1. Economic Systems

• Globalisation:

  • Refers to international trading of goods and services
  • Improvement in transport and communication
  • Advantages:
  • Businesses can compete globally, larger variety of goods and services
  • Freedom to work elsewhere
  • Capital can move freely between countries
  • Growth of international trade leads to uneven economic playing fields between rich and poor countries
  • Advantages for 1st world countries:
  • More capital and skills for manufacturing products
  • Extract natural resources from developing countries at low prices
• Market Economy e.g. America
• Who owns the factors of production in ME?

  
  

  Ownership of the

  by private people and business,.

  Workes are unionised.

  Freedom of movement and speech
• How are the

  resources

  allocated in ME?

  Supply and demand.

  Variety and quantity

  of goods and

  services. Competition.
• How are goods and

  services distributed in ME?

  
  

  Distribution is

  motivated by profits.
• Who makes the economic decision in ME?

  Minimum interference from the state.

  Democratic political system
• How are goods and services distributedin ME

  Distribution is motivated by profits
• Advantages of Market Economy

  -People have the opportunity to work hard and become successful.

  -Entrepreneurship is strong because there is a financial reward, and this ensures competition.

  -Large variety of goods and services.

  -Resources are privately owned therefore people are motivated to use them sustainably.

  -Skills development improves in order to keep up with technology.
• Disadvantages of market economy

  -Unfair distribution of wealth = the rich get richer, and the poor get poorer. Not everyone will afford goods and services.

  -Monopolies may be formed where there is only one supplier of a product or service.

  -Little motivation to provide public services as there is very little money to be made.

  -Lay off staff to cut costs. Automation = job loss.

  -Workers may be exploited.

  -Large businesses have an unfair advantage (economies of scales). Some businesses may fail due to intense competition.
• Planned economy?

  Cuba/Russia
• Who makes the economic decisions in PE?

  The state has full control of economic decisions.

  Dictatorship- single part system e.g. Communist arty.

  The government controls all the key industries e.g. mining rights, power, and transportation.
• Who possesses the factors of production in PE?

  No private ownership.

  All the factors of production belong to the state.

  Workers are employed by the government and are exploited.

  no access to information e.g. no access to the internet in Cuba ( Only since 2010 were Cubans allowed building their own homes).
• How are the resources allocated in PE?

  The government controls the distribution of resources e.g. money was spent on weapons while the people starved.

  Few choices and no competition.
• How are goods and services distributed in PE?

  Subsistence- no excess in produced.

  Distribution of goods and services are not profit-driven and prices are set by the government.

  Goods and services are rationed.

  All are poor.
• Advantages of PE

  -High employment rate.

  -All citizens have access to basic services like healthcare. The quality is often not of a good standard.

  -Equal distribution of goods, services and resources.

  -Pricing is set by the government and isn’t profit motivated.

  -The state benefits from the income generated by F.O.P which benefits the masses.
• Disadvantages in a planned economy

  -Since all resources belong to the government, there is little motivation for citizens to use them sustainably.

  -There are limited choices of products therefore the desires of consumers aren’t met.

  -People do not have the freedom to improve their economic position because there is no private ownership.
• Mixed Economy?

  South Africa
• Who makes the economic decisions in Mixed?

  Multiparty democracy.

  Nationalisation- government ownership of key industries e.g. power, steel, and transportation.

  Privatisation- private ownership of key industries e.g. toll roads.
• Who possesses the FOP in Mixed?

  Private and government own the FOP.

  Workers are unionised.
• How are the resources allocated in Mixed?

  Supply and demand.

  Resources are distributed to benefit the whole population.

  The government collects taxes to take care of social needs.
• How are the goods and services distributed in Mixed?

  Distribution is motivated by profits and to meet the needs and interests of the people.
• Advantages of a Mixed

  • Taxes are used to take care of the poor e.g. social grants and pensions
  • Taxes are used to improve infrastructure e.g. roads stadiums, airports etc.
  • Entrepreneurship is encouraged
  • Workers have rights (Unions)
  • Governments provide jobs directly as employers and indirectly through public works programs.
• Disadvantagesof a mixed

  • key industries owned by the government are not all profitable and cost the taxpayers money e.g. SAA and ESKOM
  • Nationalisation scares off investors e.g. Mining
  • Taxes on the working class are high in order to compensate for the needy.
  • Highly active unions have a negative impact on investment due to strikes and high cost of salaries and wages.
  • Privatisation of roads e.g. Toll makes transport very expensive.
• GLOBALISATION

  Refers to international trading of goods and services. The improvement of transport and communication has made the world a “smaller place”.
• ADVANTAGES

   -Businesses can now complete globally which results in a larger   variety of goods and services due to the importing and exporting   of goods and services.

  -Freedom to work elsewhere in the world.

  -  Capital can move freely between countries. Businesses can invest   in countries that offer opportunities to make a profit.
• GLOBALISATION

  The growth of international trade means that the economic playing fields between the rich (developed/1st world countries) and the poor (developing/ 3rd world countries) becomes even more uneven.
• ADVANTAGES FOR 1ST WORLD COUNTRIES

  •More capital and skills makes it easy to manufacture products from   natural resources. •Developing countries will extract natural resources to sell to 1st world countries (usually at low prices). 1st world countries turn natural resources to finished goods and resell to developing   countries at higher prices.
• ADVANTAGES FOR 1ST WORLD COUNTRIES

  •Governments in 1st world countries can afford to provide businesses with subsidies. This results in a decrease in manufacturing costs. Businesses in 3rd world countries will struggle to sell their products and be forced to close = unemployment.
• ADVANTAGES FOR 1ST WORLD COUNTRIES

  •1st world countries have established economies, and their exchange rates are stronger. Makes it expensive for 3rd world countries to import goods and services. •South Africa has a DUALISTIC ECONOMY – a combination of 1st and 3rd world characteristics.
• Label

  A) Communism

  B) Capitalism

  C) Mixed economy