CURRICULUM GRADE 10 -12 DIRECTORATE

NCS (CAPS)SUPPORT

STEP AHEAD LEARNER DOCUMENT

ECONOMICS TERM: 2, 3 & 4

GRADE 11

2023
1
 PAGE
No. TOPIC

3-11
1. Relationship Between Markets

11-21
2. Effect Cost and Revenue

21-27
3. Price Elasticity of Demand and Supply

27-33
4. Economic Growth

33-42
5. Economic Development

42-50
6. Money and Banking

51-60
7. Globalisation

60-68
8. Environment

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TOPIC 5: RELATIONSHIP BETWEEN MARKETS
RELATIVE PRICES
Relative price is the price of a product compared to another product. It’s expressed as a ratio between the prices of two
products or services. To obtain a relative price of a product, divide the price of one product by another. Let us take coffee,
for example. A tall cup of cappuccino costs R5, while one cup of coffee with almond milk costs R10.
R10 / R5 = 2:1
Here is a formula to calculate a relative price for the goods you need:
Pr=Px/Py
Where;
Pr is a relative price.
Px is the price of a first product.
Py is the price of a second product.
This ratio indicates that instead of buying a cup of coffee for R10, you could buy two tall cups of cappuccino.
Let’s take another example where the two goods will be houses and apartments. For instance, there is an increase in the
price of houses compared to apartment rents, which might indicate that houses are in great demand now. To meet the
demand and obtain the highest profit, a developer would withdraw funds from the apartment construction and relocate
them to the building of houses. As a result, there will be more houses than apartments.
Let’s imagine that the price of apartments is declining. It might be the outcome of an oversupply of apartment units. As a
result, developers would build fewer apartments and consider allocating resources to building houses.

To sum it up, a relative price is crucial as it helps companies allocate resources in the right way and receive the highest
revenue. Besides, it allows you to compare the prices and set preferences about specific products.

DEMAND AND SUPLY RELATIONSHIP

Relationship between product and factor market
Description
A factor market is a resource market that allows business firms to purchase factors of production such as land, labour,
and raw materials with which they produce goods and services.
A product market is selling finished products such as pizza. Likewise, the factor market would be selling pizza raw materials
such as cheese, olives, etc., used for making a pizza. Together, they help understand the demand, supply, and prices of
the finished products and factors of production.

SUBSTITUTES AND COMPLEMENTS

Substitute Products
Products that serve the same purpose as another product in the market.
What are Substitute Products?
Substitute products offer consumers choices when making purchase decisions by providing equally good alternatives,
thus increasing utility. However, from a company’s perspective, substitute products create a rivalry.

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The demand for substitute products shows a negative correlation. That is, consumption of one product reduces or replaces
the need for the other. For example, if you are moving from point A to B, you can only use a car, bicycle, or another mode
of transportation. However, the demand and pricing of substitute products exhibit a positive correlation. This means if the
price of one product increases, the demand for the other increases.
Complementary goods
Two goods that complement each other exhibit negative cross elasticity. The increase in the price of one product causes
a drop in the quantity demanded of the other product. For example, if pens are very expensive, people will opt to use
ballpoints. As a result, the demand for ink will drop drastically.

ACTIVITY:1
1.1 MULTIPLE CHOICE
1.1.1 The price quoted for a product and a signal to buyers of what they are expected to pay…..
A. Elasticity
B. Ceteris paribus
C. Opportunity cost
D. Absolute cost
1.1.2 A market where prohibited goods are exchanged is known as …….
A. Goods
B. Factor
C. Black market
D. Capital
1.1.3 The price of one good expressed in terms of another…..
A. nominal
B. index
C. percentage
D. relative price
1.1.4 The sacrifice that must be made of one item in favour of another, because of scarcity, is known as …
A. opportunity costs.
B. scarcity costs.
C. cost of living.
D. standard costs.
4x2 (8)

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1.2 Give one term for each of the following descriptions. Write only the term next to the question number
(1.2.1 – 1.2.4)
1.2.1 The demand relationship between goods that are used in conjunction with each other.
1.2.2 The price of a good or service, in terms of another good or service relative prices
1.2.3 The responsiveness of the quantity supplied of a product to a change in its price.
1.2.4. These goods that can be used in place of another good.
4x1 (4)
ACTIVITY: 2
2.1 Study the graphs below and answer the questions that follow.

Price
Price
D1 S
D
S1 D
S R 10
R 15
R5
R 10 D1
S1 S
D D
S
Quantity
0 120 160 Quantity
0 100 150
Tea
Coffee

2.1.1 Identify the quantity demanded for tea? (1)

2.1.2 What type goods is represented in the graph above? (1)
2.1.3 Briefly describe the term complementary goods. (2)
2.1.4 Explain the impact of an increase in coffee price in the tea market. (2)
2.1.5 How does the factor market relate with goods market? (4)

ACTIVITY 3
3.1 Study the extract below and answer the questions that follow.
Air conditioner Cooler
Price Quantity demanded Price Quantity demanded
R 22 000 100 R 13 000 200
R 28 000 60 R 13 000 500

3.1.1 identify the relationship between the price and quantity of complementary good? (1)
3.1.2 Name any ONE example of a pair of substitute goods. (1)
3.1.3 Briefly describe the term substitute goods. (2)
3.1.4 Why would the increase in the price of the substitute good like butter cause an increase in the demand of
margarine? (2)
3.1.5 How does the product market relate to the factor market? (4)

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ACTIVTY 4
4.1 Study the graphs below and answer the questions that follow.

Market for iPhone Chargers

Market for iPhones
Price
Price

D D
S S
R 15 000

R 11 000 e
R 11 000 e

S D S
D

0 150 250 Quantity 0 250 Quantity

4.1.1 Identify the kind of goods represented by graphs above? (1)

4.1.2 Name the original market price for i Phone in the graph above (1)
4.1,3 Briefly describe the term elastic demand. (2)
4.1.4 Why will the demand for i-Phone change if the price of i-Phones decreases? (2)
4.1.5 How does the coefficient of 0,8 impact the demand elasticity for the i Phone? (4)

4.2 With the aid of a neatly labelled graphs explain the impact of land shortage on the production of food.
(8)

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ACTIVITY 5
5.1 Study the graphs and answer the questions that follow.

5.1.1 Identify the price setter in the graphs above. (1)

5.1.2 Name the market price in the graphs above. (1)
5.1.3 Briefly explain the term average revenue. (2)
5.1.4 What would be the impact on the market if many firms leave this industry? (2)
5.1.5 How is the price of a perfect market influenced in the long run? (2 x 2) (4)

ACTIVITY 6
6.1 Study the graph and answer the questions that follow.

6.1.1 Identify the market structure above. (1)

6.1.2 What is the cost of the product in the graph above? (1)
6.1.3 Briefly describe the term marginal cost. (2)
6.1.4 Why is the marginal revenue curve (MR) in the perfect market the same as the demand curve? (2)
6.1.5 Determine whether this business makes a normal/ economic profit or a loss. Show ALL calculations.
(4)

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MARKET STRUCTURE: PERFECT AND IMPERFECT
Perfect vs. Imperfect Competition: An Overview
Perfect competition is a concept in microeconomics that describes a market structure controlled entirely by market forces.
If and when these forces are not met, the market is said to have imperfect competition.
While no market has clearly defined perfect competition, all real-world markets are classified as imperfect. That being
said, a perfect market is used as a standard by which the effectiveness and efficiency of real-world markets can be
measured.

Perfect Competition
Perfect competition is an abstract concept that occurs in economics textbooks, but not in the real world. That's because
it's impossible to attain in real life.
Theoretically, resources would be divided among companies equally and fairly in a market with perfect competition, and
no monopoly would exist. Each company would have the same industry knowledge and they would all sell the same
products. There would be plenty of buyers and sellers in this market, and demand would help set prices evenly across the
board.
In order for a market to have perfect competition, there must be:
• Identical products sold by companies
• An environment in which prices are determined by supply and demand, meaning companies cannot control the
market prices of their products
• Equal market share between companies
• Complete information about prices and products available to all buyers
• An industry with low or no barriers to entry or exit

ACTIVITY 1
1.1 Various options are provided as possible answers to the following questions. Choose the answer
and write only the letter (A–D) next to the question number.
1.1.1 The two large firms dominating an oligopolistic market is known as a ….
A duopoly
B pure oligopoly
C monopoly
D perfect market
1.1.2 Many firms selling heterogeneous products are referred to as …
A Monopolies.
B oligopolies.
C monopolistic competition.
D perfect competition.
1.1.3 The demand curve for a monopolistic competition is ...
A horizontal.
B vertical.
C downward-sloping.
D upward-sloping. 3x2 (6)

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1.2 Choose a description from COLUMN B that matches the item in COLUMN A. Write only the letter
(A-G) next to the question number (1.2.1 –1.2.5) in the ANSWER BOOK.

COLUMN A COLUMN B
1.2.1 Price maker A A market structure that sells a unique product with no close
substitute
1.2.2 Patent B Few large sellers dominating the market.
1.2.3 Long term C Goods and services are traded.
1.2.4 Oligopoly D It gives the producer the sole right to be a producer a particular
product
1.2.5 Monopolies E Period long enough to change all the inputs.
F The ability of a firm to control and set the market price
G Legal barrier to entry.
(5x1) (5)
1.3 Give one term for each of the following descriptions. Write only the term next to the question number
(1.3.1 – 1.3.5)
1.3.1 A period whereby only one factor of production can be varied
1.3.2 Demand curve for an oligopoly
1.3.3 When firms do branding, advertising, product differentiation, extend shopping hours
1.3.4 A platform where the quantities and prices of production inputs are negotiated.
1.3.5 Products that are not identical to other similar ones and have slight differences (5x1) (5)

ACTIVITY 2
2.1 Study the graph and answer the questions that follow

2.1.1 Identify the nature of demand curve in the graph above? (1)
2.1.2 Name the type of profit is indicated in the above graph? (1)
2.1.3 Briefly explain the term economic profit. (2)
2.1.4 Why must marginal cost be equal to marginal revenue for the profit to be maximized? (2)
2.1.5 How is the long-run equilibrium achieved in the above market? (4)

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ACTIVITY 3
3.1. Study the extract below and answer the following questions.

THREE MONOPOLIES THAT SOUTH AFRICA SHOULD END

Entities that are protected by legislation such as licences, patent rights and copy rights morph into
monopolies, resulting in limited competition. Time and time again, these legislated monopolies bank on
the taxpayer’s rands to bail them out of the repercussions of what seems to be chronic underperformance.
Below is a list of industries that are overshadowed by state-run monopolies that, if deregulated and
privatised, will yield far greater returns to the citizens of South Africa.
 Aviation
 Energy Supply
 Railways

www.mg.ca.za

3.1.1 Identify ONE of the three state monopolies implied in the extract. (1)
3.1.2 Name one barrier to entry mentioned the extract above. (1)
3.1.3 Describe the term natural monopoly. (2)
3.1.4 Why do South African state-owned monopolies fail to make economic profit? (2)
3.1.5 How do monopolies disadvantage consumers? (4)

ACTIVITY 4
4.1 Study the following information and answer the following information.

4.1.1 Identify the point on the graph that indicates optimum production (1)
4.1.2 Provide another alternative name for AR curve. (1)
4.1.3 Briefly describe the term deadweight loss. (2)
4.1.4 Why is the marginal revenue curve (MR) will always lie below the average revenue curve (AR)? (2)
4.1.5 Calculate the profit or loss of this market. Show ALL calculations. (4)

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ACTIVITY 5
5.1 Study the extract below and answer the questions that follow.

OLIGOPOLIES

A few large oligopolies dominate an oligopoly market, and they sell a homogenous and differentiated products,
i.e. just a few hand set manufacturing companies dominate the cell network of South Africa. The products are
similar and sold by a few companies. Moreover, the products are branded due to extreme competition, and
because there are huge long-term entry barriers, the companies make exorbitant profits. The competing
companies have an unusual interdependence, to the point that they almost operate in unison.

[Adapted from Markitects./co.za]

5.1.1 Identify an example of an oligopoly market in the extract above. (1)

5.1.2 Name the type of a product sold by a pure oligopoly. (1)
5.1.3 Briefly describe the term cartel. (2)
5.1.4 Why do firms collude with one another? (2)
5.1.5 How does branding assist oligopolies gain a bigger market share? (4)

ACTIVITY 6
6.1 Study the picture below and answer the questions that follow.

