Labour Relations Act:

The South African government has outlined the rights and responsibilities of employers and employees in the
LABOUR RELATIONS ACT, NO 66 OF 1995

The Act has three basic objectives:

Self-government… Majorification… Consultation…

● provided basic rights for
employees and employers
● set rules for the fair
treatment of employees.
● set rules so that employees
perform their duties to the
best of their abilities
● occurs when a person
reaches the age of 18.
● also allows for the right to
establish workplace forums in
organisations with more than
100 workers
● and the right to enter into
closed-shop agreements with
employers,
● and the right to extend
collective agreements to
non-union members by
agreement with the employer.
● whereby the LRA gives the
rules for how employers and
employees should solve
workplace problems through
a consultation process,
conducted by workplace
forums, bargaining councils
and trade unions

Labour rights and conventions:

The International Labour Organisation (ILO) is an agency of the United Nations

(UN) that sets international labour standards and promotes social justice.

CONVENTION LABOUR RIGHTS

are international agreements.
● The ILO meets once a year and draws up
conventions and recommendations regarding
labour-related issues.
● Conventions made by the ILO concern issues
such as minimum wages, working conditions
and hours, sick leave, etc.
● SA is one of the members of the ILO
set of rights that protects the person who sells
his or her labour.
Internationally, these rights include:
● The right to dignified working conditions
● The right to work that is freely chosen or
accepted
● The right to adequate remuneration
● The right to a limited workday and
remunerated periods of rest
● The right to equal pay for work of equal
value
● The right to equal treatment
● The right to safe and hygienic working
conditions.

43
44
Labour rights in South Africa:

● The Constitution of South Africa aims to ensure equality for all citizens in South Africa.
Equality refers to all people receiving the same fair treatment

● All laws and regulations regarding labour rights are derived from the Constitution.

● The Constitution stipulates:

✔ the rights of employees
✔ the rights of trade unions, and
✔ the rights of employer organisations.

45
 LABOUR RELATIONS ACT (LRA)
(No. 66 of 1995)

● The LRA is based on the Constitution

● Provides the legal framework for the South African labour-relations system.
● The general purpose of this Act is to advance economic development, social justice, labour peace and
the democratisation of the workplace.
● The LRA has been amended in 1996, 1998, 2000 and 2002, and a bill for a new amendment was
published in 2012.

The LRA therefore:

✔ governs relationships between employers and employees

✔ enforces the fundamental rights in all labour-related issues
✔ sets rules so that employers manage employees fairly
✔ ensures that employees can earn fair wages and salaries
✔ ensures that employees perform their duties to the best of their ability
✔ provides a framework for collective bargaining, and
✔ promotes the effective resolution of labour disputes

THE BASIC CONDITIONS OF EMPLOYMENT ACT (BCEA)

(No.75 of 1997)

● The purpose of this Act is to “advance economic development and social justice”.
● Its primary objective is to ensure workers’ rights to fair labour practices.
● The BCEA regulates the basic conditions of employment in order to implement the right to fair labour
practices referred to in the Constitution.

Typical issues covered in the BCEA are:

✔ working hours
✔ leave and sick leave
✔ public holidays and yearly holidays
✔ wages, salaries and deductions, and
✔ termination of employment.

The BCEA also specifically addresses the following problems:

✔ child labour (work undertaken by people under the age of fifteen years)
✔ overly long working hours
✔ the lack of fair payment to vulnerable workers
✔ the mistreatment of vulnerable workers (such as farm workers and domestic workers

THE COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES ACT (COIDA)

(No. 130 of 1993)

● This Act provides for the payment of compensation for disability caused by injuries or diseases in the
execution of work duties.
● Compensation is also paid in the event of death as a result of such events.
● The COIDA gives the legal requirements about how workers must be compensated if they suffer any
form of injury as a result of workplace-related incident or a workplace-related disease.

46
47
The Compensation for Occupational Injuries and Diseases Act (No. 13C applies to all employees except:
✔ any employee guilty of a misconduct
✔ domestic workers
✔ people doing military training
✔ the South African Police Force and Defence Force
✔ foreigners
✔ people who are temporarily employed.

Workers or their relatives must apply within 12 months to the Compensation Commissioner.

The collective bargaining / dispute resolution process:

● In South Africa, the Labour Relations Act promotes collective bargaining as the main vehicle for
regulating terms and conditions of employment, as well as relations between employers and unions.
● Collective bargaining is a process of negotiations between an employer and the representative of a unit
of employees (for example, a trade union) which is aimed at reaching an agreement about a
work-related disagreement.
● The collective bargaining/dispute resolution process can be seen as a four-cornered process.

PARTICIPANTS IN COLLECTIVE BARGAINING

Workplace forums
● are formal meetings
● between the representatives of labour union and employers

Bargaining council …
● is a group of representatives from both the labour unions and the employers' organisations in a
particular industry.
● established on a voluntary basis by employers and unions

A labour union or trade union

● is a workers' association
● that aims to help employees achieve good wages and working conditions from employers through
collective bargaining.

