Question new skills and technology for improving the economy

Question 1

The graph below indicates that the Increase in
demand of raw water will shift the demand curve to the right from (D0 to D1),The change(increase) in demand of raw water will
result in no change in price(P0) which will result in flat or vertical supply
curve(S0) Point (A)
shows the equilibrium point which will determine the price of raw water which
remains the same, whereas Point B indicate the price after the change in demand
of raw water to date.Equilibrium point (A) and (B) shows the price of
raw water that does not change when there is an increase in demand from Q0 to
Q1 This indicates that in a perfectly competitive market individual firms are price
takers and that the price is determined by the intersection of the market
supply and demand curves competitive, (A) and ( B )

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Price (R)

 

Quantity Demand

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question
2

Factors
that can affect the supply curve of raw water to shift

In 1994 the new democratic government took
over in South Africa, the international countries lifted the suctions which
were exposed because of the apartheid. This change the economic status of the country.

 

 The following are some of the factors which
caused the change in Supply to shift.

Climate Changes-According to Vollgraaf & Mbatha (2016)
South Africa in 2015/2016 experienced its worse drought in 100 years. The
agricultural and manufacture output dropped drastically. The drought decreases
the supply of agricultural products. This caused the supply curve to shift to
the left.

New Technology-South African government invested money on
innovation hub. Many student were sent in other countries such as China and
Cuba to enquire new skills and technology for improving the economy of the
country. Industries also invested in new technology. Example, the courier
service companies are using the GPS to locate the address for delivery to save
on time to go around searching for the address. Because of the use of technology,
the output levels increase causing the supply curve to shift to the right.

Government
Policies-South Africa passed some legislation and policies from 1999 with the
aim of controlling consumption and make revenue.

One
of the policy was to increase from 0.12 cent per cigarette to 0.38c in 2009/10.
The goal of policy was to reduce the cigarette consumption and prevent the negative
impact caused by it. Abedian & Jacobs , 2001.

The
supply curve shifted to the left because of the low supply of the cigarettes.

 

Factors
that can affect the demand curve of raw water to shift

Change in Taste and Preferences -The consumption of poultry
meat in South Africa increased by almost 80% from 21.5 kg per person per year
in 2000 to 80.5 kg per person per year in 2014. As chicken is relatively
expensive and generally available in most places, it grows to be most important
protein source in the diet of majority of South Africans. Burgin,2015

 This resulted to steady economic growth and
increase in average income levels of South Africans since 2000. This cause the
rightward shift of the demand curve.

Population-According to the World Bank (2015), since 1994 in
South Africa the working age population has grown by 11 million and comprises
65% population of 54.9 million in 2015. Therefore, more people in employment mean
more production, more income and more spending. This expansion of South
Africa’s workplace presents the country with a demographic window of
opportunity for increase economic growth and better living standard. World
Bank,2015.

Because of the increase in population the demand curve will
shift to the right.

 

Question 3

South
Africa is a welfare developing state. A country leading with inequalities, with
the highest poverty rate and with challenges in education, health, crime and
employment.

Social
grants are the one of the many tools used to make sure that people faced with
those challenges have something to live on, this is the way our government is
trying to reduce unemployment but again we need to look at our economy and how
will it be affected in the long run.

Since
these social grants are paid out of taxes the country might find itself unable
to pay these social grants due to insufficient money received from tax payers. Citizen
Rossouw,2017

 

My
proposal is to build an economical enabling Infrastructure. Economic enabling
Infrastructure refers to the basic physical systems of country’s or community’s
population, including roads, utilities, water, sewage, etc. Investors word,
2017

Having
good quality Infrastructure in South Africa will have a positive effect in
economic growth meaning increase in job creation and increase foreign direct
investment to improve tax revenue. An increase in economic growth will result
in increase in Gross Domestic Product of a country.

 

Question 4

I would choose the option of ensuring that
my child is on Discovery medical aid because

to me health is the main priority and discovery medical aid
will give my child access to private hospital care, meaning the opportunity
cost will be the quality health care instead of good quality education.