COLLUSION AMONG OLIGOPOLIES AT THE EXPENSE OF CONSUMERS

6.1.1 identify the market structure represented by the above illustration. (1)
6.1.2 Name one barrier to entry in this market structure (1)
6.1.3 Briefly describe the term non price competition (2)
6.1.4 Why is it more beneficial for firms to collude instead of engaging in competition? (2)
6.1.5 How does non price strategy positively impact oligopolies? (4)

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ACTIVITY 7
7.1 Study the picture and answer the questions that follow

Source:googlepictures.com
7.1.1 Identify the non-price competition strategy in the cartoon above/ (1)
7.1.2 What kind of profit can these competitors make in the long run? (1)
7.1.3 Briefly describe the term product differentiation (2)
7.1.4 Why is there interdependency between oligopolies? (2)
7.1.5 How can the two monopolistic competitors increase their market share (2x2) (4)

TOPIC 6: EFFECTS OF COST AND REVENUE

COSTS AND REVENUE
Introduction
• In a market economy, firms are responsible for the production of goods and services.
• To produce the goods and services, they combine the factors of production and they must pay costs.
• The cost of producing a good or service as well as the revenue that firms receive plays an important role in the decision
of firms to supply goods and services.

Objectives of businesses
When entrepreneurs start businesses, they may have different objectives in mind that they would like to achieve with the
business.• A business can strive for many objectives. • These objectives include:

=maximising the profit of the business.

= maximising the sales revenue.
= growing its target market share by decreasing the price of its product or improving the firm’s marketing campaign.

Profit is the positive difference between total revenue and total costs.
• Total revenue is the total income a firm receives from the sale of its products.
• Total revenue depends on the price the business receives for its products and the number of units it sells.
• Profit maximisation occurs where the positive difference between total revenue
and total cost is the highest or where marginal revenue is equal marginal cost.

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Cost and Profit
• Economists and accountants look differently at the concept of cost of production and therefore, calculate profits
differently.
• The main difference is that accountants only take explicit costs into account, while economist use the opportunity cost
principle.
• The reason for using the opportunity cost principle is that economists are interested whether resources are used
efficiently for the production of goods and services. • They make use of the concept of implicit cost.

Explicit costs
• Explicit costs are directly linked to business operations.
• Explicit costs are all expenses a business has to pay for the use of the factors of
production.
• Explicit costs include payments for labour (wages), materials, transport, rent payments, water, and electricity
payments.

Implicit costs
• Implicit costs are hidden costs.
• Measures the opportunity costs of the use of all self-owned resources in the production of goods and services.
• Implicit costs include an acceptable remuneration for the entrepreneur and the opportunity cost of the factors of
production.
• The entrepreneur needs to receive remuneration for his time and effort and for being willing to take the risk of starting a
business.
• Opportunity cost is the income from the next-best method of using the factors of production.
• For example, if an entrepreneur invests all of his money in a financial institution instead of using it to run a business, he
may earn 10% interest.
• To ensure that the entrepreneur keeps on employing his factors of production in his business – he has to make a profit
of at least more than 10%.
• The entrepreneur will keep running his business only if the profit is high enough to cover the opportunity cost.

Example
You run your own business. The total revenue from the business is R80 000 and the total cost is R35 000. If you were
not self-employed you could have earned R50 000 working for another firm.

According to the economist you are losing money by running your own business.
Better off financially if you sold your labour to another firm.

Short run costs

• A firm will combine a specific quantity of fixed inputs with a quantity of variable inputs in order to produce a specific
quantity of outputs.
• Fixed inputs are the factors of production and other intermediate inputs of which the quantity used remains constant as
the level of production increases.
• Variable inputs are the factors of productions and other intermediate inputs for which the quantity used increases as
the level of production increases.

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• In the short run at least one input is considered fixed – examples of such inputs are the size of the factory in which
production takes place and the machines that are used.
• Fixed inputs do not change in the short run.
• Variable inputs do change, for example electricity.
• The long run is defined as a period that is long enough so that all factors of production and intermediate inputs can
become variable.
• All the factors of production and intermediate inputs can be changed as the output level changes.
• In the long run, there are no fixed factors of production or other fixed intermediate inputs.

Total cost (TC)

• These are certain costs that a business always has to pay.
• A firm has fixed costs and variable costs.

Fixed costs (FC)

• Fixed costs remain the same even when the number of units produced changes –whether a business produces one
product per month or a thousand the fixed costs will stay exactly the same.
• Fixed costs include maintenance of a building, lease payments on equipment and machinery, rent or interest payments
for buildings and vehicles and insurance payments.
• The quantity produced in the short run will not influence fixed costs – stay constant.
• Fixed costs are also called overhead costs, indirect costs or unavoidable costs.

Variable costs (VC)

• Variable costs change with the number of units produced.
• Are those costs that change with the level of output.
• Represent the cost of variable inputs.
• As more of a good or service is produced – the variable cost increase.
• Variable costs include payments for raw materials, power/electricity, water and labour services.
• Variable costs are also called direct costs, prime costs or avoidable costs.

The total cost of production is the sum of the fixed costs and the variable costs.

Average cost (AC)

• Defined as the total cost per unit.
• Calculated to determine the cost of each unit that is produced.
• The following equation is used to determine the average cost:

• The average cost must consist of average fixed costs (AFC) and average variable costs (AVC).

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Average fixed cost (AFC)
• Fixed costs divided by the number of units produced.
• The following equation is used to determine the average fixed costs:

Average variable cost (AVC)

• Variable costs divided by the number of units produced.
• The following equation is used to determine the average variable costs:

Average total cost (ATC)

• Total cost divided by the number of units produced.
• The following equation is used to determine the average total costs:

Marginal cost (MC)

• Marginal cost can be defined as the additional or extra cost a firm has incurred by producing one additional or extra
unit of its product.
• Additional cost of producing one additional unit of a product.
• Marginal cost indicates by how much the total cost has increased if one additional unit of the product is produced.

Marginal cost and marginal revenue

• When the marginal cost is less than the marginal revenue – the business will produce more units of a product.
• When the marginal cost is more than the marginal revenue – the business will produce fewer units of a product.

Cost schedules
• All the different costs can be presented in a cost schedule.

Discussion
1. Fixed costs stay the same for all quantities.
2. Variable costs increase as quantity increases.
3. Total cost is the sum of the fixed costs and variable costs.
4. Average fixed cost is fixed cost divided by the number of units produced.

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Average fixed costs decrease as quantity increases – shows economies of scale (cost per unit decreases while quantities
produced increase)

5. Average variable cost is variable cost divided by the number of units produced.
Average variable costs first decrease and then increase – law of diminishing returns. The law of diminishing returns states
that as more of a variable input is added to a fixed input – the returns from the variable input decreases. For
example, when you double the number of bakers and double the ingredients, you will not be able to bake double the
number of bread, because you will still have only one oven in which you can bake the bread.
6. You can calculate the average total cost by dividing total cost by quantity.
7. Marginal cost is the change in the total cost of each consequent unit produced. Marginal cost first decreases,
reaches a minimum and then increases.

Fixed cost
The fixed cost curve is a horizontal line because fixed costs stay the same for
all quantities.

Variable cost and Total cost curve

• The variable cost curve begins at 0, and then slopes upwards from left to right and more sharply at the last quantities
produced, because it increases then with a higher percentage for each quantity produced.
• The total cost curve begins on the horizontal line of the fixed cost curve.
The curve then slopes upwards to the right. It has the same shape as the variable cost curve.

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Average and marginal cost curves
Discussion
•The average fixed cost (AFC) curve slopes downwards from left to right, because its value decreases for each quantity.
•The average variable cost (AVC) curve is roughly U-shaped, because it first decreases and then increases.
•The average total cost (ATC) curve has the same U-shape as the AVC curve. The curve will always be above the AVC
curve because the ATC curve is the sum of the AFC curve and AVC curve.
•The marginal cost curve first slopes downwards sharply, and then
gradually slopes upwards, because it is the change in total costs.

Long – run costs

• In the long run, all inputs can be changed and so all costs are variable.
• A business has enough time over the long run to buy a larger factory, more vehicles and more or improved machinery
and equipment.
• It is possible for the firm in the long run to adapt the size of its factory, and also to introduce new product ranges and
technology in its production processes.
Discussion
• The curve consists of several consecutive short-run ATC curves.
• Each time a business increases its size, it will have a short new run ATC curve.
• The long run average cost curve is also called the planning curve, because it reflects the increase in the level of
production as planned.
• The U-shape long-run average cost curve
• The word “scale” refers to the extent, size, or level of production that takes place.

Discussion
• The curve shows the three different phases of the LRAC.
• As long as the LRAC decreases, the firm experiences economies of scale.
• Eventually the firm will reach a stage where the LRAC remains constant as the level of production increases – at this
level of production the firm experiences constant economies of scale.
• If the firm expands its production capacity beyond a specific level – the LRAC will start to increase – this indicates that
the firm then experiences diseconomies of scale.

Economies of scale (increasing returns to scale)

• When the business produces more, the costs of the additional units will be lower than the previous units.
• Reasons for lower costs:
1. Fixed costs can be divided among more quantities.
2. Discounts can be received when buying in bulk.
3. Resources can be used more effectively.

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Constant returns to scale
• Constant returns to scale imply that when the business produces more – the additional units will have the same costs as
the previous units.
Diseconomies of scale
• When the business produces more – costs of additional units will be higher than those of the previous units.
• Diseconomies of scale happen when a business becomes difficult to control and coordinate because it is too large.
• For example, when a business expands it puts a lot of strain on management, the workforce and existing machinery.
• Workers must work overtime, and machines must run for longer periods per day.
Revenue calculations
• To achieve maximum profit, a business strives to keep its revenue as high as possible.
What is revenue?
Revenue is the total income that a firm generates when it sells goods or services to consumers.
Total revenue
• The total revenue (TR) is the total income that a firm receives from the sale of its products.
• It is calculated by multiplying the quantity sold by the price of the product.
• TR = Price X Quantity sold

Discussion
• The more units a business sells the more total revenue it earns.
• The total revenue curve slopes upwards from left to right.
Average revenue (AR)
• Average revenue is the total revenue divided by the quantity sold.
• The following formula is used to calculate the average revenue (AR):

• In the case of perfect competition all products will be sold at the market price.
• In this case the average revenue will be equal to the market price.
Marginal revenue
• Marginal revenue is defined as the change in total revenue if one additional unit
of a product is produced.
• It refers to the increase in total revenue if one extra unit of a product is sold.
• The following formula is used to determine the marginal revenue of a firm:

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Profits and losses
• Profit can be described as the positive difference between total revenue and total
cost of a firm.
• In order to make a profit, the total revenue of the firm must be greater than the
total cost of the firm.
• A firm will make a loss if the firm’s total cost is greater than its total revenue.

Different types of profits

1. Accounting profit (total profit)
• The difference between total revenue from sales and total explicit costs (payments made for the factors of production
and other inputs that are used in the production process).

2. Normal profit
• Is equal to the best return that the firm’s self-owned, self-employed resources could earn elsewhere.
• Normal profit includes the cost of the owner’s time and capital and is included in the firm economic costs.
• The minimum return that is required by the owners of a firm in order for them to continue with the business.
• This profit should be large enough to justify the continuation of the business.

3. Economic profit
• Is the extra profit that a firm makes.
• Is the profit that the business makes in addition to the normal profit.
• Sometimes called excess profit, abnormal profit, supernormal profit or pure profit.
There are two ways of determining when the profit of a firm will be at a maximum.

Discussion
• At the first quantity, the business will suffer a loss of -4.
• At the second quantity – break-even point – total revenue is equal to total cost.
• This is also the level at which the firm makes normal profits.
• The highest profit will be generated when the difference between total revenue and total costs is the most.
• At the fourth quantity, the business will make the highest profit of 6.
• The fourth quantity is the ideal level of production at which profits can be maximised – called maximum economic profit.

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 Total revenue and total cost curves

Discussion
• The losses and economic profits are represented by the vertical distance between total cost and total revenue.
• The two curves intersect at A – shows break-even point (normal profit).
• When the total cost curve is above the total revenue curve – loss/economic loss.
• Profit will be maximised when total revenue lies above total cost and where the vertical distance between total revenue
and total cost is the biggest.
• In order to maximise its profits – the firm must produce the quantity where the vertical distance between total revenue
and total cost is the greatest.

Profit maximisation: Marginal revenue and marginal cost

• When the marginal revenue is more than the marginal cost (MR>MC), the business will increase its level of production
because the added benefit is more than the added cost.
• When the marginal revenue is less than the marginal cost (MR<MC), the business will reduce its level of production
because the added benefit is less than the added cost.
• It will benefit a business to produce at the level of production where the additional income received from the additional
unit is equal to the additional cost of producing that unit (MR=MC).
• The business will want to produce at the level of production where the additional income received from the unit is equal
to the additional cost of producing that unit.
• To locate the level of production at which the business operates – where the marginal revenue (MR) curve intersects the
marginal cost (MC) curve.
• The position of the ATC curve – determine the profit or loss.

