SUBJECT:
GRADE:
EMS
AIMS OF
LESSON:
RESOURCES
7
9
WEEK:
CAPS SECTION:
Term 1: Lesson 1
Term 1: Lesson 1
The Economy
Learners must be able to understand:
1. Economic systems: namely the planned economy, market economy and mixed economy
2. The characteristics of each economic system
3. The global economy
4. The circular flow: the participants in the circular flow of a closed economy; the flow of goods and services, money
and factors of production in the circular flow of a closed economy; and illustrated by using a flow diagram
PAPER BASED RESOURCES:
• Textbooks
DIGITAL RESOURCES:
• https://www.thelearningtrust.org/asp-treasure-box
• wcedeportal.co.za
Prior content knowledge: Needs, services and factors of production
Link with the next lesson: Circular flow and price theory
By the end of the lesson learners will be able to:
• Understand the three major economic systems and the circular flow
INTRODUCTION
TERMINOLOGY
8
DATE:
•
•
•
•
•
•
•
•
•
•
•
Any terms that appear in the topic that do not form part of the learner's normal vocabulary.
Markets
Economic systems
Capitalism
Socialism
Traditional system
Globalisation
Integration
Circular flow model
Circulation
Participants
Financial institution
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Expenditure
Consumers
Producers
Exchanged
Start-up capital
Households
Government
Businesses
Interact
Factors of production
Goods and services
Public goods and services
Savings
Investments
Loans
Goods and service market
Factor market
Labour market
Collectively
Income
Wages
Labour
Spending
Taxes
Real flow
Rent
Profit
Introduction
•
•
An economic system is a system that a country chooses to allocate its resources and distribute its goods and
resources.
The economic problem is how to meet the endless wants and needs of people with limited resources
Three economic systems
•
•
•
Planned economy
Market economy
Mixed economy
Planned economy
CONTENT:
CONCEPTS
and/or
SKILLS
An economic system in which government make all the decisions about the production and consumption of goods and
services.
Characteristics of Planned economy
•
•
•
•
•
•
The government owns the land, natural resources, factories and the farms
People are not allowed to own property
The government decides what should be produced and how it should be sold for
Workers don’t have a choice about what they want to do
The government gives workers everything they need to live, including their food
Examples of countries with planned economies are Cuba, Libya, India, China, North Korea, Iran, Saudi Arabia
Market economy
An unplanned economy in which land, property and business are owned by private people, not the government.
Characteristics of Market economy
•
•
•
•
•
•
•
Aim of business is to make a profit
Entrepreneurs decide what goods and services to produce
Businesses and people borrow money from banks
Workers can choose what work to do and who they want to work for
Consumers, government and businesses spend money on goods and services
Workers and businesses make money from producing goods and services
The government makes money from taxes
Mixed economy
A mixture of private and government control of the economy. The government, as well as people and businesses, own the
land and natural resources.
Characteristics of Mixed economy
•
•
•
•
Capital comes from banks, shareholders and the government through the spending of
taxes
Entrepreneurs decide what to produce
The government spends taxes on education, housing and clean water
South Africa is a mixed economy
The global economy:
➢ The term ‘global economy’ refers to how the economies of most of the countries in the world have become
interconnected.
➢ The world has virtually become one big marketplace where all countries trade.
➢ This has given rise to the term ‘globalisation’ which means the integration of production and consumption in all markets
across the world.
➢ Transport and communication are continually making trade between countries increasingly easier.
➢ In addition to goods and services, labour and capital are now also more mobile and respond to the market forces of
demand and supply.
➢ This has affected the prices of products, which have become more equal around the world.
➢ Some people are critical of these new developments.
➢ They believe that they are a means of strengthening capitalism.
➢ They feel that the economies of those countries that prefer to have more state control of production will be affected
negatively because capitalist countries will not trade with them.
➢ Some critics say that globalisation takes jobs away from well-paid workers in the wealthy nations and creates
sweatshops (large factories where workers work long hours in poor conditions and earn low wages producing goods for
international markets) in the poor countries.
➢ Another criticism is that globalisation has impacted on the cultures of many peoples and countries.
➢ International marketing has led to international brands, so people all over the world end up wearing the same clothes,
eating the same foods and buying many of the same consumer goods.
➢ Supporters of the global economy say that the free movement of capital stimulates investment in poor nations and
creates jobs in them.
➢ It also gives domestic consumers a large number of imported goods to choose from.
EXPLANATION OF THE CIRCULAR FLOW
The circular flow of money, good and services, and factors of production.
Business
Government
• The business buys goods and services from the government. This is done through the purchase of goods by state-owned
businesses, where the business would then pay the government an agreed price.
