Chapter 11
The South African Economy, Circular Flows and Economic
Limitations
11.1 Role Players in the Economy
Households
Functional distribution of income: The way 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 distribution of income: The way the economy’s disposable income
is divided among different households.
Personal consumption expenditure
Durable goods: A consumer good with an expected life (use) of three or
more years.
Semi-durable goods: Semi-durable goods include goods such as clothing,
footwear with a longer life span than non-durable goods.
Non-durable goods: A consumer good with an expected life (use) of less
than three years.
Services: An (intangible) act or use for which a consumer, firm or
government is willing to pay
, The business population
Plant: A physical establishment that performs one or more functions in
the production, fabrication and distribution of goods and services.
Firm: An organization that employs resources to produce a good or
service for profit and owns and operates one or more plants.
Industry: A group of (one or more) firms that produce identical or similar
products.
The organizational structures of firms are complex
Muliplant firms can be organized horizontally with many plants
performing the same function. (Example: the acquisition of Instagram by
Facebook)
They can also be vertically integrated; they own their own plants that
perform different functions during different production stages. (Example:
Tesla invests in nickel mines to secure the production of nickel for their
batteries)
Conglomerates are plants that produce products in several industries.
(Example: Tiger Brands makes breakfast cereals, soft drinks, baby food,
rice and many more.)
Legal forms of business
Sole proprietorship: An unincorporated firm owned and operated by one
person
Partnership: An unincorporated firm owned and operated by two or more
persons.
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