african_economies_2.pptx

7/27/2019 african_economies_2.pptx

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AfricanEconomies


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All Economic Systems seek to answerthe three basic economic questions

1) What to produce?

2)How to produce?

3) For whom to produce?


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Command Economies

Basic economic questions answered bythe government (central authority)


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How do command economies answer

the basic economic questions?

1) What to produce? Whatever thegovernment says to produce

2) How to produce? However thegovernment tells you to produce

3) For whom to produce? For whomever

the government tells you to produce(ideally the entire society)


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Advantages to command economy Because the government has total control

over production and its factors, these

economies can change rapidly. Whatever isneeded most will be produced.

There is no uncertainty (people are toldwhen and how to work)

Free education, health care, and otherpublic services


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Disadvantages of command economies

Economy designed to meet needs not wants

No incentive to work hardpeople dontoften lose their jobs, so they do the bare

minimum to get by Large bureaucracy means slow decision

making, raises cost of production, lacks

flexibility No reward for initiative slows progress


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Traditional Economies

Basic economicquestions answered by

what has been done inthe past. Traditions aremaintained. Ritual,

Habit, and Custom


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Traditional economies

Individual roles and choices are defined

by the customs of elders and ancestors These economies are usually based in

societies of hunter/gatherers

Sharing is a big part of these economies


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How do traditional economies

answer the three basic questions?

1) What to produce? Whatever ritual, habit

or custom dictates2) How to produce? However ritual, habit or

custom dictate

3) For whom to produce? For whomeverritual, habit or custom dictate


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Advantages of traditional economy

There is little or no uncertaintyeveryone

knows what role to play. Life is generally stable, predictable, and

continuous


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Disadvantages of Traditional

economies

Tend to discourage new ideas and new

ways of doing things Lack of progress lowers standard of

living


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Market Economies

Basic economic questions answered by

consumers


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How do market economies answer

the three basic questions?

1) What to produce? Whatever people need

and want2) How to produce? However companies

decide to produce their product

3) For whom to produce? For whomeverwants to purchase their product


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Advantages of Market Economies Adjusts to change based on consumer wants High degree of individual freedom

Low levels of government interference

Because individuals (with money) make thedecisions, everyone (with money) has a voice inthe way the economy runs

Wide variety of available goods & services Many choices=high degree of consumer

satisfaction


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Disadvantages of Market Economies

Poverty: only those with money can participate

Market does not provide for peoples basicneeds. Governments must attempt to do this(think Katrina). High degree of uncertaintypeople lose jobs, businesses fail

Greed based system puts profit before people


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South Africa

1. What to Produce?

A large portion of South Africas GDP comes from a highly

developed, privatized enterprise system rivaling many other

developed economies. The private sector is based on mining,agriculture, services, and manufacturing.Due to large inequities established by apartheid era policies,the South African government operates a relatively large social

services sector and maintains state-run enterprises in theareas of housing, business development, education, basicservices, and healthcare.


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South Africa

2. How to produce

In the developed sector, private businesses andconsumers make production decisions based on

market


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South Africa

3. For whom to produce?

The private sector produces goods and

services for domestic and internationalmarkets based on the market price system.The government social services sector

produces public goods and services basedupon the needs of the population throughoutthe country.


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Pure

Market

Pure

Command

South Africa

Place on the continuum: South Africa is a strong

market economy with some command

characteristics.


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Nigeria

1. What to produce?

Nigerias major industry is petroleum production.

This is followed by agriculture.Business development is difficult because ofcorruption and ineffective government oversight ofmarkets.

It is estimated that as much as 75% of Nigeriaseconomy occurs in the informal sector and it notcounted in GDP.


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Nigeria

2. How to produce?After years of government control,the countrys major industries are

increasingly becoming privatized.This includes the petroleum industryand banking sector.Corruption, high tariffs on imported

goods, and lack of infrastructurecause production inefficiencies.


