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Summary Economics Grade 12

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  • Economics
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  • 12th Grade

This document outlines all concepts tested under Inflation Grade 12 Economics. I have also compiled questions from past exam papers particularly under this topic . The link to my blog is given in the notes .

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  • July 13, 2023
  • 7
  • 2022/2023
  • Summary

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  • economicsgrade12

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  • 12th Grade
  • Economics
  • 200
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Inflation
Presented by Alison Tutors Contact us on +27 68 051 8805




Inflation
In this topic you will learn about:

Inflation
Types and characteristics of inflation
Causes and consequences of inflation
The inflation problem in South Africa
Measures to combat inflation

Unit 1 : Inflation

Inflation is an increase in the general price level of goods and services in an economy over a
period of time. When the general price level rises, each unit of currency buys fewer goods and
services. In 2003 , price of bread was pegged at R3,56 but currently bread on average is
R14,50 .

Unit 2: Types and characteristics of inflation

2.1 Demand-pull inflation

A rise in the price of a product or service that is normally caused by a increase in demand and
a shortage of supply

, Demand-pull inflation has the following characteristics:

a relative increase in total demand
Foreigners contribute to demand-pull inflation because they demand imported goods
and this demand puts greater strain on limited supply thereby increasing prices
if demand of goods rises more rapidly than supply, a shortage will arise and prices will
rise to match inflation

A good example of Demand-pull inflation is aggregate demand rising at 4% but the productive
capacity is at 2.5% , hence firms will see demand outstripping supply . Therefore the respond
by increasing prices




2.2 Cost-push inflation

Cost-push inflation occurs when we experience rising prices due to higher costs of
production and higher costs of raw materials . Cost-push inflation is determined by supply
side factors such as higher wages and oil prices. Cost-push inflation can lead to lower
economic growth and often causes a fall in living standards, though it often proves to be
temporary .

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