1.1 Trade and the economic problem

1. A cell phone or a walkman?
2. A bicycle or a set of TV games?
3. A holiday at the seaside or a 4 x 4 tour?
4. Nike shoes or a pair of Levi jeans?

SELF:

Provide a reason or reasons for the choices that you have made in each instance:

A previous paragraph has explained that the self-provident stage of economic development is followed by the phase of SPECIALISATION, SURPLUSES AND EXCHANGE. As communities developed their needs increased, both with regard to range and degree of sophistication. Nowadays the need for meat, for example, is not satisfied by meat in its simplest processed form any longer. There is a wide range of meat products from which to make a selection – frankfurters, polonies, sliced ham and many more national and international specialty products. The extension of the needs of people has created greater opportunity for specialty products, which, in turn, has created opportunities for exchange and trade over a wide spectrum.

With the improvement of transport and communication, it has become possible to distribute products to where a need arises. Communication between producers and traders lead to the conclusion of trade transactions both locally and abroad. Speedy transport by road, rail, air and sea make it possible to deliver products without unnecessary delays, so that they arrive at end users in good time and in good condition. Compare the marketing of fresh products, and also of other specialty products.

Activity 4

COMMUNICATION

GROUP:

Compile a list of organisations and/or institutions that are responsible for communication networks, both locally and abroad:

Activity 5

TRANSPORT

SELF:

Provide the names of organisations and/or institutions that are responsible for the distribution of goods, both locally and abroad. Complete and compare your list with those of other learners.

By road

By rail

By air

By sea

When a country like South Africa sells its products to other countries, we call it EXPORT, and when South Africa buys goods from other countries, we call it IMPORTS. SOUTH AFRICAN EXPORTS comprise mainly primary products such as products from mining (gold, diamonds, platinum, manganese, chromium, coal, iron ore and asbestos), and agricultural products such as wool, sugar, hides and fruit. SOUTH AFRICA’S IMPORTS comprise mainly capital goods such as machinery, computers and electronic products. The money that is earned through exports is used to pay for imported products and in this way the numerous needs of South Africans are satisfied.

Activity 6

IMPORT AND EXPORT

GROUP:

Compile a list of products that are exported and imported by South Africa. Indicate the destinations of exports and the origin of imports.

It is evident from the above that exchange transactions or trade agreements cannot be initiated if production is inadequate. Goods must be manufactured by factories or industries before they can be distributed, whether locally or abroad. Industries require large amounts of money or capital before production can commence and in most cases an industrialist or entrepreneur is unable to generate enough capital to start such an enterprise on his / her own. The entrepreneur can submit an application for a loan from a bank to make it possible to start production. The bank will have to use funds that other investors have deposited in the bank in order to make such a loan available. They make the money available to the entrepreneur at a fixed interest rate for an agreed period of time. In economic terms we speak of funds that are used or applied in such a manner as an INVESTMENT, i.e. money made available to facilitate further production. What we have to remember is that such funds/capital can be made available only when there are other investors who are willing to deposit their SAVINGS in the bank. The bank therefore is the middle person who facilitates the investment.

Activity 7

SAVINGS

SELF

Consult a bank or other financial institution to find out what facilities they offer to encourage the public to entrust their savings to them.

[LO 1.2]

Assessment

Learning Outcomes (LOs)

LO 1

the economic cycle

The learner will be able to demonstrate knowledge and understanding of the economic cycle within the context of ‘the economic problem’.

Assessement Standards(ASs)

This is evident when the learner:

describes the historical development of money and its role in societies and their economies;

discusses how trade (import and export) addresses the economic problem (choice and opportunity cost), as well as the role of banks in investing in the economy;

explains how different economic systems address the economic problem (e.g. planned, market and mixed economies);

discusses the role, rights and responsibilities of trade unions;

discusses the role, rights and responsibilities of trade unions;

Overview

ACTIVITY 1: Needs

SELF:

Evaluate each one’s list of needs.

ACTIVITY 2: Classification of needs

GROUP:

FOUR / FIVE most basic needs of people :

Food, clothing, housing, protection, recreation.

ACTIVITY 3: Opportunity cost

SELF:

Let learners make a selection and then let them use the above list to determine the category in which they would place each product, e.g. would a cellular phone be rated as a necessity or a luxury, etc?

ACTIVITY 4: Communications

GROUP:

Communication service providers : Telkom, Cell C, Vodacom, MTN, etc.

ACTIVITY 5: Transport

SELF:

By road: Pickfords, Stuttafords, etc.

By rail: Spoornet

By air: SAA, Nationwide, etc.

ACTIVITY 6: Import and export

GROUP:

IMPORT: Cars (Japan), Computers (USA), Watches (Switzerland)

EXPORTS: Iron ore (Japan), Mealies (Zimbabwe), Wine (England)

ACTIVITY 7: Savings

SELF:

Evaluate the learner’s research with regard to savings facilities offered by various financial institutions.