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Nigeria

3. For whom to produce?

46% of Nigerias daily oil production is

exported to the United States.Due to an overvalued currency, Nigeriansimport many consumer goods. Many

domestic manufacturers have been unable tocompete with cheap imports and haveclosed.


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Pure

Market

Pure

Command

Nigeria

Place on the continuum: Nigeria is on the market

side of the continuum, but is more toward the

command end than South Africa.


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In this country a single or centralizedgovernment authority decides what isproduced. Which term identifies this type ofeconomic system?

A. TraditionalB. Command

C. Market

D. Public


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In this country a single or centralizedgovernment authority decides what isproduced. Which term identifies thistype of economic system?

A. Traditional

B. Command*

C. Market

D. Public


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South African economic policy is conservative focusing on

controlling inflation, maintaining a budget surplus, and usingstate-owned enterprises to deliver basic services to low-income areas as a means to increase job growth andhousehold income. However, companies are freed to choose

what to produce, how to produce, and for whom to produce.Where does this policy place South Africa on a continuumbetween pure market and pure command?

A. Almost pure traditionalB. Pure market

C. More market than commandD. Pure command


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South African economic policy is conservative focusing on

controlling inflation, maintaining a budget surplus, and usingstate-owned enterprises to deliver basic services to low-income areas as a means to increase job growth andhousehold income. However, companies are freed to choose

what to produce, how to produce, and for whom to produce.Where does this policy place South Africa on a continuumbetween pure market and pure command?

A. Almost pure traditionalB. Pure market

C. More market than command*D. Pure command


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Specialization

Specialization encourages trade and can be apositive factor in a countrys economy.

Specialization occurs when one country can

produce a good or service at a lower opportunitycost than another country.

What are the potential problems of over-specialization, such as one-crop economies andlack of diversification? How can this impact aregions economy?


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Trade Barriers Tariff a duty levied by a government on imported or

exported goods; a list of fees fares, or other prices chargedby a business.

Quota a maximum number or quantity that is permitted or

needed Embargos a government order restricting or prohibiting

commerce, especially trade in a given commodity or with aparticular nation

Why would a specific trade barrier be used and howthat trade barrier would affect each country involved


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Currency Exchange Currency exchange the act of exchanging money

from one currency to another

Example: dollar to a euro

Exchange rates provide a procedure for determiningthe value of one countrys currency in terms ofanother countrys currency. Without a system forexchanging currencies, it would be very difficult toconduct international trade.


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Nigeria has a new industry that builds tractorsfor agriculture. To protect this new industryfrom competition by lower priced foreign builttractors the Nigerian government would usewhat type of economic trade barrier to raise

the price of imported tractors?A. EmbargoB. QuotaC. TariffD. Treaty


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Nigeria has a new industry that builds tractorsfor agriculture. To protect this new industryfrom competition by lower priced foreign builttractors the Nigerian government would usewhat type of economic trade barrier to raise

the price of imported tractors?A. EmbargoB. QuotaC. Tariff*D. Treaty


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Most African nations depend on foreign trade withmany nations to provide things which are notmade in their country. Which of these makesforeign trade with many nations easier?

A. Use of a world-wide currency.

B. A system to exchange currency betweencountries.

C. Trading only with countries that have the samecurrency.

D. Trade of products made in their country forneeded goods so currency is not needed.


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Most African nations depend on foreign trade withmany nations to provide things which are notmade in their country. Which of these makesforeign trade with many nations easier?

A. Use of a world-wide currency.

B. A system to exchange currency betweencountries.*

C. Trading only with countries that have the samecurrency.

D. Trade of products made in their country forneeded goods so currency is not needed.


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Human Capital Human capital education and training

of workers whether formal or on-the-job


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Gross

Domestic

Product

(GDP) - value

of all goodsand servicesproduced

within acountry


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If the literacy rate is growing quickly, isGDP growing at a fast rate also?

