Exam (elaborations)
OTE 2601 Exam summary and assignments
- Course
- OTE 2601 (OTE2601)
- Institution
- University Of South Africa (Unisa)
This document consist of a summary per unit 1-7 with both assignment 1 and two.
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Study unit 1OTHER DEFINITIONS OF ECONOMICS
-Economics is often defined as the study of using limited resources to satisfy unlimited needs and wants.
-Economics is the study of how our scarce productive resources are used to satisfy human wants
-Economics is the study of how scarce resources are allocated among various uses.
-Economics is the study of how individuals and groups of individuals respond to and deal with scarcity.
-Economics is the study of how individuals and societies choose to use the scarce resources that nature and
previous generations have provided
Economic growth
Occurs when the level goods and services produced increases. A higher production of goods and services
enables us to consume more goods and services and thereby increasing our economic welfare. Economic
growth is therefore an important macroeconomic objective of all economies. producing more goods and services
not only increases our consumption of goods and services but it also contributes to higher employment since
higher production usually requires more labour
Exchange rate
Countries use different currencies for their transactions. in order for two countries to do business they need
to be able to exchange one currency for another currency. if you as a South African wish to buy goods and
services from American company you need to exchange your rands for dollars in order to pay the American
company. When an American buys goods from a South African company the American must exchange dollars
for rands in order to pay the South African company. The rate at which one currency can be exchanged for
another currency is known as the exchange rate.
A depreciation of the rand occurs when we have to pay more rands for foreign currency while an appreciation of
the rand occurs if we to pay fewer rands for a foreign currency unit.
INFLATION
Inflation is defined as a continuous and considerable rise in prices in general. it refers to a process in which the
prices of most goods and services are increasing from year to year. it is concerned with a considerable increase
in prices. inflation refers to an increase in prices in general. Economists therefore often refer to inflation as
increases in general price level.
THE DIFFERENT TYPES OF ECONOMIC ACTIVITY IN THE SOUTH AFRICAN BUSINESS ENVIRONMENT
The are two sectors that can be identified in the South African economy, the formal sector and the informal
sector.
FORMAL SECTOR INFORMAL SECTOR
-The formal sector of the economy may be regarded as those -The informal sector or hidden sector. It is difficult to give a
businesses that are registered with government precise definition of the informal sector. Like the formal
authorities. These businesses employ many workers; use the sector this sector of the economy has its producers,
latest technology to produce goods and services. They also distributors and service providers. Informal activities are
pay tax to the central government and trading licences etc. to either legally acceptable or illegal.
local municipalities.
The South Africa economy is a mixed economy in which private property, private initiative, self-interest and the
market mechanism all play an important role. The South African economy is, however, also characterised by a
substantial degree of government intervention. in pure market capitalism all factors of production are privately
owned. In South Africa as in all other countries, some enterprises, or significant shares of them, are owned
directly or indirectly by the state.
One particular area of government intervention is price control. In a pure market system all prices are
established through the market mechanism. South Africa, however, has a long history of price and other forms
of price-fixing by the government. South Africa does not have a pure market system. The system is a mixed one
,in which both the market mechanism and command or central direction(in the form of government intervention)
play a significant part. Moreover, the mix between the market and central organisation, or between the private
sector and public sector, changes all the time.
DEFINITION OF UNEMPLOYMENT
There is no doubt that South Africa is suffering from high unemployment and that it suffered high unemployment
rate even before the arrival of Covid 19 pandemic .
Unemployed persons are those persons who, being 15 years and older, are not in paid employment or self
employment, were available for paid employment or self employment during the seven days preceding the
interview and took specific steps during the four weeks preceding the interview to find paid employment or self-
employment.
THE UNEMPLOYMENT POOL
A person may enter the unemployment pool for one of four reasons:
-The person may be a new entrant into the labour force, looking for work for the first time, or a re-entrant-
someone returning to the labour force after not having looked for work for some time.
- A person may leave job in order to look for other employment and will be counted as unemployed while
searching.
-The person may be laid off meaning that a worker is not fired but might return to the old job if the demand for the
firm's product recovers.