ACTIVITY 1
1.1 Study the table below and answer the questions that follow.
Output FC VC TC AVC MC
0 20 0 20 0 -
1 20 5 25 5 5
2 20 8 28 4 A
3 20 10 30 3.3 2
4 20 16 36 4 6

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1.1.1 Identify the cost that does not change from the table above. (1)
1.1.2 What is the total cost of producing the forth unit of output? (1)
1.1.3 Briefly describe the term average variable costs. (2)
1.1.4 Explain the impact of producing the third unit of output on average variable cost. (2)
1.1.5 Calculate the value of A. Show ALL your calculations. (4)

ACTIVITY 2
2.1 Study the table below and answer the questions that follow.
Price Quantity TR TC Profit
10 0 0 25 - 25
10 5 A 30 20
10 10 100 35 65
10 15 150 40 B
10 20 200 45 155

2.1.1 Identify the quantities where the business maximise the highest profit. (1)
2.1.2 What is represented by the – 25 in the profit column? (1)
2.1.3 Briefly describe the term total revenue. (2)
2.1.4 Why is there a value for total cost when production (quantity) is 0 (zero)? (2)
2.1.5 Calculate the values of A and B. Show ALL calculations. (4)

2.2 With an aid of a graph how does total cost (TC) and total revenue (TR) achieve profit maximization
in a perfect market. (8)

TOPIC 7: PRICE ELASTICITY OF DEAMAND AND SUPPLY

Degrees of price elasticity of demand / Types of price elasticity of demand
The demand for most goods and services is either elastic or inelastic.
The table below illustrate the different degrees and influence of each PEd. Factors determining the demand elasticity
for a product
• Nature of the good
• The type of a good or service affects the elasticity of demand.
• Essential goods for example, food, medicine has a inelastic demand. Price increases does not influence demand
because it is used for survival
• Comfort goods for example, washing machine, dishwasher, etc. has an elastic demand. The consumption thereof
can be postponed for a period of time.
• Luxury good for example Cars, TV, etc. has a relatively high elastic demand.

Availability of substitute goods and services

• The availability of substitute goods can affect demand elasticity.
• When a large number of close substitutes are available, the quantity demanded is highly sensitive to changes in the
price level and vice versa. (Price elasticity is very high).
• A small increase in the price levels of goods causes consumers to buy its substitutes.
For example, the demand for Chips is highly price-elastic because there is a large number of substitutes available. If the
price of one type chips increase, consumers will buy a cheaper substitute.

21
Price levels
• The price level of an item affects the demand for a good or service
• The price elasticity of demand can be used to measure the sensitivity of a change in the quantity demanded of a
good or service relative to a change in price

• For example, Luxury goods have a high price elasticity of demand because they are sensitive to price changes.
• For example; If the price of Televisions decreases more people who previously were unable to buy it will now
buy TV.

Income
• Income levels of consumers plays a role in the demand elasticity of goods and services.
• Different types of goods are affected by income levels.
• For example, inferior goods, such as generic products, have a negative income elasticity of demand because the
quantity demanded for generic products tends to fall as consumers' incomes increase

22
 Graph Value of PEd Classification Explanation
• %∆ in P < %∆ in Qd.
D D • Ex. an increase of 20% in P, will lead to a
decrease of 25% in Q.
Price Between
• An increase in P will lead to a decrease in
1 and
Elastic the revenue of the business. A decrease in P
demand will result in a big increase in Q, revenue of
(coeff >
businesses will increase.
1)
Quantity • Examples: close substitute (red/white
meat), luxury goods

• %∆ in P > %∆ in Qv.
D
• Ex. an increase of 20% in P, will lead to a
decrease of 10% in Q.
Between
• If P increases, consumer expenditure
Price 0 and 1
increases, revenue of business increases.
Inelastic demand
(coeff < • Examples: necessities (food), addictive
D
1) goods and services (cigarettes/TV), g + s with
Quantity no substitutes substitute (needles for needle
work), goods with different uses.

• %∆ in Qd = %∆ in P.
D • Ex. a change of 10% in P, will lead to a
change of 10% in Q.
Price Unit price elasticity • Consumer spending and income received
1 by businesses does not change, stays the
D
(Unitary demand) same.
• Examples: non-essential products
Quantity
(meat)

• %∆ in P will lead to no %∆ in Qd.

• Vertical line – irrespective what happens
D to price, demand will remain the same.
• As the price increase, consumer
expenditure will increase.
Price 0 Perfect inelasticity
• Example: insulin which is required by
diabetes sufferers need to survive – they will
Quantity
demand the same quantity irrespective the
price.

23
 D • %∆ in P will lead to an %∆ in Qd.
• Irrespective what happens to P, Qd will
remain the same.
• If P increases or decreases, Qd for the
Price
product will not increase.
Perfect elasticity
• Any ∆P will not lead to a bigger income or
consumer spending, demand = zero.
• Example – customers buy cd’s at a
Quantity concert, a competitor reduces the price, more
customers will buy from the competitor.

PRICE ELASTICITY OF SUPPLY

• Price elasticity of supply indicates how sensitive supply of a product is for a change in price.
• In other words, if there is a big increase in the price of a product, will there be a big or small change in the
quantity supplied.

Measuring price elasticity of supply

• PEs measures how responsive sellers (producers) are for a change in price.
𝑃𝑟𝑖𝑐𝑒 𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 𝑜𝑓 𝑠𝑢𝑝𝑝𝑙𝑦(𝑃𝐸𝑠) = % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒
• 𝑃𝐸𝑠 = % ∆𝑄𝑠
% ∆𝑃
• Example: o Assume the price (P) of a product increase from R4 toR5 and the quantity supplied change from
200 to 260 units (Qs).

o Step 1: 𝑷𝒓𝒊𝒄𝒆 𝒄𝒉𝒂𝒏𝒈𝒆 = 𝐶 𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒 𝑝𝑟𝑖𝑐𝑒 × 100

= × 100 = 𝟐𝟓%

o Step 2: 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚 𝒄𝒉𝒂𝒏𝒈𝒆 = 𝐶 𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 × 100

= × 100 = 𝟑𝟎%

o Step 3: 𝑷𝑬𝒔 = % % ∆∆𝑄𝐴𝑃 = 3025%% = 1.2

Degrees of price elasticity of supply (types of price elasticity of supply) The table below illustrate the different
degrees and influence of each PEs.

24
 Value of Explanation
Graph Classification
PEs
• %∆ in P < %∆ in Qs.
S
• Ex. an increase of 10% in P, will lead to an
increase of 30% in Qs.
Price
Between 1
Elastic supply
S and

Quantity

S • %∆ in P > %∆ in Qs.
• Ex. an increase of 10% in P, will lead to an
increase of 5% in Qs.
Between 0
Price Inelastic supply
and 1
S

Quantity
S • %∆ in Qs = %∆ in P.
• Ex. an increase of 10% in P, will lead to an
increase of 10% in Qs.
Unit price
Price 1
elasticity
S

Quantity
• %∆ in P will lead to no %∆ in Qs.
S • Vertical line – irrespective what happens to
price, supply remains the same.
Perfectly inelastic • As price increases, no change will occur in
Price 0
supply quantity supplied.

Quantity

• %∆ in P will lead to %∆ in Qs.

• Producers will offer any quantity at price P.

Price S
Perfect elasticity

Quantity
Description of income elasticity of demand
Income elasticity of demand refers to the sensitivity of the quantity demanded for a certain good to a change in the real
income of consumers who buy this good.
The formula for calculating income elasticity of demand is the percent change in quantity demanded divided by the percent
change in income. With income elasticity of demand, you can tell if a particular good represents a necessity or a luxury.

25
ACTIVITY 1
1.1 Various options are provided as possible answers to the following questions. Choose the answer and
write only the letter (A–D) next to the question number
1.1.1 When the percentage change in quantity supplied is greater than the
percentage change in price it refers to …
A. price elastic supply
B. price inelastic supply
C. unitary elasticity of supply
D. zero elasticity of supply

1.1.2 The situation in which the quantity of a good or service is unaffected when the price of that good or service
changes is known as ……
A inelastic
B elastic
C elasticity
D unitary elastic 2x2 (4)

1.2 Choose a description from COLUMN B that matches the item in COLUMN A. Write only the letter (A-I)
next to the question number (1.2.1 –1.2.10) in the ANSWER BOOK.
COLUMN A COLUMN B
1.2.1 Relative elastic demand A States that an increase in price leads to an increase in quantity supplied and
a decrease in price results in a decrease in quantity supplied,
1.2.2 The law of demand. B The cost of producing one extra unit of output, it can be found by calculating
the change in total cost when output is increased by one unit.

1.2.3 Marginal cost C Is an economic term referring to the change in behaviour that buyers and
sellers have in response to a price change for a good or service
1.2.4 Elasticity D States that an increase in price results in a decrease in quantity demanded
and a decrease in price results in an increase in quantity demanded.

1.2.5 The law of supply E When the proportionate change produced in demand is greater than the
proportionate change in price of a product
5X1 (5)

1.3 Provide the economic term/concept for each of the following descriptions. Write only the term/concept
next to the question number. No abbreviations, acronyms and examples will be accepted.
1.3.1 When there is no change produced in the demand of a product with change in its price
1.3.2 A change in price that causes the same change in quantity demanded.
2X2 (2)

26
ACTIVITY 2
2.1 Study the graphs below and answer the questions that follow.

PRICE ELASTICITY OF DEMAND

Price

R 80

R 65
D

0 50 110 Quantity

2.1.1 Identify the quantity of goods demanded when the price increases. (1)
2.1.2 Name the type of price elasticity of demand depicted in the above graph. (1)
2.1.3 Briefly describe the term perfectly elastic demand. (2)
2.1.4 Briefly explain the durability of the product as a determinant of price elasticity of demand. (2)
2.1.5 Calculate the price elasticity of demand from the above graph. Show ALL calculations. (4)

2.2 Why is the price elasticity of demand important to the producer? (8)
2.3 How does substitutes influence the price elasticity of demand? (8)
2.4 Examine the importance of the relative prices in the economy. (8)

ACTIVITY 3
3.1 Study the graph below and answer the questions that follow.

PRICE ELASTICITY

Price
S

R 50

R 40

Quantity
0 20

27
3.1.1 Identify the type of price elasticity in the diagram above. (1)
3.1.2 What is the quantity offered for sale in the graph? (1)
3.1.3 Briefly describe the term price elasticity of supply. (2)
3.1.4 Why is the supply curve shaped vertically? (2)
3.1.5 How are relative prices used in the economy? (4)

ACTIVITY 4
4.1 Study the extract below and answer the questions that follow.
How Would Price Elasticity of Supply for Nuclear Energy be?
Price elasticity of supply for energy generated from nuclear power plants is likely to be quite low, likely below 1.

One of the factors, influencing price elasticity of supply is time taken to fill demand – building a new power plant takes
a long time, suggesting that an increase in price cannot necessary be met by a quick increase in quantity supplied.

www.blombeg.ca.za

4.1.1 Identify the degree of price elasticity that is equal to 1. (1)

4.1.2 Give the formula used to calculate PES. (1)
4.1.3 Briefly describe the term supply. (2)
4.1.4 Explain the effect of decreasing relative prices on the people’s standard of living. (2)
4.1.5 Why is the price elasticity of supply important? (4)

4.2 Briefly discuss inelastic supply and unitary elastic supply as a degree of price elasticity of supply, without the use
of a diagram. (8)

28
TOPIC 8 ECONOMIC GROWTH AND DEVELOPMENT

WEALTH CREATION PROCESS

Definition of wealth
Is the stock/value of assets accumulated overtime or owned by individuals, businesses and government

Income
Is the amount of money earned by factors of production for participating in economic activities?

Sources of wealth
• Inheritance
• Savings
• Gifts

Methods to create wealth

Wealth creation is the process of increasing your stock of assets
Methods:
• Education and training
• Savings
• Investment

DISTRIBUTION
Income distribution
Shows how the total income is distributed among its population, this may be even or uneven.
Wealth distribution
It is unevenly distributed in all societies, but more obvious in free-market economies than in centrally planned systems
Inequality
Means there is a big difference between income and levels of wealth of the richest and the poorest households/countries
Quintile ratio
Is used to measure income inequality between different groups of people. It is obtained by dividing the income of the
highest 20% by the income the lowest 20%
Gini Coefficient
Is a statistic that can be used to measure the degree of inequality in the distribution of income, is calculated using the
Lorenz curve
Lorenz curve
Is a graphical representation of how uneven the distribution of income /quintile distribution of income?
Redistribution methods
• Taxation
• Social security programmes/grants
• Minimum wage
• Free benefits
• Subsidised services
• Job creation programmes
• Land redistribution
• Redress policies
• Reducing discrimination

29
ECONOMIC GROWTH
Definition
Is the increase in the productive capacity of the economy/country over a certain period of time?
It is measured by the percentage change in the real GDP in a certain period, usually a year
It is important because it provides citizens with more job opportunities.
Calculation
Nominal GDP – doesn’t give a true picture of economic growth, as the increase in general price level (inflation) is not
taken into account/considered.
- Formula: output multiplied by average price
Real GDP – is GDP after the increase in the general price level has been taken into account, GDP deflator index is used
to remove effects of inflation (adjusted to inflation)
The real GDP cannot be used to determine income distribution in a country, but must be divided by the size of the
population to obtain real GDP per capita
An increase in real GDP indicates economic growth, while increase in real GDP per capita indicates economic
development (increase in the standard of living of the population)

- To calculate the GDP deflator:

GDP deflator = average price for current year X 100
average price for the base year
Once the GDP deflator has been calculated, real GDP can be calculated

Real GDP = nominal GDP X 100

GDP deflator
Importance
Benefits of economic growth
• Reduce unemployment
• Reduce poverty
• Income increase
• Increase in government revenue
• Reduce government expenditure
Methods
• Increase in productivity -Especially labour productivity
• The availability of production factors- All four factors of production
• Increase in investment- Capital widening and capital deepening
• Technological development- Inventions, scientific discoveries and innovation
• Improvement in infrastructure
Constraints on growth
• Lack of appropriate skills
• Low levels of entrepreneurship
• Too many regulations
• Shortage of infrastructure
• Lack of management skills
• Poverty and unemployment
• High value of the rand
SA’s recent growth experience
By world’s standards, the economic growth rate in South Africa is fairly low Real GDP did increase when compared with
years before 1994. The global recession of 2009 had a great impact on South African economy.