Highly developed economies like the USAand South Africa have smaller growth

rates because the size of theseeconomies is already so large.


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South Africa

Years compulsoryChildren ages 7

15 must attend school. Literacy Rate 86.4%

Real growth rate (2007): 2.5%

South Africas literacy rate is up from76% in 1980


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Nigeria

Years compulsoryNo compulsoryeducation

Literacy Rate est. between 39 51%

Real growth rate (2006-2007): 5.9%(growth based on oil exports)

Nigerias literacy rate is up from 33.5%in 1980


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How does investment in

capital influences GDP?


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South Africa Capital Investment20.1% of GDP

Real growth rate (2006-2007): 2.5%

Nigeria

Capital Investment40.2% of GDP

Real growth rate (2007): 21.4%


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South Africa

GDP$506.1 billion (2008 est.) ResourcesWorlds largest producer of Gold; No significant oil

production; Produces diamonds; No significant

uranium productionNigeria

GDP$328.1 billion (2008 est.) Resources Oiland natural gas production account for 37% ofGDP; Not a major producer of uranium, diamonds,or gold.


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How has entrepreneurship aideddevelopment in Africa?

If there is a lack of entrepreneurship, howdoes this affected development in theseregions?


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In Africa, a unique form ofmicro-entrepreneurship hasdeveloped.

Entrepreneurship is notlimited to large businesses,but in the case of Africa,includes very small shopsand one person businesses.


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South Africa

Based on information fromthe Economic FreedomIndex (EFI), South Africa isvery open toentrepreneurship. It is easy

to start a business. Privateproperty rights are wellprotected by law, but thecourts are slow andinefficient, making it difficultto resolve disputes.

To view the EFI for SouthAfrica go to:http://www.heritage.org/Index/Country/southafrica


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Nigeria

Based on information from the Economic Freedom Index(EFI), Nigeria is moderately open to entrepreneurship. Intheory, it is easy to start a business, but in practice,government corruption makes it very hard to obtain anofficial business license. Another difficulty for businessowners is lack of protection of private property rights.

Much of the entrepreneurship takes place in the informalsector of the economy. To view the EFI for Nigeria go to:

http://www.heritage.org/Index/Country/Nigeria


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Nigeria has large deposits of oil and is currently

exporting a significant quantity of oil. However,Nigeria has very few industries outside of oil andno other significant natural resources. How doesthis impact Nigerias GDP?

A. Makes the GDP more dependent on agriculture.B. Makes the GDP more dependent on oilproduction.

C. Makes the GDP inaccurate because there is littleindustry.

D. Makes the GDP inaccurate because there is onlyone major natural resource in the country.


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Nigeria has large deposits of oil and is currently

exporting a significant quantity of oil. However,Nigeria has very few industries outside of oil andno other significant natural resources. How doesthis impact Nigerias GDP?

A. Makes the GDP more dependent on agriculture.B. Makes the GDP more dependent on oilproduction.*

C. Makes the GDP inaccurate because there is littleindustry.

D. Makes the GDP inaccurate because there is onlyone major natural resource in the country.


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In South Africa it is easy to start a business. In

addition, private property rights are well protected.What impact does this have on the role ofentrepreneurs in South Africa?

A. Entrepreneurs are not affected.

B. The efforts of entrepreneurs are limited becauseof a lack of government rules.

C. Entrepreneurs will have no real impact on theeconomy of South Africa.

D. Entrepreneurs can make a significant contributionto South Africas economy.


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In South Africa it is easy to start a business. In

addition, private property rights are well protected.What impact does this have on the role ofentrepreneurs in South Africa?

A. Entrepreneurs are not affected.

B. The efforts of entrepreneurs are limited becauseof a lack of government rules.

C. Entrepreneurs will have no real impact on theeconomy of South Africa.

D. Entrepreneurs can make a significant contributionto South Africas economy.*

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african_economies_2.pptx