 

 In
South Africa, we have a very poor public health services as compared to public
education. The South African Constitution’s Bill of Rights says
that everyone has the right to have access to health care services. Yet more
than 80 percent of the nation’s population has no medical insurance and depend
on a public health system with too few doctors and poor facilities, resulting
in treatment delays.

 The
country’s poorest people have access to free services and medicines at about
4,200 public clinics, but these facilities have been badly managed and are
hampered by broken equipment, medicine shortages and insufficient numbers of
staff.

Business Day newspaper found that out of
the 1,427 facilities inspected in the four years through March 2016, only 6
percent of them passed their inspections on criteria ranging from drug
availability to infection control. Bonorchis & Kew, 2017

 The
biggest reason most of doctors leaving South Africa’s public sector is the poor
working conditions. Medical Aid scheme will help me to pay for my child’s
health care needs.

Taking the child to the private school can
be costly and in case the medical condition for the child become a challenge it
will be more expensive taking him/her to the private hospital, sometimes the
child will end up to the public hospitals which are having all the challenges
stated above.

 

 

 

 

 

 

Question 5

Examples of Monopoly and Oligopolistic
Competition

Retail Sector – Monopolistic CompetitionWater Sector-Oligopolistic CompetitionOil and gas Sector-Oligopolistic Competition

Both Monopoly and Oligopoly are market
competition models that are imperfect

meaning that they show some characteristics of
Imperfect competition. In perfect competition, there aren’t barriers to entry
and exit in the market place, there are a large, even infinite, number of
buyers and sellers, and every buyer and seller is a “price taker,” meaning no
one has the power to set prices.

A cartel is a special case of oligopoly when
competing firms in an industry collude to create explicit, formal agreements to
fix prices and production quantities. In theory, a cartel can be formed in any
industry but it is only practical in an oligopoly where there is a small number
of firms A cartel has less command over an industry than a monopoly According
to News 24 June 2017, two fire companies (Fireco Gauteng has admitted cartel
conduct. Fireco Gauteng and Afrion have admitted that they engaged in price
fixing, market division and collusive tendering in contravention of the
Competition Act. Fireco Gauteng has agreed to pay an administrative penalty of
R909 000, while Afrion has agreed to pay R327 000.

The commission said its
investigation found that from at least 1996 to 2015 the companies had fixed
prices, divided markets and tendered collusively when bidding for tenders to
install fire control and protection systems in new and existing buildings. Fin24
,2017

                                    

 

 

 

 

 

 

 

Question
6

 

A
cartel occurs when two or more firms enter agreements to restrict the supply or
fix the price of a product in an industry.

Cartel become
harmful to small and medium sized businesses and consumers by artificially
raising prices, restricting choice or reducing product quality or service.

 

Cartels
are against the community interest because they at increasing prices ; Alter
normal workings of a competitive market   from consumers to powerful entrusted interests.
Successful cartels become an ‘easy’ way to make profit, therefore it may
discourage innovation and efficiency gains.

In South Africa cartel behaviour is prohibited by section
4(1)(b) of the Act. The penalty for participation in a cartel is a fine of up
to 10% of the firm’s annual turnover. The firm also faces the risk of damages
claims by customers who may have suffered harm because of the cartel activity. Compcom
,2017

It found that work completed by South Africa’s
competition authorities in fighting cartels in the cement and food industries has
helped to reduce prices, stimulate growth, and helping hundreds of thousands of
South Africans ward off deeper poverty. Mail and Guidian Donnelly,L.2017

 

Question 7

C-Class continues to be the best-selling model in Merc
Benz due to its high demand and lesser in price as compared to E Class Model. To
measure production efficiency of C Class, we need to look at how well a company
is producing its Mercedes-Benz to maximize its outputs while using the least
amount of resources. The price of Mercedes Benz C Class is cheaper than of E
Class which means the unit cost of C Class will be less that of E Class, when
production cost per unit of C-Class is cheaper the company will therefore
increase its production efficiency.

Variable costs for C-Class will be higher than
variable cost of E-Class , the more production of C class will result in
increase in Variable Cost while Fixed cost remain the same both models.