30
STANDARD OF LIVING
Definition
The quality of life of an individual/household (welfare)
Measured by the quantity of goods and services available to the population of a country on average.
Economic growth is essential for an improvement in standard of living
Population size
The standard of living of the population of a country is influenced by the size of the population
Per Capita income
Is the average income received by every person in the country?
Is calculated by dividing the real GDP by the total population.
The standard of living is measured in terms of the total income earned per capita, this method is useful for comparing
standard of living between countries.

Concepts Description

Wealth Is the stock/value of assets accumulated overtime or owned by individuals, businesses and
government
Income Is the amount of money earned by factors of production for participating in economic
activities?
Economic Growth Is the increase in the productive capacity of the economy/country over a certain period of
time?
It is measured by the percentage change in the real GDP in a certain period, usually a year

Economic Development Is an increase in of the standard of living of people in a country? It includes the
improvement of health, education, infrastructure and living conditions in general

Income distribution Shows how the total income is distributed among its population, this may be even or
uneven.

Wealth distribution It is unevenly distributed in all societies, but more obvious in free market economies than in
centrally planned systems

Lorenz Curve Is a graphical representation of how uneven the distribution of income /quintile distribution
of income

Land Restitution Policy that consists of the state buying land from the present owners and giving it to those
who had their land confiscated during the apartheid years.

Real GDP is GDP after the increase in the general price level has been taken into account, GDP
deflator index is used to remove effects of inflation (adjusted to inflation)

Nominal GDP It doesn’t give a true picture of economic growth, as the increase in general price level
(inflation) is not taken into account/considered.

31
ACTIVITY 1
1.1. Various questions are provided as possible answers to the following questions. Choose the correct
answer and write only the letter (A. – D.) next to the question number (1.1.1 -1.1.5) in the answer book, for
example 1.1.6 B.

1.1.1. The curve that measures inequality and distribution between households is known as a ………………..
A. Gini coefficient
B. capital
C. Lorenz curve
D. productive inefficiency

1.1.2. Real GDP measures the …………………

A. Standard of living
B. Economic growth
C. Economic development
D. Income distribution

1.1.3. A policy aimed at increasing the ownership of agricultural land of black people in the economy is called …
A. Land reform.
B. Agricultural land.
C. Land redistribution.
D. Information

1.1.4. The standard of living of a population is best described by the………………..

A. Per capita income
B. Low economic growth
C. Decrease in expenditure
D. Secondary education

1.1.5. South Africa uses a ………………. taxation system

A. Proportional
B. Progressive
C. Regressive
D. All of the above 5X2 (10)

1.2 Choose a description from COLUMN B that matches the item in COLUMN A
COLUMN A COLUMN B
1.2.1 Progressive taxation A A stock of capital assets of households, representing money earned and saved .

1.2.2 Economic growth
1.2.3 Residual income
1.2.4 Wealth
1.2.5 Absolute poverty
B When people live below a certain income threshold and cannot afford certain
basic goods and services.
C Is a graphical representation of the distribution of income /quintile distribution of
income.
D A wage rate set by the government below which no employer can pay their
workers and is set above the equilibrium.
E Is the return of land to those who have lost it due to discriminatory laws.

32
 1.2.6 Minimum wage
1.2.7 Land Restitution
1.2.8 Per capita income
1.2.9 Gini coefficient
1.2.10 Lorenz curve
F Income per person or per head of the total population
G Method used to measure income inequality.
H A system in which those who earn more pay more.
I Is the increase in the productive capacity of the economy
J It captures errors and omissions that occurs during the calculation of national
income
K The price of goods and services that you pay to maintain an average standard of
living.
10X1 (10)

1.3 Give one term for each of the following descriptions. Write only the term next to the question number
(1.3.1 – 1.3.4)
1.3.1 The quality of life of an individual or a household
1.3.2 The relationship between input and output obtained with one unit of inputs per worker.
1.3.3. Measures the number of years a newborn baby or a person is expected to live
1.3.4. The process that focusses on the improvement of the standard of living of the inhabitants of the country
4X1 (4)

ACTIVITY 2
2.1 Study the picture below and answer the questions that follow.

Source www.cartoon. com

2.1.1 Identify the cause of inequality in the above information. (1)

2.1.2 Name ONE method used by government to reduce inequality. (1)
2.1.3 Briefly describe the term residual income. (2)
2.1.4 Explain the impact of poor education on the standard of living (2)
2.1.5 How is wealth created through savings? (4)

33
ACTIVITY 3
3.1 Study the graph below and answer the question that follow.

Source: www.investopedia.com
3.1.1 Identify a country with the most unequal distribution from the graph above (1)
3.1.2 What is represented by letter C in the above graph? (1)
3.1.3 Briefly describe the term Lorenz curve. (2)
3.1.4 What does a Gini coefficient of zero mean? (2)
3.1.5 Calculate the value of Gini coefficient. show all calculations 2×2 (4)

ACTIVITY 4
4.1 Study the Graph below and answer the question that follow.

4.1.1 Identify the period in which growth in real GDP is the lowest. (1)
4.1.2 Name an economic indicator that is used to measure economic growth. (1)
4.1.3 Briefly describe the term economic growth. (2)
4.1.4 Explain factors that lead to increased economic growth. (2)
4.1.5 Why is South Africa experiencing low economic growth rate? (2 x 2) (4)

34
ACTIVITY 5
5.1 Study the picture below and answer the questions that follows

Source www.cartoon .com

5.1.1 Identify the cause of poverty. (1)
5.1.2 Name one factor that determine the standard of living. (1)
5.1.3 Briefly describe the term standard of living. (2)
5.1.4 Why is South Africa regarded as a country with the highest inequality in the world? (2)
5.1.5 How can high population growth influence the standard of living? (2 x 2) (4)

ACTIVITY 6
6.1 Differentiate between economic growth and economic development. (8)
6.2 Discuss the importance of economic growth (8)

ACTIVITY 7
7.1 With the aid of a well labelled graph explain a country with high inequality (8)
7.2 Examine the impact of COVID-19 impact on wealth creation (8)
7.3 How should higher education inequalities be addressed to improve the standard of living in
South Africa? (8)

ACTIVITY 8
• Discuss the methods used by the government to redistribute income and wealth (26)
• Analyse the causes of uneven distribution of income in South Africa. (10)

35
TOPIC 9 ECONOMIC DEVELOPMENT
Concepts
CONCEPTS DESCRIPTION
Economic growth
Economic development
Life expectancy
Per capita income
Literacy rate
underemployment
Quintile ratio
Indigenous knowledge system
Head count index
The increase in productive capacity of a country in particular period.
An improvement in the standard of living and well-being of the population.
The number of years a person is expected to live.
Is the measurement of average income per person in a specific country
The percentage of adults who can read and write in one language
People who are working less than they are able.
it is the ratio of the income of the poorest 20% of the population compared to
the richest 20
Traditional local knowledge and technologies that developed over time around
specific conditions.
Ratio of population with an income living which is less than the poverty line
income
36
ECONOMIC DEVELOPMENT
Learners should cover the following
Compare: Economic Methods of Common characteristics of Developing strategies
growth and economic Development developing countries
development
Low standard of living Human resources
Low levels of productivity High Natural resources
population growth Capital
and dependency burdens High Technology
levels of unemployment Entrepreneurship
Dependence on the primary
sector
Deficient infrastructure
South Africa’s Indigenous
endeavours knowledge
systems

Meeting basic needs

Developing the economy
Developing human
resources
Advancing freedom of
choice Government’s
economic interventions

Vocabulary List
Learners must first give a description of the following words in their notebook:
Economic growth Underemployment
Economic development Open unemployment
Real GDP Human resources
Real per capita GNI Per Capital Formation
capita income Gini NGP
coefficient: NDP
Quintile ratio SDI
Poverty line income IDZ
Head count index SETA
Literacy rate IKS
Dependency burden

COMPARE ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT

Economic growth is a prerequisite for economic development!

ECONOMIC GROWTH ECONOMIC DEVELOPMENT

Exists when there an increase in real GDP.
Implies an increase in the capacity of the economy to
produce more goods and services.
The emphasis is on increasing GDP, perfect markets,
maximum profit, etc.
Exists when there is an increase in real per
capita GNI (GDP)
Implies an increase in the capacity of the population
to produce more goods and services.
The emphasis is on higher standards of living, more
employment, less poverty, etc.

37
DEVELOPMENT METHODS
• Attracting new businesses: more new businesses create employment opportunities that promote diversity and
growth of the local economy.
• Building community capacity: by developing their own skills, people will be in a position to make the most of
available opportunities.
• Expanding local markets: the local government should expand and promote local products and markets (export
promotion and import substitution)
• Use of outdated facilities: be transformed so that they can meet the new needs of the local community.
• Promoting direct investment: government needs to upgrade infrastructure and build new facilities to create
more jobs
• Natural resources: must be used effectively to improve the standard of living of local people.
• Attract new businesses: more new businesses create jobs that promote diversity and growth of the local
economy.
• Build community capacity: by developing their own skills, people will be able to make the most of available
opportunities.
• Expand local markets: local government must promote and market local products (export promotion and import
substitution)
• Use of obsolete facilities: must be converted so that it can meet new needs of local community.
• Promote direct investment: enable government to upgrade infrastructure and build new facilities to create more
jobs.
• Natural resources: must be used effectively to improve the standard of living of local residents.

COMMON CHARACTERISTICS OF DEVELOPING COUNTRIES

Low living standards
Low per capita income: about 80% of the world's population is living on less than 1/5 of the world's income.
Low growth of per capita income: developing countries have a slower growth of per capita real GNI than developed
countries
Greater unequal distribution of income, income gap between rich and poor in the same country is generally greater in
developing countries than developed countries.
Income inequality is measured by the
Gini coefficient: the bigger the co-efficient the more the inequality.
Quintile ratio: it is the ratio of the income of the poorest 20% of the population compared to the richest 20%.
More poverty: low living standards is an indication of poverty.
Poverty line income: People are poor when they earn an income that is less than the amount required to satisfy their
basic needs.
Head count index: It is used to indicate the magnitude of poverty. This is the % of people with an income living which
is less than the poverty line income
Low life expectancy: many people in developing countries are fight a battle against malnutrition, diseases etc.
Low levels of education: low living standards are related to low levels of education.

38
Adult literacy rate refers to the % of people aged 15 years and above who can read, write and speak.
Literacy rates in developing countries are lower than in developed countries.

Low levels of productivity

Levels of labour productivity (output per worker) in developing countries are extremely low compared to developed
countries.
This is mainly due to the lack of management, lack of education and training and malnutrition during childhood.

High population growth and dependency

Population growth: In developing countries, birth rates are very high and mortality low due to availability of medicines
Dependence burden: children under the age of 15 represent almost 29% of the population. People over 64 years are
also dependent on family.

High levels of unemployment

Underemployment: people who are working less than they are able.
Open unemployment (visible unemployment): people who are able to work, want to work but cannot find work

Dependence of the primary sector

Agriculture: Most people in developing countries live and work in rural areas.
Exports: Primary goods e.g., agricultural products, minerals etc. are the main export goods.

Deficient (Poor) infrastructure

Deficient infrastructure in developing and especially low-income countries.
The economies of developing countries are held back through deficient infrastructure. The governments did not invest
enough in the following:
• Physical infrastructure like transport, communication, electricity and water •
• Social infrastructure like health, education and training
• Financial infrastructure like the banking system.

DEVELOPMENT STRATEGIES / METHODS

Human resources:
Refers to the labour force.
Are the most important asset of a country
Can be improved in various ways:
• Education and training: Improvement in literacy levels contribute to economic growth and
development.
• Health: Healthy people are more energetic and productive and contribute to economic development.
• Population planning: Unplanned families are often the main cause of poverty and unemployment.
• Motivation: Human resources need to be motivated and must strive towards self-improvement.

Natural Resources:
Land: Land ownership is a strong incentive to improve the quality of the soil.
Minerals and fuels: The establishment of secondary industries which can process the raw primary products, and
hence add value to labour.

Entrepreneurship:
For a country to be develop, entrepreneurship should be
encouraged.
A country can only perform at its best if managers / owners are willing to take risks.