48
The Commission for Conciliation, Mediation and Arbitration (CCMA)
is an independent statutory body that is financed by the Department of Labour.

CCMA provides fair judgement and mediation between opposing parties in a working environment, as well as
information on good labour practice.

Conciliation
● is a voluntary process
● the Act provides for conciliation between the employer and the employee in respect of a dismissal

Mediation
● involves the services of an acceptable, impartial and neutral third party to assist the parties
● in dealing with their dispute and, where possible, to reach agreement.

In arbitration a judgment is made.

Labour Courts:

● The Labour Court handles labour disputes

● Such as those arising from unfair dismissals.
● The Labour Court falls under the jurisdiction of the Ministry of Justice.
● Appeals are made to the Labour Appeal Court.

The powers of the labour court

● decide settlement agreements
● order relevant parties to act in a certain manner
● change conditions laid down by the CCMA or bargaining council, and
● award compensation to an employee / employer.

Representation before the labour court

A legal representative who specialises in labour-related issues is allowed to act on behalf of the employer or
employee in a case or proceeding.
Eg a lawyer/ official of Department of labour needs to notify the labour court if he/she is planning to
act as a representative or stop representing the employer or employee.

49
 GRADE 10 ECONOMICS

PAPER 2

CONTEMPORARY ECONOMIC ISSUES – TERM 4

TOPIC CONTENT SCOPE AND DEPTH OF EXAMINABLE

CONTENT
13. Economic The reconstruction of the South Briefly discuss human resources
Redress African economy after 1994 as an
effort to redress the inequalities of
the past.
Human resources
Education
Briefly discuss natural resources
Training
Employment Equity
Natural resources
Land
minerals and energy
Fishing
Forestry
Briefly discuss capital
Capital
capital to acquire businesses
capital to acquire properties
working capital needs
Entrepreneurship
institutions promoting Briefly discuss entrepreneurship
entrepreneurship
government departments
formal education
the private sector
BEE
Democratisation of economic
procedures:
Briefly discuss the elements of
labour legislation
democratisation of economic procedures
public hearings
Nedlac
self-regulating bodies
Macroeconomic adaptations:
economic performance
employment
50
 income inequality
poverty Briefly discuss the elements of
stability macroeconomic adaptations

TOPIC 13: ECONOMIC REDRESS

MACRO ECONOMIC OBJECTIVES OF THE STATE IN SOUTH AFRICA'S ECONOMY

Government is constantly trying to achieve specific objectives to improve the standard of living of the
nation.

The government provides goods and services that are under supplied by the market and therefore plays a
major role in regulating economic activity and guiding and shaping the economy

MACRO ECONOMIC OBJECTIVES:

1. Economic growth
● Refer to an increase in the production of goods and services
● Measured in terms of Real GDP
● For economic growth to occur, the economic growth rate must be higher than
population growth
● Growth and development in a country benefit its citizens because it often leads to a higher standard of
living

Formula used:

Real GDP = Real GDP current year – Real GDP previous year x 100
Real GDP previous year

51
2. Full employment
● It is when all the people who want to work, who are looking for a job must be able to get a job
● High levels of employment are the most important economic objective of the government.
● The unemployment rate increased over the past few years
● Disabled persons have disadvantaged status in South Africa
● Informal sector activities must be promoted because it is an area where employment increase
● For employment to increase, production needs to increase

Formula: Employment rate = number of employed persons x 100

Total EAP 1

3. Exchange rate stability

● The economy must be managed effectively, and effective fiscal and monetary policy must be used to
keep the exchange rate relatively stable
● Depreciation and appreciation of the currency create uncertainties for producers and traders and
should be limited
● The SARB changed the exchange rate system from a managed floating to a free-floating exchange rate
system

52
4. Price stability
● Stable prices cause better results in terms of job creation and economic growth
● The SARB inflation target is 3 - 6%
● Interest rates, based on the repo rate are the main instruments used in the stabilisation policy
● The stable budget deficit also has a stabilizing effect on the inflation rate

53
5. Economic equity / Economic fairness
● Redistribution of income and wealth is essential
● South Africa uses a progressive income tax system
● Taxation on profits, taxation on wealth, capital gains tax and taxation on spending, are used to finance
free services
● Free social services are basic education; primary health and to finance basic economic services
● E.g. cash grants to the poor, e.g. child grants and cash grants to vulnerable people, e.g. disability
grants
● Progressive taxation means that the higher income earners pay higher/more taxation

6. Balance of Payments equilibrium

● The surplus or deficit on the trade balance should be minimised by limiting imports and promoting
exports
● It can be done by a foreign trade policy which focuses on export promotion, import substitution and
protection
● Domestic industries, with special focus on the secondary sector, must also be developed

54
55