Total Cost =TFC +TVC

The increase in TVC result in increase in total output
of C- Class. Mercedes leverage on the economies of scale, because they produce
more C-class on a larger scale but they must try and avoid Diminishing return
to scale. Diminishing return will be bad to business because it will lead to decrease
in output, decrease in Profit while more money will be spending on Variable
Cost.

 

 

Question 8

China’s industrial production rose by 6.1
percent year-on-year in November of 2017, following a 6.2 percent gain in the
prior month while markets expected 6.2 percent.

This implies that China’s economy is booming.
China achieves this by being very innovative, investing in good technology, increase
in employment and job specialization.

Also, due to good scalability China products
are cheaper than other countries. Trade economics,2017

 

If South Africa wants to achieve a greater
scale like China they should invest in good technology, build more factories, do
research and development, reduce in imports and increase labor specialization.
This will result to an increase in total output and lower the price of products
as each worker will be doing what he/she do best.

 

If South Africa wants to achieve a greater
scale like China they can invest in the following:

Advanced Manufacturing

South African factories will have to pursue new
market and step up innovation and production. To achieve this it need to draw
its skilled labour to grow into globally competitive manufacturing hub focus on
high value added categories such as automotive, industrial machinery and
equipment as well as chemicals.

 

Infrastructure Production

Although South Africa is investing in
infrastructure, there are still gaps in electricity, water and sanitation.  The partnership between public and private
sectors can drive together three strategies to make infrastructure spending up
to 40% more productive: making maximum use of existing assets and increase
maintenance.

 

Service Exports

South Africa has high developed service
industries, but is captures only 2% of the rest of the sub Saharan Africa’s
market for service imports which is worth nearly half a trillion rand. The
export to the region could ramp up with the right investment, and government
can help by promoting regional trade deals.

 

Agricultural Transformation

The consumption of agricultural products is rising,
throughout Africa and Asia. South Africa could increase agricultural exports.
This be the key drive of rural growth, benefiting the nearly one in ten South
Africans who depends on substance or smallholder farming.

  
                     McKinsey Global Institute
,2015

 

 

 

 

 

 

 

 

 

 

References:

Burgin,
R. (2015) Case study: South Africa’s growing poultry consumption. World poultry.
Retrieved from http://www.poultryworld.net/Meat/Articles/2015/12/Case-Study-South-Africas-growing-poultry-consumption-2735530W/

World
Bank (2015) South Africa’s changing demographic could lift growth by 5.4% by
2030.Retrieved from  http://www.worldbank.org/en/news/press-release/2015/08/17/south-africa-demographic-lift-growth

McKinsey
Global Institute (September 2015) Five Ways to turn South Africa into growing
economy. Retrieved from https://www.fin24.com/Economy/Five-ways-to-turn-SA-into-a-growing-economy-20150901

Vollgraaf
,R & Mbatha ,A(March 2016) South Africa growth weakens amid worst drought
in 100 years.

Retrieved
from https://www.bloomberg.com/news/articles/2016-03-01/south-african-gdp-growth-slows-to-0-6-in-fourth-quarter

 Rossouw, R (February 2017) Why social grants matter in SA: they
support 33% of the nation. Retrieved from https://citizen.co.za/news/south-africa/1429905/social-grants-matter-sa-support-33-nation/

Investors words (2017) Infrastructure. Retrieved from  www.investorwords.com/2464/infrastructure.html

Bonorchis, R & Kew, J (July
2017) How South Africa Stumbles on health care. Retrieved from https://www.bloomberg.com/news/articles/2017-07-27/how-south-africa-stumbles-on-health-care-for-all-quicktake-q-a

Fin24 (June 2017)
Two fire companies admit cartel conduct. Retrieved from https://www.fin24.com/Companies/Industrial/two-fire-companies-admit-cartel-conduct-20170626

Compcom (2017) Cartels.
Retrieved from http://www.compcom.co.za/cartels-3/

Donnelly, L (February 2016) Competition authorities’
cartel-busting pays off for SA. Retrieved from https://mg.co.za/article/2016-02-11-competition-authorities-cartel-busting-pays-off-for-sa/

Trade economics,2017 China Industrial Production. Retrieved
from https://tradingeconomics.com/china/industrial-production