39
Capital:
When a country increases their stock of capital, it is known as capital formation.
Capital formation can be increased by:
• Increase voluntary savings.
• Increase forced savings through taxation.
• Attract foreigners to invest
• Negotiate foreign loans from development institutions such as the World Bank

Technology:
Technological development makes countries more competitive.
The expansion of communication, e.g., computers can improve productivity in developing countries. Science training
must be included in school curricula to train technicians and engineers.

SOUTH AFRICA'S ENDEVOURS

POLICIES
SA is a developing country and since 1994 the government followed an economic development policy:
• The Reconstruction and Development (RDP) was the original route map.
• This was followed by GEAR, which was reinforced by ASGISA.
• New Growth Path (NGP) was accepted and established in 2010, focusing on economic growth and job creation.
• National Development Plan (NDP) was announced by the Planning Commission in 2011. Focus on the
challenge of reducing poverty and income inequality in South Africa.

SATISFACTION OF BASIC NEEDS

All people have certain basic needs without which life would be impossible:
Food, clothing, and housing
• SA's social security grants is the main source of income for those (people) who are in need.
• The poorest 20% of the population received the largest portion of these grants.
• Many households receive benefits in kind.
• Free water and electricity, housing and school feeding.
• Access to clean water, energy, sewerage system, roads, and housing has improved the quality of life of millions
of people.

Health Care
• The government focus on primary health care.
• Poor people receive free hospitalization, medicines, etc.

DEVELOPMENT OF THE ECONOMY

Regional Development
• SDI's (Spatial Development Initiatives) - is spatial areas that offer particular advantages to mining, manufacturing
and other businesses.
• The advantages include the presence of existing or potential infrastructure and specialization of products and / or
services.
• Businesses in the SDIs can also qualify for a variety of financial assistance, which, for example. based on
establishment costs, number of people employed and skills training.
• SDIs are regarded as regional development programs because provincial and local authorities are responsible for
them.
❖

40
Export Industries
• IDZ (Industrial Development Zones) - it is industrial areas that were created for a specific purpose, physically
enclosed and linked to an international airport.
• Five (5) IDZ has been already approved: Coega (steel and auto components) East London (motor vehicles)
Gauteng (high tech and light industries) Richards Bay (coal) and Saldanha Bay (steel).

International competition / Global competitiveness

• IMS (Integrated Manufacturing Strategy):it was established in 2001.
• SA's businesses need to compete to succeed internationally, and therefore the above plan was established.

a) Development of human resources

• Economic development emphasizes an increase in the capacity of the population to produce more goods and
services. e.g., After 1994 education were served equally for all.
• SETAs were established to facilitate vocational and technical training.

b) Promoting /Advancing freedom of choice

• For real development, people should be free to choose (e.g., their jobs and careers) • The Employment
Equity Act (no. 55 of 1998) prohibits unfair discrimination.
• The Consumer Affairs Act (No. 71 of 1988) protects the rights of consumers.

c) Government intervention in the economy

The South African government's intervention in the economy for three reasons:
• To strengthen the functioning of markets
• To promote economic growth and development
• To ensure a redistribution of income and wealth

Analyse the marginalised people in South Africa and explain the effects of marginalisation. Marginalisation
describes both a process, and a condition, that prevents individuals or groups from full participation in social, economic,
and political life. As a condition, it can prevent individuals from actively participating. There is a multidimensional aspect,
with social, economic, and political barriers all contributing to the marginalisation of an individual or group of individuals.
People can be marginalised due to multiple factors, sexual orientation, gender, geography, ethnicity, religion,
displacement, conflict or disability. Poverty is both a consequence and a cause of being marginalised.

THE IMPORTANCE OF INDIGENOUS KNOWLEDGE SYSTEMS IKS…

Are a complex set of knowledge, skills, and techniques that exist and have been developed around
specific conditions in populations and communities, indigenous to a particular area.

41
IKS IS IMPORTANT FOR:
ECONOMIC DEVELOPMENT PROBLEM – BOTH LOCAL THE LIVELIHOOD OF
DEVELOPMENT PROCESSES ON SOLVING COMMUNITIES THE POOR
3 LEVELS IKS STRATEGIES AND THE The lives of the rural poor
Rural communities address poverty in FOR LOCAL GLOBAL depend on
depend on IK for local communities, COMMUNITIES COMMUNITY specific skills and
survival. and is recognised, Local communities The impact of knowledge essential
valued and Utilise IK to address sustainability could be for survival
appreciated national many problems that effective if they
and internationally. concern them, E.g. adapted to local
pest and weed indigenous practices.
control.

ACTIVITY 1
1.1 Various options are provided as possible answers to the following questions. Write down the question
number (1.1.1 to 1.1.5) choose the answer and write the letter (A-D) next to the question number in the
ANSWER BOOK.

1.1.1 A measure of the quantity of goods and services available to the population of a country is called ……….
A.) economic growth
B.) standard of living
C.) wealth
D.) productivity
1.1.2 An increase in the productive capacity of the economy so that greater value of goods and services is produced
is known as…….
A.) economic development
B.) privatization
C.) industrialization
D.) economic growth
1.1.3 The percentage of adults who can read and write effectively at least in one language is called …….
A.) mortality rate
B.) literacy rate
C.) repo rate
D.) growth rate
1.1.4 The condition that exist when the income of a household is too low to be able to afford basic needs is known as
……..
A.) poverty
B.) inequality.
C.) gini-coefficient
D) unemployment.
1.1.5 Knowledge that is unique to a given culture or society is called ……...
A.) intellectual property rights
B.) indigenous knowledge system (IKS)
C.) good governance
D.) entrepreneurship.
(2x5)10

42
1.2 Choose a description from COLUMN B that matches an item in COLUM A. write only the letter ( A-F) to the
question number (1.2.1- 1.2.5) in the ANSWER BOOK, for example 1.2.3 D
COLUMN A COLUMN B

1.2.1 Labor force A. Increasing the stock of capital in the country.

1.2.2 Dependency burden B. Implementing programmes whereby current needs are met
1.2.3 Human development index without endangering resources for future needs.
1.2.4 Economic development C. An improvement in the standard of living of the population
1.2.5 Capital formation D. People between the age of 15 and 64 who are employed and
seeking employment.
E. A measure showing the number of people to be supported by the
working population.
F. A statistic used to rank country’s average achievements in three
basic aspects: health, knowledge and standard of living.
(5X1) (5)
1.3 Give ONE word for each of the following descriptions. ABBREVIATIONS and ACRONYMS will not be
accepted.
1.3.1 The number of years a person born in a particular country is expected to live.
1.3.2 Poorly developed infrastructure in developing countries.
1.3.3 A government programme launched in 2004 to provide temporary work for the unemployed.
1.3.4 A policy that was launched in 1994 to addressing poverty alleviation and the shortcomings in the provision of
services across the country. 4X1 (4)

ACTIVITY 2
2.1.2 Name two characteristics of developing countries. (2)
2.1.2 How does low literacy rate affect the productivity of the country? (2)

2.2 Read the extract below and answer the questions that follow.
Micro developers open doors and windows for solving SA’s housing problem.

SA’s urban population is expanding, creating a growing need for housing. In addition, people are moving away from
rural areas, where poverty and unemployment are extremely high, towards metros and cities, where there are more
economic opportunities. If they get “to town”, they usually settle on shacks in informal settlements or cheap rental
accommodation. If they qualify for government-provided Reconstruction and Development Programme (RDP), they
will end up remaining on the outskirt of the city. The majority of RDP beneficiaries are so far from economic centres
that they find it too costly to even look for employment opportunities. It would therefore be extremely beneficial, for the
poor and for the country, if the poor could access accommodation closer to centres of employment and
entrepreneurship.

Source: Business day2023

2.2.1 Identify a development strategy mentioned in the above extract. (1)

2.2.2 Name one service that is provided by government as part of RDP. (1)
2.2.3 Briefly describe the term population growth. (2)
2.2.4 Explain the main aim of Reconstruction and Development Programme (RDP) (2)
2.2.5 How would higher unemployment result to chronic poverty? (4)

43
ACTIVITY 3
3.1 Study the cartoon below and answer questions that follow.

Source: google/cartoons
3.1.1 Identify the challenge faced by developing countries in the above cartoon. (1)
3.1.2 Name ONE cause of youth unemployment in South Africa. (1)
3.1.3 Briefly describe the term labour productivity. (2)
3.1.4 What strategies can be used by government to reduce unemployment in the country? (2)
3.1.5 How does low life expectancy affect the human development index of a country? (4)
3.2 Differentiate between economic growth and development. (8)
3.3 How successful is RDP in South Africa? (8)

ACTIVITY 4
4.1.1 Name two factors that influence income. (2)
4.1.2 What effect does low standard of living have on the economy. (2)

4.2 Read the extract below and answer the questions that follow
NDP 2030 Targets: SA’s targets vs. reality
The new development plan: vision 2030(NDP) was adopted by government in 2012.the plan was designed to
reduce inequality and eradicate poverty in South Africa by aiming to reach key goals meant to develop South
Africa.
However, based on key targets in the NDP 2030 that have not been met to date, picture-perfect South Africa
envisioned in the NDP’s vision 2030 may not be realized on time. The national planning commission (NCP), an
agency tasked with the strategic planning to NDP, realized a report in 2030 with recommendations to remedy
issues that may deter the NDP’s 2030 targets.
Adapted in Web// Feb 2023 SA News

4.2.1 Identify developmental strategy in the above article. (1)

4.2.2 Name the government department that is responsible for skills development in South Africa. (1)
4.2.3 Briefly describe the term economic development. (2)
4.2.4 Explain the negative impact of shortage of skilled labour force in the country. (2)
4.2.5 How would lack of productive resources in a country lead to poverty? (4)

44
 ACTIVITY 5
5.1 Study the picture below and answer the questions that follow.
Reconstruction and development programme has set out to the correct the service provision backlogs.

In areas of South Africa where electricity had traditionally not yet been provided, state subsidized solar panels and
solar powered hot water cylinders have been installed on houses to harness the power of the sun to electricity houses.
Source: google/internet

5.1.1 Identify the developing policy that was implemented by government since 1994. (1)
5.1.2 Name the common characteristics of developing country. (1)
5.1.3 Briefly describe the concept dependency ratio (2)
5.1.4 Explain inadequate infrastructure as a course of poverty. (2)
5.1.5 How do indigenous knowledge systems contribute to economic development? (4)

TOPIC 10 MONEY AND BANKING

BASIC CONCEPTS
CONCEPT DESCRIPTION
Money Money is the medium of exchange for various goods and services in an economy.
Legal tender money that must be accepted as a means of payment.
Currency is a type of money used in a specific country.
Exchange rate is the rate at which one currency is exchanged for another.
Flat money money that is not backed up by any physical assets or commodity such as gold or
silver.
Debit card Cards issued financial institutions giving the holder the option borrow funds
usually at a point of sale.
Repo rate The rate at which banks borrow money from the reserve bank.
Monetary policy A microeconomic policy that involves management of money supply and interest
rates.
Moral Persuasion Is used by the reserve bank to persuade banks to act in a manner that desirable to
economic conditions.
Inflation A sustained
Central bank an institution that issues banknotes and responsible for controlling money supply
and credit in a country.
Micro-lending Is the process whereby commercial banks lend out money that they receive as
deposits.
Liquidity Refers to how quick money can be converted into cash.
Prime rate Interest rate at which banks lend money to customers with good credit.
Fiat money Is the money in the form of notes and coins that has no intrinsic value.

45
Money
Definition: Money can be anything that is generally accepted as a means of payment
Technical functions of money
• Money is a medium of exchange: Money is generally used and accepted by law as a means of payment all over
the world.
• Money serves as a unit of account / measure of value : Prices of goods and services are expressed in a
common unit – money.
• Money as a store of value : Money is durable – it can be used repeatedly without losing its shape or size
• Money serves as a standard of deferred payment: Deferred payment allows a person to buy goods or services
and pay for them only in the future.
Modern money
• Primary or liquid money: It is immediately available in the form of cash.
• Secondary money : Secondary money refers to bank deposits and also called demand deposits
• Quasi or near money : Quasi or near money is money in bank savings accounts and short, medium and long-term
deposits in financial institutions.
Money-associated instruments: In our modern economy, most large monetary transactions are done by using credit or
debit cards, cheques and the internet, as opposed to notes and coins.
• Cheques : A cheque is a written and signed instruction from an account holder (drawer) to the bank
• Credit cards : A credit card is a card that is issued by a bank or other financial institution.
• Debit cards : is a card that is also issued by a financial institution and can buy goods and services using the card.
• Electronic payments / E-banking : E-banking allows clients to use computers to transfer funds from their accounts
to a payee’s account without leaving the comfort of their homes.
• With the advances in technology, even cell phones can be used to pay accounts.
The monetary system : The monetary system consists of the currency that is used in a country, the institutions, money
creation policies, documentation, and monetary policy
• The national treasury : The national treasury, together with the central bank, forms a country’s monetary authority.
• The central bank: Each country has its own central bank. South Africa’s central bank is called the South African
Reserve Bank (SARB).
• Financial institutions: financial institutions are the intermediaries through which money flows
The value of money
• The value of money is the purchasing power of a unit of money.
• It refers to a number of goods or services that a unit of money can buy.
• The value of money, like the value of any other product, depends on scarcity, supply and demand.
• Money can only be valuable when it is scarce, so its value depends on how much money is circulating in the
economy
Stabilizing the value of Money
Inflation: is the general increase in the price level.
• Because of a reality such as inflation, then the value of money needs to be stabilized.
• However, it is important to note that in order for the value of money to stabilize, then, the general price level needs
to be stable.
• It is usually impossible to keep the prices constant.
• The most commonly used monetary instrument to control inflation is the interest rate
• The SARB uses repo rate to stabilize the value of money.
• The value of money can also be stabilized by using fiscal policy.
• The government uses taxation and government spending to influence the value of money
• Setting inflation targets (3%-6%)
• This is called inflation targeting Stats SA and the SARB use the Consumer Price Index (CPI) to measure inflation.
• Selling government bonds and thereby reduce money in circulation.

