ECONOMICS FOR SOUTH AFRICAN STUDENTS

CHAPTER 2:

THE ECONOMIC PROBLEM

PART 2: HOW TO PRODUCE?

ECON-1

ECONOMIC PROBLEM?

When you consider the economic problem:

•Scarcity

•Choice

•Opportunity cost

It leads to 3 important questions:

•WHAT to produce?

•HOW to produce?

•For WHOM to produce?

Economic systems determine how society will answer these questions.

HOW TO PRODUCE…

Use the factors of productionCLNE – Capital, Labour, Natural resources, Entrepreneurship

Can be classified in different ways:

• Primary vs secondary factors of production• Human resources vs. non-human

HOW TO PRODUCE…

LABOURDescriptionQuantityQuality Box 2-1: Division of labour and specialisation

NATURAL RESOURCES

ExamplesFinite, non-renewableQuality is also NB.

CAPITALManufactured resourcesAssociation with finance?

ENTREPRENEURSHIPCombines the factorsMore than a manager

HOW TO PRODUCE…

Technology

• When new knowledge is applied in the production process.• Part of capital and entrepreneurship.

Why isn't money a factor of production?

• Money can be used in exchange for goods and services, it does not make goods and services!

HOW TO PRODUCE…

The choice of method:

• Labour intensive• Capital intensive

DID WE ACHIEVE THE OUTCOMES?Can you name and describe the four factors of production?

Can you describe the division of labour and specialisation?

Can you explain the role of technology?

Can you explain why money is not a factor of production?

Can you decsribe two types of production methods and say when which one should be used?

Chapter 2 in Mohr & Fourie

eFundi

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