- A worker may lose a job to which there is no chance of returning, either on account of being retrenched or fired
or because the firm closes down
Study unit 2
Bank Overdraft
An overdraft is an extension of credit from a lending institution that is granted when an account reaches zero.
The overdraft allows the account holder to continue withdrawing money even when the account has no funds in it
or has insufficient funds to cover the amount of the withdrawal.
Basically, an overdraft means that the bank allows customers to borrow a set amount of money. There is interest
on the loan, and there is typically a fee per overdraft.
With an overdraft account, a bank is covering payments a customer has made that would otherwise be rejected,
or in the case of actual checks, would bounce and be returned without payment.
As with any loan, the borrower pays interest on the outstanding balance of an overdraft loan. Often, the interest
on the loan is lower than the interest on credit cards, making the overdraft a better short-term option in an
emergency. In many cases, there are additional fees for using overdraft protection that reduce the amount
available to cover your checks, such as insufficient funds fees per check or withdrawal
BUDGETING
Budgeting is the way a business decides to use the money and other resources that it already has or will
receive. A budget is implemented over a specific period of time, e.g an annual budget. It sets targets for
activities such as expenses, stock, production and sales. When a manager works out a budget, he/she commits
the business to following a certain course of action. This is similar to a person making a well thought out
decision and then taking action to carry out this decision.
Budgeting allows the small business manager to:
• Control the future expenditure (spending of money) of a business
• Provide targets that can be compared with actual results
• Identify current or future expenditure problems
• Use budgets for planning
• Co-ordinate the activities of the whole business by uniting the plans and objectives of the different
departments
, The reasons for budgeting:
• It provides a plan about how to use resources.
• It provides a standard by which to evaluate the performance of different business activities
• It helps with decisions about staff, money.
Capital is a factor of production refers to all man-made assets that are used in the production of goods and
services. this includes things as machines, plant, buildings, roads, bridges and dams-all things that are not
wanted for their own sake but which are required to produce other goods and services. South Africa is a capital -
poor country. many capital goods, such as heavy or specialised machinery and profitable equipment, cannot
be manufactured locally on a profitable basis and therefore have to be imported
What Is Credit?
Credit is generally defined as a contract agreement in which a borrower receives a sum of money or something
of value and repays the lender at a later date, generally with interest.
Credit also may refer to the creditworthiness or credit history of an individual or a company. To an accountant, it
refers to a bookkeeping entry that either decreases assets or increases liabilities and equity on a company's
balance sheet.
KEY TAKEAWAYS OF CREDIT
• Credit is generally defined as an agreement between a lender and a borrower.
• Credit also refers to an individual or business' creditworthiness or credit history.
• In accounting, a credit may either decrease assets or increase liabilities as well as decrease
expenses or increase revenue.
How Credit Works
Credit refers to an agreement to purchase a product or service with the express promise to pay for it later. This is
known as buying on credit.
The most common form of buying on credit today is via the use of credit cards. This introduces a middleman to
the credit agreement: the bank that issued the card repays the merchant in full and extends credit to the buyer,
who may repay the bank over time.
The amount of money a consumer or business has available to borrow—or their creditworthiness—is also called
credit. For example, someone may say, "He has great credit, so he's not worried about the bank rejecting his
mortgage application."
MAN AS A CONSUMER
The most important element of the marketing environment is consumer. A close second in importance is the
product because marketers use the products to satisfy consumer needs.
However, to understand the nature of products a person needs to understand behavior of consumers.
Consumers do not buy products, they buy benefits. A consumer, for example does not buy a drill because he
wants a drill, he buys it because he wants a hole. Likewise a person buys knitting needles because she wants to
be warm. Products are therefore only bought while they offer a benefit.
Furthermore consumers seldom buy products for a single reason. A Mercedes Benz does not merely offer the
benefit of movement, it offers benefit of comfort, safety, status, etc
FUNCTIONS OF MONEY
-Money is a medium of exchange
-Money is a measure of value or accounting unit
-Money is a store of value
-Money is a standard of deferred payment
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