46
Banking
• Banks are in the business of taking deposits and lending money .
• One of the most important functions of the bank is that of acting as a provider of credit

Basic principles of credit creation:

• Credit creation is also called money creation.
• Banks can and do create money
• When banks accept deposits from the public, they are required by law to keep a certain minimum amount in cash
reserves.
• Banks have to keep a minimum cash reserve of 2.5%

Factors that influence credit creation

• Demand for loans and credit
• Level of cash reserves required for banks
• Low levels of savings
• The size of other investments by banks
• Educator then indicates to the learners how credit creation increases economic growth
Interest rates
• Interest is the payment made for using borrowed money or capital
• Interest rate is the interest paid or earned expressed as a percentage per annum.
• The interest rate can be seen as the price for funds that can be loaned.

Factors that affect interest rates

• Duration / Term of loan and the loan amount: The bigger the loan, the higher the interest rate and the longer the
term, the higher the interest rate.
• Repurchase rate : The repurchase rate ( repo rate) is the interest the Reserve Bank charges commercial banks
when it lends money to them.
• Creditworthiness / Credit status: Creditworthiness is the ability of the borrower to pay back the loan.
• Economic conditions : Economic conditions that prevail in a country, such as inflation or economic growth, play an
important role in determining the rate of interest.
• Prime overdraft rate : The prime overdraft rate is the interest the banks charge their clients. When they lend
money, they charge the prime rate, which is slightly higher than the repo rate.
• Mortgage bond rate: The mortgage bond rate is the interest paid on money borrowed to buy property.

Micro-Lending
Definition: Micro-lending is the provision of short-term loans of small amounts of cash to low-income clients who are
outside the banking system.
Benefits of micro-lending : Micro-lending in South Africa is regulated by the Micro Finance Regulatory Council
(MFRC).
The MFRC promotes the sustainable growth of the micro-lending industry while ensuring that consumer rights are
protected.

THREE important aims of Micro-lending

• To improve living conditions in developing nations
• To promote entrepreneurship
• To generate economic activity because these small businesses create jobs and improve standard of living in smaller
communities , which in turn can lead to the development of more businesses and more economic activities.

47
Micro finance institutions can be divided into THREE main groups
• Member-based organizations :
-The advantage of a stokvel is that it earns more interest because of the size of the deposit.
-A stokvel is a good example of a member-based organization. Stokvels are purpose driven schemes.
• Banks that act as micro-finance providers:
- Post Bank, African Bank and Capitec Bank are good examples of banks that act as micro-finance providers.
• Other micro-finance institutions:
-Micro-lenders are allowed to charge higher interest rates, due to the higher risks associated with these loans.
-Micro-lenders must comply with the National Credit Act, and are supervised by the National Credit Regulator, where
they also have to register.
Loan sharks:
• Loan sharks’ prey on the vulnerable, especially in townships and rural areas. They offer small loans at illegally
high rates to individuals and enforce repayment with drastic measures.

CENTRAL BANKING

Basic functions of the Reserve Bank:

• Issues notes and coins: The Reserve Bank has the sole right to issue notes and coins
• It is the bankers’ bank: All other banks bank with the Reserve Bank.
• Banker to the government: The SARB undertakes national and international transactions on behalf of the
government
• Credit control: The most important function of the central bank is to control the money supply in a country.
• Economic and statistical information: The central bank collects and processes economic and statistical
information.
• Custodian of gold and foreign reserves: The central bank acts as custodian of the country’s assets.
• Lender of last resort: When banks have exhausted all their sources of finance and they experience a shortage of
funds, they approach the Reserve Bank for loans.
• Central clearing bank: In their daily operations, banks accept cheques drawn on other banks which are then
cleared by the central bank
• The SARB and Stats SA compile the national account aggregates.
• The SARB publishes this information in its Quarterly Bulletin.

Monetary Policy
• Monetary policy refers to the measures used by the monetary authorities to influence the money supply and the rate
of interest to strive for stable prices, full employment, and economic growth.

Uses of monetary policy instruments by MPC

• Interest rate: The interest rate is the price of lending money.
• The more expensive it is to take out a loan, the less demand there will be for loans, and this will in turn decrease
the amount of money in circulation
• Restrict excessive credit /cash reserves requirements: The SARB can restrict banks from creating too much
credit, in other words, restrict the availability of loans.
• Moral persuasion: The SARB can, by means of consultation and persuasion, influence the banks to act in a
manner that is desirable, judged in terms of the economic conditions that prevail.
• Setting an inflation target: The SARB has set a target for inflation.
• This means that inflation should not be under a set percentage and should not be over a set percentage.
• Inflation target for South Africa is between 3% and 6%.

48
BANK FAILURES
Definition
• Bank failure occurs when a bank is not able to meet its obligations to its depositors or other creditors.
• This could happen when the bank becomes insolvent (bankrupt; unable to pay debts owed).
• In simple terms bank failure refers to the inability of a bank to meet its liabilities.
• A failing bank cannot pay its liabilities due to being insolvent or having liquidity problems.
• Bank failures take place all over the world and also in South Africa

Main causes of bank failure

Bank run:
• A run on the bank happens when a large number of bank customers withdraw their deposits at the same time
because they think that the bank is becoming insolvent.
• This can destabilize the bank to the point where it faces bankruptcy.
Loans that are not repaid:
• Banks always take a risk by granting loans to its clients.
• Unfortunately, not everybody repays their loans and the interests on them.
• Outstanding loans are bad debt that causes a bank to lose income and in the long run fails.
Liquidity squeeze:
• Banks fail when they are unable to meet their day-to-day obligations, in other words, when they are unable to pay
their bills.
Fraud, corruption and mismanagement
• Fraud refers to t the misappropriation or theft of funds in banks.
• Corruption is the dishonest and unlawful deeds of people in positions of power at banks.
Difficult economic situation:
• Times of recession and depression cause many banks to fail because of the decrease in overall economic activity.
Unstable political situation:
• Uncertainty in people can be caused by political unrest, can result in many people withdrawing their deposits and
thus causing a bank to fail.

Consequences of bank failures

Depositors:
• When a run on a bank starts, the bank will stop repaying deposits when it runs out of cash, and it has also no more
assets to make use of the Revenue Bank’s repurchasing facility.
Shareholders:
• Shareholders are the last in the line to get something out of a bank failure.
• Shareholding disappears even before the bank fails. Shareholders of a bank could also lose their investments, or a
large part of them.
• The employees of all branches of the bank will lose their jobs which will cause unemployment.

49
ACTIVITY 1
1.1 Various options are provided as possible answers to the following questions. Choose the answer and
write only letter (A-D) next to the question number (1.1.1-1.1.5)

1.1.1 The total supply of money in the economy is known as…….

A. M2
B. M3
C. M1
D. M1 for M2
1.1.2 A facility whereby an account holder is able to withdraw more than what he/she has in the bank account is
known as …
A loan facility
B credit card
C bank overdraft
D mortgage bond
1.1.3 A deposit of money in the bank account for a period longer than three years is known as …
A long-term deposit
B fixed deposit
C Short-term deposit
D medium-term deposit
1.1.4 An exchange rate system in which the value of the currency is determined by market forces is … exchange rate
system.
A. fixed
B. managed floating
C. monetary
D. free floating
1.1.5 A branch of macroeconomics that provides a framework for analysis of money and its functions is known as
……
A. monetary economics.
B. money supply.
B. financial markets.
D. quantitative economics. 5X2 (10)

1.2 Choose a description from COLUMN B that matches the item in COLUMN A. Write only the letter (A-I)
next to the question number (1.2.1 to 1.2.8)
COLUMN A COLUMN B
1.2.1 Flat money A. Money that must be acceptable as a means of payment.
1.2.2 Currency B. The rate at which banks borrow money from the reserve
bank
1.2.3 Moral persuasion C. Refers to how quick money can be converted into cash.
1.2.4 Exchange rate D. Money that is not backed up by any physical assets such
as gold.
1.2.5 Repo rate E. General rise in the prices of goods and services which
leads to a decline in the buying power
1.2.6 Liquidity F. The price of one currency in terms of the other
1.2.7 Inflation G. Money used in a specific country
1.2.8 Legal tender H. Interest rates offered by banks to their preferred clients.
I. Used to convince banks to act in a way that is desirable in
current economic conditions
8X1 (8)
1.3 Provide the economic term/concept for each of the following descriptions. Write only the term or
concept next to the question number.
1.3.1 Percentage of deposits at banks that must be kept on hand to meet short-term and emergency funding needs.
1.3.2 The percentage at which banks lend money to their most preferred clients.

50
1.3.3 The amount of money available in an economy.
1.3.4 The number of times the available money supply in the economy changes hands.
1.3.5 An account from which deposited funds can be withdrawn at any time.
1.3.6 A process of giving too many loans to micro-lenders, while increasing the risk of loans not being paid back.
6X1 (6)

ACTIVITY 2
2.1 Answer the following questions
2.1.1 Name any TWO examples of major banks in South Africa. (2)
2.1.2 Explain the importance of bank notes security features. (2)

2.2 Study the picture below and answer the questions that follow.
MONEY ASSOCIETED INSTRUMENTS

Debit Card

Source: pinterest.ie

2.2.1 Identify the money instrument shown in the picture above. (1)
2.2.2 What is the three-letter code for South African currency? (1)
2.2.3 Briefly describe the term bartering system. (2)
2.2.4 How does inflation affects the value of money as a store of value. (2)
2.2.5 Why is money a necessity in the economy? (4)

ACTIVITY 3
3.1 Study the picture below and answer the questions that follow.

NEW MONEY

Source: South African Reserve Bank

51
3.1.1 Identify the currency depicted in the picture above. (1)
3.1.2 What is the highest denomination of money shown in the picture above? (1)
3.1.3 Briefly describe the term credit creation. (2)
3.1.4 Why do banks require security against issuing of loans? (2)
3.1.6 How does the use of electronic fund transfer (EFT) benefit the economy? (4)

ACTIVITY 4
4.1 Answer the following questions.
4.1.1 Name any TWO measures of money supply. (2)
4.1.2 Explain the role of capital markets in the economy? (2)

4.2 Study the graph below and answer the questions that follow.

4.2.1 Identify the period when the consumer price index was at its highest. (1)
4.2.2 What is the South African Reserve Bank’s inflation target range? (1)
4.2.3 Briefly describe the term prime rate. (2)
4.2.4 Explain the benefit of high CPI on debtors. (2)
4.2.5 How does the repo rate increase affect consumers? (4)

ACTIVITY 5
5.1 Answer the following questions.
5.1.1 Name any TWO examples of money-associated instruments. (2)
5.1.2 What is the role national treasury in the South African financial system? (2)

52
5.2 Study the cartoon below and answer the questions that follow.

MONEY AND BANKING

Source: ww.businesstimes.co.za

5.2.1 Identify an institution where people can save money from the cartoon above. (1)
5.2.2 What is another name for micro-lenders? (1)
5.2.3 Briefly describe the term interest rates. (2)
5.2.4 Explain the purpose of National Credit Act (2)
5.2.5 How does borrowing from loan sharks disadvantage the consumers? (4)

ACTIVITY 6
6.1 Answer the questions below.
6.1.1. Name any TWO of currencies. (2)
6.1.2 Why are bank cards more preferred that using cash money? (2)

6.2 Read the extract below and answer the questions that follow.
VBS customers queue for their money at Nedbank

The South African Reserve Bank announced earlier this week that over R300 million had been given to Nedbank
to pay VBS retail depositors affected by the collapse of their bank. They will have access of up to R100 000
once they’ve opened an account at Nedbank.
Hundreds of people have been queuing since early on Friday morning at branches in Limpopo where many VBS
customers live.

