Summary
EKN120 Summary Notes (Ch11 - Ch15)
- Course
- Institution
An in depth and detailed summary of the relevant chapters and content covered in EKN120.
[Show more]
Seller
Follow
MrMahan
Content preview
EKN 120 - NotesChapter 11 - The South African economy, Circular flows and economic
limitations
Role players in the economy
Households - a household may consist of a single person a family or a group of people who live
together, depend on a common income and, within the limits of that income, exercise their choices with
a view to meeting their economic objectives.
The business population
The business population constitutes the second major component of the private sector.
Functional distribution of income - the manner in which national income is divided among the functions
performed to earn it (or the kinds of resources provided to earn it); the division of national income into
wages and salaries, proprietors' income, corporate profits, interest and rent.
Personal consumption expenditure
Durable-good- a consumer good with an expected life of three or more years.
Semi-durable goods- semi durable goods include goods such as clothing, footwear with a longer lifespan
than non-durable goods.
Non-durable good- a consumer good with an expected life of less than three years.
Distinction between firm plant and industry
• Plant- physical establishment
• Firm- business organisations that own plants
• Industry- a group of firms
Legal forms of business
1- a sole proprietorship
2- a partnership
3- a private or public company
Advantages of companies:
- limited liability
- unlimited continuity
The principal-agent problem:
A conflict of interest that occurs when agents (workers or managers) pursue their own objectives to the
detriment of the principals’ (stockholders’) goals.
,EKN 120 - Notes
The government's role:
• Provide legal structure
• Public goods and services
• Private goods (rivalry and excludability)
• Public goods (non-rivalry and non-excludability)
• Quasi-public goods (e.g. education)
• the reallocation process through taxation
role of the foreign sector
• Include all role players
• Open economy
• International trade
Circular flow of the economy
,EKN 120 - Notes
Society's economising problem
Society has a limited or scarce economic resources, meaning all natural, human, and manufactured
resources that go into the production of goods and services.
Resource categories (factors of production):
- Land
- Labour
- Capital
- Entrepreneurial ability
The importance of entrepreneurs:
• Entrepreneurs take the initiative in combining resources to produce a good or service
• Entrepreneurs make the strategic business decisions that set the course of an enterprise
• Entrepreneurs innovate
• Entrepreneurs bear risk
Production possibilities model assumptions:
• Full employment
• Fixed resources
• Fix technology
• two goods
Production possibilities table: Production possibilities graph:
, EKN 120 - Notes
Optimal Allocation of resources (MB = MC):
Chapter 12 – Measuring Domestic Output and National Income
national income accounting - The techniques used to measure the overall production of the economy
and other related variables for the nation as a whole.
Purpose of National Income Accounting:
• Assess the health of the economy by comparing levels of production at regular intervals.
• Track the long-run course of the economy to see whether it has grown, been constant, or
declined.
• Formulate policies that will safeguard and improve the economy’s health.
Gross Domestic Product (GDP) - The total market value of all final goods and services produced in a
given year within the borders of the country (Citizen-supplied or foreign-supplied resources employed
WITHIN the country).
Gross National Income (GNI) - The total market value of all final goods and services produced in a given
year by the residents or registered business from a particular country anywhere in the world.
It is ownership-based and includes also what is earned abroad and repatriated by residents.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller MrMahan. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.68. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
72042 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now