• Businesses pay taxes to the government for the provision of services and infrastructure in the country.
Government
Businesses
• Government buys the goods and services produced by businesses and pays them the agreed price.
• The government also collects taxes from businesses which they use to make improvements to the country and supply
businesses with services and other infrastructure needed by them and the country.
• The government makes investments into businesses which allow them to flourish. The government also offers guidance and
legislation to support and help businesses in the country to be ethical and profitable.
Households
Government
• Households own factors of production and sell them to the government. For example, households supply government with
labour to work for the government and municipalities in the country, for which the government pays the wages.
• Households pay tax to the government for the services and infrastructure they supply.
Government
Households
• The government provides households with goods and services such as infrastructure, education, healthcare, and so on.
• Government supplies households with employment and capital in return for factors of production.
Households
Businesses
• Households sell the factors of production they own to businesses who can then convert them into goods and services.
• Households buy goods and services from businesses to satisfy their wants and needs and allow businesses to make a profit.
• Households supply businesses with labour, i.e. people in the households are the workers in a business.
Businesses
Households
• Businesses sell goods and services to households.
• Businesses employ people from households and pay them salaries and wages.
Activity 1
Compare the 3 main economic systems by completing the following table: Write in the answer that answers the question
to the characteristics.
Characteristic
Planned economy
Market economy
Mixed economy
Government control
Profit Motive
Ownership of factors of
production
Choice of occupation
CONSOLIDATION
ACTIVITIES
Allocation of resource
Distribution of output
Prices
Economic growth
Privatization
Bureaucracy
Interest
Decisions
Private Enterprise
Activity 2
Study the following diagram and answer the questions that follow.
A. ______________
C. ___________
HOUSEHOLDS
SUBSIDIES
GOVERNMENT
PUBLIC SERVICES
B.__________
TAXES
MARKET FOR
FACTORS OF
PRODUCTION
1.1
1.2
1.3
1.4
Complete the diagram above by writing the letters A to E and the correct answers. (5)
Give any two examples of public services provided by the government to households. (2)
Write the correct participant for each of the activities below:
1.3.1 ...sells goods and services to other participants.
1.3.2 ...provides labour to the government and businesses.
1.3.3 ...buys factors of production to produce goods and services.
1.3.4 ...receives taxes from the other participants.
1.3.5 ...earns wages from the other participants.
(5)
Discuss four (4) roles of the government to the businesses in the circular flow in
the closed economy.
(8)
[20]
MEMORANDUM
OF ACTIVITIES
Memorandum: Activity 1
Characteristic
Planned economy
Government control
Central
Profit Motive
No
Ownership of factors of
Government
production
Choice of occupation
People are trained and
educated according to the
needs identified by the
government
Allocation of resource
The government decides
what the production
targets are and allocates
resources accordingly
Distribution of output
The government distributes
not only capital goods but
also consumer goods
Prices
Economic growth
Privatization
Bureaucracy
Market economy
No control
Yes-the driving force
Private
Mixed economy
Semi-control
Yes – the driving force
Private
People can choose their
field of study and level of
education
People may usually choose
their occupation
Consumers determine how
resources are allocated
Government has key
industries for the whole
economy. Provincial
incentive schemes.
Market free to operate
according to supply and
demand. Government has
certain license
requirements
Competition determine
prices
Consumer and government
play a role
Privately and publicly
owned. Increases scope of
the market
Very little
In a marketplace where
goods are exchanged for
money
Fixed – set by the
government
Determined by
government
None
Competition checks price
Very important because of
central planning and
centralization
Not much because the
government’s officials do
not play a fundamental
role
Consumer
Privately owned
Interest
Society
Personal
Personal, society
Decisions
Central government
Individuals - decentralized
Private Enterprise
Government is responsible
for the production
Can produce, buy and sell
as much as they like
Individual
Government
The government provided
certain services. Others by
private individuals
Activity 2
1.1
A.
Market for goods and services
B.
Businesses
C.
Households pay taxes to the government
D.
Households supply factors of production
E.
Households buy goods and services
1.2
Water, Electricity, medical, educational, safety and security, soial welfare, etc
Any correct two
(5)
(2)
1.3
1.3.1 Business
1.3.2 Household
1.3.3 Business
1.3.4 Government
1.3.5 Household
(5)
1.4
a) Government buy goods and services produced by businesses?
b) Government collects taxes from businesses which they use to make
improvements in the country and supply businesses with services and
infrastructure
c) Government makes investments into businesses which allow them to
grow
d) Government also offers guidance and legislation to support and help
businesses
(8)
[20]