Source: www.ewn.co.za

6.2.1 Identify the bank that was liquidated according to the extract above. (1)
6.2.2 What is the name of the policy that is used to manage money supply in the country? (1)
6.2.3 Briefly describe the term liquidity. (2)
6.2.4 Why are banks advised to be careful when giving loans to their clients? (2)
6.2.5 How do bank failures affect the financial industry? (4)

6.3 Discuss reasons for bank failure. (8)

6.4 Discuss the aims of the monetary policy instruments. (8)
6.5 Analyse the reasons for people to use loan–sharks to borrow money? (8)
6.6 How do savings positively influence the economy? (8)

ACTIVITY 7
• Discuss in details the main functions of the South African Reserve Bank. (26)
• How can the South African reserve bank stabilize the value of money? (10)

53
TOPIC 11 GLOBALISATION
Definition:
The breaking down of the trade barriers to promote the free movement of goods and services, labour and capital to form
a global economy.

The causes of globalisation:

• Transportation: Increase in number of transport systems. The movement of goods and people. Reduced the
distances between countries.
• Communication: The arrival of computers and the internet (the fastest method of communication).
• Trade liberalisation: Reduction of trade barriers between countries.
• Multinational enterprises (MNE’s): International companies that are not bound by their countries’ borders, eg.
BMW, Vodafone, KFC, etc.
• International capital markets: Can invest money anywhere in the world without government intervention.
• Foreign direct investment (FDI): When one country establishes a business enterprise in another country.
Globalisation lead to an increase in FDI.
• Trade agreements: The General Agreement on Tariffs and Trade (GATT). World Trade Organisation (WTO).
Millennium Development Goals (MDG’s). Free Trade Zones (FTZ).

The consequences of Globalisation:

UNWANTED AMERICAN CHICKEN DUMPED IN S.A
SOUTH AFRICA – USA AGOA CHICKEN AGREEMENT
Big unhappiness rules under the Farming Association of SA about the fact that chicken parts that are sent to SA
are parts not demanded by the American market such as thighs, drumsticks and feet. These chicken parts do
not have a sufficient market in America because chicken producers receive subsidies from the
goverment in the USA, these parts can be dumped in South Africa at a lower cost.

Rob Davies, Minister of Trade and Industries, said that the government will do their best to conclude an
agreement to protect the local producers.

Positive:
• Economic growth: Grow faster because they have access to international markets.
• Employment: The need to produce more goods creates demand for more labour.
• Foreign direct investment: Establish businesses in other countries.
• Balance of payments: Improved because of more exports.
• Poverty alleviation: Reduce the levels of poverty because there are more jobs available.

Negative:
• Economic costs: Brain Drain-Newly qualified graduates migrate to developed countries for better paying jobs.
Smaller countries can’t afford the restructuring and reforming of their economies.
• Social costs: Increase in drug trafficking, abduction, cybercrimes.
• Health issues: Made countries more vulnerable for diseases, eg bird flu, AIDS.

54
• Environmental costs: Depletion of minerals. Damage to flora and fauna. Land, water and air pollution.
• Indigenous knowledge systems: Communal values and Ubuntu are lost due to globalisation.

Absolute and comparative advantages and disadvantages of free trade:

• Economic growth: Accelerate the rate of economic growth and development, eg. India, China, Hungary, Mexico.
• Employment: Cheaper labour gives developing countries a comparative advantage, eg. South Africa, India and
China.
• Increased standard of living: More employment opportunities, better income and improved productivity raised the
standard of living in developing countries.
• Reduced cost of living: Reduce the prices of goods and services.
• Increased inclusion: Give countries and their citizens a feeling of togetherness.
• Human development: Growth of individual incomes, better life expectancy, higher health standards and better
education.
• Emergence of a global community: Rich countries assist poorer countries in respect of capital, health, literacy.

Absolute and comparative disadvantages of free trade:

• Increased income gap: Wealth of developed countries grow faster than developing countries.
• Uneven distribution of wealth: Wealth is still concentrated in the hands of a few individuals.
• Increased poverty: The gap between rich and poor is growing, and [poor people are still lacking skills, health and
education.
• Different wage standards for developing countries: The remuneration for the same job in developed countries
is higher than in developing countries.
• Economic instability: An economic crisis in one country have severe effects on other countries, eg. recession of
2008/2009.
• Financial instability: Developing countries find themselves in economic turmoil when investments are reversed.
Currencies depreciate that increase the loan amount.
• Exploitation of labour: the value of labour is often much higher than the remuneration offered.
• Environmental deterioration: The demand for products and raw material leads to exhaustion of renewable
resources.
• Marginalisation of developing countries: Poor countries lack skilled labour, infrastructure, capital and policies to
take advantage of the opportunities of globalization.
• Unfair subsidisation: When rich countries subsidise their agriculture, developing countries may find it difficult to
compete.
• Risk of diseases: There is a risk of diseases being transported unintentionally between countries.

55
NORTH / SOUTH DIVIDE

Causes:
• Capitalism: Developed countries accumulate wealth through dispossession at the cost of developing countries.
• Globalisation: It enhances social and economic gaps between countries when richer countries exploit poorer
countries.
• Immigration: People in the south are eager to move to the north for better opportunities and a better standard of
living.
• Rate of development: Countries that has industrialised have higher rates of development than countries that have
economies based on agriculture.
• Emergence of economic powers: Developed countries with access to capital obtain economic power.
• International infrastructure: Most of the transport systems and telecommunications networks to international
markets are in the hands of the north.
• New technologies: The research, development and production of new technologies are in the hands of large
corporations in the north.
• Financial aid and debt: Many countries in the south build up huge foreign debts from wealthier countries and
struggle to repay their loans.

Characteristics:

THE NORTH SOUTH DIVIDE:

Developed Countries (North) Developing Countries (South)
25% of world population live in these countries. 75% of world population live in these countries.

Per capita income - approximately 87% of the
world's total income is produced by 15% of the
total population and live in the economically
developed regions of the world
Life expectancy in developed countries high =
75jaar
Literacy levels are high. Everyone is literate
The majority of people are highly educated.
85% of the world population lives on only one fifth of the
world’s income.
Life expectancy in developing countries is low due
to problems such as malnutrition, disease and ill
health. Life expectancy is 48 years.
Literacy levels are low.
This relates to the low standard of living.
Only 46% adult literacy rate.
The majority of people are illiterate.

56
 Trade: rich countries subsidise the production of Trade: There is an insistence that developing countries
agricultural products. should remove tariffs on manufactured goods. Africa felt
marginalized by subsidies.
This makes it difficult for developing countries to Low economic growth rates.
compete The south is a small player in the world economy.
High economic growth rates. There is poor technology.
The north dominates world economy. These countries occupy lesser positions in the UN.
Advanced in all technologies.
These countries occupy important seats in the
UN.
Mass Consumption - burn mass quantities of oil Focus on agriculture: soil quality, adequate rainfall, good
and coal. harvest is critical.
This leads to the destruction of ozone Degradation and loss of soil, water and vegetation are
the major environmental problems.
Their inability to produce enough food is the major cause
of hunger and malnutrition.

ACTIVITY 1
1.1 The various options are provided as possible answers to the following questions. Choose the correct
answer and write only the letter next to the question number. E.g. 1.1.6 D

1.1.1 A type of intergovernmental agreement where barriers to trade are reduced among participating states is known
as………….
A. trade bloc
B. building bloc
C. banking bloc
D. business bloc

1.1.2 The process of interaction among the countries of the world to bring their economies closer together is called ---
----------------
A. globalization
B. industrialisation
C. integration
D. liberation

1.1.3 A grouping of countries to get more control over the global economy is called ------
A. integration
B. Foreign Direct Investment
C. Free Trade
D. Internationalization

1.1.4 The institution that is responsible for assisting countries with balance of payment deficit is known
as……..
A. International Labour Organization
B. World bank
C. International Monetary Fund
D. World Trade Organization

57
1.1.5 A socio-economic and political division between the wealthy developed and the poorer developing countries is
called----------
A. South divide
B. North divide
C. North -South divide
D. Economic divide (5x2) 10

1.2 Choose a description from column B that matches the item in column A. Write only the letter next to the
question number in the answer book. E.g. 1.2.6 G
COLUMN A COLUMN B
1.2.1. Capital liberalization A. An organization that is initiated trade liberalisation
1.2.2 IMF B. A country can produce more output with the same input than another country.

1.2.3. Internationalization C. Trade is an important element

1.2.4.GATT D. Removal of restrictions such as tariffs and quotas
1.2.5. Absolute advantage E. Extension of economic activities across national borders
F. An institution of standardized trade, BOP and exchange rates, international
lending and borrowings.
(1×5) 5
1.3. Give ONE term for EACH of the following descriptions. Write ONLY the term next to the question number
(1.3.1 -1.3.5) in the answer book. Abbreviations, acronym and examples WILL NOT be accepted.
1.3.1 Trade unification between different states by partial or full abolishing of customs and tariffs on trade.
1.3.2 The group of first twenty most industrialised countries.
1.3.3 A policy that limits the quantity of supply that can be imported.
1.3.4 The trading of goods and services between countries with less red tape.
1.3.5 Businesses that are producing goods or services in more than one country. (1×5) 5

ACTIVITY 2
2.1 Study the following extract and answer the questions that follow.
China’s Free Trade Zone See Robust Growth in Q1 2023
Free Trade Zones (FTZs) in China witnessed a rapid foreign trade and investment growth in the first quarter (Q1)
this year with the total foreign trade of its 21 FTZs amounting to 1.8 trillion Yuan, up to 6.6% year on year, according
to the ministry of commerce.
The growth rate was 1.8 % higher than the national level according to the ministry spokesperson. Foreign Direct
Investment (FDI), in these FTZs in actual rose by 22.1% from a year earlier to71.9 billion Yuan.
Source: Fibre2Fashion News Desk: 16 May 2023

2.1.1 Identify the organization that regulates trade between countries. (1)
2.1.2 Mention one member country of BRICS besides the one mentioned in the extract. (1)
2.1.3 Briefly describe the concept foreign direct investment. (2)
2.1.4 Explain the benefits of being part of the free trade zone. (2)
2.1.5 How did Russia and Ukraine war affect the South African Economy? (4)

2.2 Discuss the changes in employment conditions and changes in culture as consequences of
globalization. (8)
2.3 Analyse the effect of the Covid-19 pandemic on globalisation. (8)

58
ACTIVITY 3
3.1 Study the picture below and answer the questions that follow.

Fibre2Fashion News Desk:

3.1.1 Identify one disease that can be as the result of globalisation (1)
3.1.2 Name one-member country of G8 countries. (1)
3.1.3 Briefly describe the concept comparative advantage. (2)
3.1.4 Why are developing countries more affected by climate change than developed countries? (2)
3.1.5 How will the abolishment of globalization impact the South African Economy? (4)

3.2 Briefly discuss trade liberalization and standardization as causes of globalization. (8)
3.3 Analyze the environmental and economic costs as effects of globalization on the South African
economy. (8)

ACTIVITY 4
4.1 Study the picture below and answer the questions that follow.

Source: amazon U.K

59
 4.1.1 Identify one country that is regarded as a developed country. (1)
4.1.2 What are the phenomena depicted by the above picture? (1)
4.1.3 Briefly describe the concept trade liberalization (2)
4.1.4 Why is it beneficial for countries to engage in free trade? (2)
4.1.5 How does globalization negatively affect South Africa in terms of culture and pollution? (4)

4.2 Differentiate between countries in the North and countries in the South in terms of per
capita income and life expectancy. (8)
4.3 Analyze the consequences of globalization (8)

ACTIVITY 5
• Examine the causes of globalization. (26)
• How can South Africa benefit from trade agreements such as BRICS? (10)

TOPIC 12 ENVIRONMENTAL DETERIORATION:

CONCEPT DESCRIPTION /DEFINITION
Air pollution Occurs when there is an accumulation of substances in the atmosphere in such
concentrations that they become part of the air we breathe. Air pollution can include
tobacco smoke, exhaust fumes and acid rain etc.

Brown Issues Effects on environmental health impacts, such as water usage and waste collection.

Clean energy This is energy that is produced through methods that do not release greenhouse
gases or any other pollutants, such as electricity or nuclear power.

Command and control (CAC) The direct regulation of an industry or activity through laws that state what is allowed
and what is illegal.
Conservation Deals with the sustainable use and management of both renewable and non-
renewable resources to ensure that they are available for use for future generations.

Deforestation Cutting, clearing and removal of rainforest/trees into less bio-diverse ecosystem
such as pasture, cropland or plantations/permanent destruction of forests in order to
make the land available for other uses.

Ecosystem A localised group of interdependent organisms together with the environment that
they inhabit and depend on.
Environment Refers to everything around us: land, water, air, plant and animal life. It provides us
with the space to live, erect buildings and produce food.

Environmental degradation Exploiting natural resources without destroying the ecological balance of an area

Environmental subsidies Cash granted by the government for activities that reduce environmental damage.
For example, recycling of waste, production of unleaded petrol, development of an
equipment to save energy or to reduce smoke etc.

Environmental Sustainability Means the ability of the environment to survive its use for economic activity

60
 Erosion It is a gradual process of movement and transport of the upper layer of soil (topsoil)
by different agents, particularly water, wind and mass movement causing its
deterioration in the long term.

Externalities Are the extra costs and benefits that are not captured by the market transactions.
They can either be positive or negative.

Global warming The emission of greenhouse gases due to human activity causes global warming
which in turn causes an increase in temperature that then leads to rising sea
levels, melting of polar ice caps, flash floods and desertification. Climate change
affecting the whole world

Green Issues Effects of future generations, such as water conservation and less waste generation.

Green tax/environmental tax Tax that can be imposed on the output of a good, wherever external environmental
costs are generated. Green taxes are charged on items such as tyres.

Greenhouse Gasses A gas that contributes to the greenhouse effect by absorbing infrared radiation.
Carbon dioxide is an example of greenhouse gasses.

Kyoto protocol It is an international agreement whereby developed countries pay developing

countries for their right to pollute.
Land Arises from dumping toxic waste products. It includes visible waste and litter as well
pollution/environmental as the pollution of the soil itself
pollution
Marketable permits Each business is given a license (permit) to emit a share of the chemical pollutants.

Noise pollution The excessive noise released by factories, motor vehicles, loud music etc. People
who live near airports, train stations or factories can actually be harmed by the noise
levels they endure

Pollution Pollution is the introduction of waste matter into the environment, both directly and
indirectly.
Preservation To keep resources that are non-renewable intact e.g. ecological systems, heritage
sites
Soil erosion Refers to the wearing away of a field’s topsoil by natural physical forces of water,
wind or through forces associated with farming activities such as tillage.

THE PROBLEM
Natural environmental degradation
• Natural environmental degradation includes situations that arise from local influences such as extremes of weather,
local infectious agents and physical disasters.
• It is estimated that, in South Africa, water erosion affects 6.1 million hectares of cultivated soil.
• Of this 6.1 million hectares, 15%is seriously affected, 37% moderately and the rest slightly affected.
• Wind erosion has more severe affect on cultivated soil, estimated at 10.9 million hectares that is currently affected.
• In South Africa, the estimated annual soil loss is 2.5 tons per hectare per year with the highest losses up to 60 tons
per hectare per year from unprotected pineapple fields.

61
Human-induced environmental degradation
• This type of degradation refers to the effect of human activities on the natural environment.
• Humans are constantly engaged in activities such as agriculture, industrial development, mining activities, rural
settlement or urban development.
• These human activities often lead to deforestation, land and water degradation, as well as air pollution.

Poverty and environmental degradation

• Poverty is seen as a great threat to the environment.
• Poor health conditions limit people’s capacity to produce and earn.
• When people have to survive from day to day, it makes them less sensitive to maintaining the natural environment
resources.
• Poor people tend to have large families, coupled with poor health services, which will increase poverty levels and
create further environmental pressure.
• People are often ill-equipped to deal with the effect on the environment in a manner that limits damage.

Agricultural development and deforestation

• The expansion of agriculture and plantation forestry, as well as other commercial or substance activities, threaten
natural resources.
• Agricultural development needs large tracks of land that must be developed to meet the demand for food for an
ever-increasing population.
• This often leads to deforestation, soil erosion, land degradation, desertification and various forms of water and air
pollution.
• Deforestation reduces the habitats of plant and animal species.
• It also influences rainfall patterns and lowers the ability for rain develops.

Land degradation
• Land degradation is a mismatch between land quality, land usage and land productivity.
• If land is not used efficiently and effectively it becomes eroded through deforestation, soil erosion, soil infertility and
flooding. Soil erosion is the most serious form of land degradation.
• At 53% water erosion is the main problem in Africa, followed by wind erosion at 30.5%, chemical degradation at
11.2% and physical degradation at 5.3%.

Industrial development, mining and environmental degradation

• Industrial processes contribute to water, land and air pollution.
• In South Africa, the major contributor to air pollution is the country’s oil refineries.
• These refineries emit high levels of sulphur dioxide and several other chemicals known to cause health problems.
• Greenhouse gas emissions as a result of vehicle emissions, power plants, factories and giant livestock farms have
a devastating effect on climate change.
• Pollution from mining activities is a direct cause of ground water pollution in South Africa.

Human settlement, urbanisation and environment degradation.

• Rural-urban migration helps reduce pressure on the rural environment, but puts pressure on the urban environment
such as demand for land and services.
• Unplanned informal settlements are one of the consequences of large-scale rural urban migration.
• Government struggles to meet the community needs.

62
• Run-off from storm water is a common problem in unplanned settlements due to the lack of proper sewage and
drainage system.
• The consequences of urbanisation are overcrowding, poor housing conditions overconsumption of limited
resources, uncollected solid waste and untreated waste water, environmental pollution and other forms of social
evils, such as child abuse, domestic abuse and child labour.

PROTECTING THE ENVIRONMENT

Price-based method
• Price based charges, such as taxes and subsidies, are used to persuade polluters to reduce the level of pollution.
• The use of price-based instruments for pollution control has been advocated for many years, but it is only in recent
years that government have come to protect them.
• Government also had concerns that additional charges would increase inflation and thereby impact severely on low-
income groups.

Market-based method
• Market-based approach used to control pollution by providing economic incentives for achieving reduction in the
emissions of pollutants.
• The central government sets a limit on the amount of a pollutant that can be emitted.
• Businesses are required to hold a number of permit equivalents to their emissions.
• Firms that need to increase their emission permits must buy permits from those businesses that require fewer
permits.

Use of laws and regulations

• Laws cannot influence the natural processes that cause environmental changes, but it can be used to regulate
human behaviour.
• Laws about noise levels, pollution and waste management have been introduced to keep the environment safe for
future generations.
• Today, environmental laws are enforced by all countries in the world.

Sustainable development is development that meets the needs of the present without compromising the ability of
future generations to meet their own needs.

Measures to ensure sustainable development

Public sector involvement /intervention

Granting property rights
• It ensures that people care for the things that belong to them. • (e.g.) Kyoto Protocol.
• where developed countries agreed to provide financial assistance to developing countries because they cause less
pollution.
• The developed countries therefore pay for the right to pollute.

Charging for the use of the environment.

• The pricing of the environment is one method used by government to impose environmental charges.
• Government levies a fee on consumers and producers for the waste (solid, liquid, gas) they dump in the
environment.
• Best results are obtained when these charges are proportional to the waste they produce.

63
Environmental taxes
• A tax could be imposed on the output or consumption of a good, wherever external environmental costs are
generated.
• These are known as green taxes, (e.g.) tyres.
• The rate of tax should be equal to the marginal external cost.

Environmental subsidies
• These subsidies reduce activities that cause environmental damage.
• These costs are recovered from taxation.
• Subsidies could be for the development of new technology or equipment.
• Encourage production of environmentally friendly subsidies.
• Encourage recycling of waste such as bottles or cardboards.

Marketable permits
• Governments may wish to charge for the pollution (externality) and it could raise a levy or a tax to pay for it.
• A licence (credits) or permit is offered, and businesses are allowed to sell their licences to other businesses.
• Licences or permits or credits are traded in a permit market.

Public sector control

At times government must take direct control. • This occurs through command and control (CAC) or voluntary
agreements or education.

Green issues
• Increased loss of biodiversity: in South Africa 15% of plant species, 37% of mammal species, 14% of bird
species, 8% of amphibian species and 4% of reptile species are extinct of near extinction.
• Climate change: the change to rainfall and temperature are also prevalent in South Africa.
• Deteriorating freshwater resources: according to the water research commission, South Africa is projected to run
out of water between 2020 and 2030, given the current high volumes of wastage and projected demand.

Brown issues
• Increased air pollution: declining air quality and harming people’s health.
• Increased soil erosion: the annual soil loss in South Africa is estimated at 300-400 million tons.
• Increased consumption of natural capital: South Africa is using up its natural capital due to over-consumption.

ACTIVITY 1
1,1 Various options are provided as possible answers to the following questions. Choose the correct
answer and write only the letter ( A-D) next to the question number.

1.1.1. Carbon dioxide that is emitted during the production of goods and services are called …
A. The greenhouse effect
B. Global warming
C. Biodiversity
D. Carbon emissions.

64
1.1.2. Resources that may become exhausted if they are not managed in a sustainable manner are known as
………… resources.
A. Natural
B. Finite
C. Man-made
D. Renewable

1.1.3. Resources that will run out or will not be replenished in our lifetimes
A. Non-renewable resources
B. Renewable resources
C. Recyclable resources
D. Non-recyclable resources

1.1.4. Gas emission and climate change are connected to ……

A. Property rights
B. Global warming
C. Positive externalities
D. Private benefits

1.1.5. Quantity of goods a country is permitted to import or produce…

A. Taxation
B. Externalities
C. Quotas
D. Tariffs
5X2 (10)
1.2. Choose a description from COLUMN B that matches the item in COLUMN A. Write only the letter (A-E)
next to the question number (1.2.1 -1.2.6)
COLUMN A COLUMN B
1.2.1. Environmental A. Depletion of resources such as air, soil, and water.
degradation
1.2.2. Deforestation B. The permanent destruction of woodlands
1.2.3. Global warming C. Long term shift in temperatures and weather patterns
1.2.4. Greenhouse gasses D. Emissions on climate change.
1.2.5. Command and E. Direct regulation of an industry or activity through laws that state what
control is allowed and what is illegal.
1.2.6. Erosion F. The wearing away of natural resources
G. Refers to protection of nature
6X1 (6)
1.3 Provide the economic term/concept for each of the following descriptions.
1.3.1. The practice of organizing human activities in order to limit their impact on the natural environment.
1.3.2. A localised group of independent organisms together with the environment that they inhabit and depend on.
1.3.3. Introduction of waste matter into the environment, both directly and indirectly.
1.3.4. The extra costs and benefits that are not captured by market transactions.
1.3.5. Keeping the resources that are non-renewable intact. 5X1 (5)

65
 ACTIVITY 2
2.1 Answer the following questions
2.1.1 Name any two types of pollution. (2)
2.1.2 How do environmental subsidies ensure environmental sustainability? (2)
2.2 Study the information below and answer questions that follow

THE CONFERENCE OF THE PARTIES (COP)

The UN has yearly conferences which serve as a formal meeting of parties that are known as the
Conference of the Parties (COP). The meeting asses the progress made in dealing with climate
change. The first conference was held in Berlin, Germany, in 1995 and the third meeting was held in
Kyoto, Japan, in 1997, where the reduction of green of greenhouse gases was discussed.
In 2011 the 17th meeting was held in Durban, South Africa. The emphasis was on the creation of a
green climate fund. The Kyoto conference outlined the reduction of greenhouse gas emissions. In
2016 the 22nd conference (also known as COP 22) was held in Morocco. Despite these numerous
meetings, global temperatures are still increasing.
[adapted from 222.wikipedia.com]
2.1.1 Identify any ONE African country where climate change conference was held. (1)
2.1.2 Name the international organisation in the extract above that initiated climate change conferences. (1)
2.1.3 Briefly describe the term conservation. (2)
2.1.4 Explain the effect of climate change on the GDP. (4)
2.1.5 How can a green climate fund helps to reduce global warming? (2)
2.2 Study the information below and answer the questions that follow.

[adapted from http://www.google.com/amp)]

2.3.1 Identity environmental friendly source of energy in the above picture. (1)
2.3.2 What type of pollution do oil spills cause to the ocean? (1)
2.3.3 Briefly describe the term marketable permit. (2)
2.3.4 Explain the use of education to protect the environment. (2)
2.3.5 Why is it important to protect the environment? (4)
2.4 Briefly discuss property rights and voluntary agreements as approaches to sustain environment. (8)
2.5 How does environmental degradation impact on South Africa’s economy? (8)
ACTIVITY 3
3.1 Answer the following questions.
3.1.1 List any TWO examples of renewable resources. (2x1) (2)
3.1.2 How do green taxes contribute towards sustainability? (1x2) (2)

66
3.2 Study the information below and answer questions that follow

[adapted from http://www.google.com/amp)]

3.2.1 Identify the term that relates to the variety of species in the data above. (1)
3.2.2 What type of tax used to protect environment? (1)
3.2.3 Briefly describe the term sustainable development. (2)
3.2.4 Why is it important to protect the environment? (2)
3.2.5 How does environment affect economic development? (4)
3.3 Study the information below and answer questions that follow

`
Adapted from www.poachstatsSA
3.3.1 During which year was rhino poaching at its highest in Africa? (1)
3.3.2 What is the reason of poaching rhinos in Africa? (1)
3.3.3 Briefly describe the term biodiversity. (2)
3.3.4 Explain the effect of over consuming renewable natural resources. (2)
3.3.5 How will conservation benefit the people living near the rhino habitat? (4)
3.4 Briefly discuss green and brown issues as South African environmental issues. (8)
3.5 Analyse negativity of globalisation on the environment? (8)
ACTIVITY 4
• Examine in detail the state of environment/problems threatening the environment. (26)
• Analyse the measures/methods used to protect the environment. (10)
[40]

67