Question use of technology, the output levels increase causing

Question
1

 

The graph below indicates that the Increase in
demand of raw water will shift the demand curve to the right from (D0 to D1),The change(increase) in demand of raw water will
result in no change in price(P0) which will result in flat or vertical supply
curve(S0) Point (A)
shows the equilibrium point which will determine the price of raw water which
remains the same, whereas Point B indicate the price after the change in demand
of raw water to date.Equilibrium point (A) and (B) shows the price of
raw water that does not change when there is an increase in demand from Q0 to
Q1 This indicates that in a perfectly competitive market individual firms are price
takers and that the price is determined by the intersection of the market
supply and demand curves competitive, (A) and ( B )

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Price (R)

 

Quantity Demand

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 2

 

Factors that can affect the supply curve
of raw water to shift

In
1994 the new democratic government took over in South Africa, the international
countries lifted the suctions which were exposed because of the apartheid.
These change the economic status of the country.

 The
following are some of the factors which caused the change in Supply to shift.

Climate Changes

According to Vollgraaf
& Mbatha (2016) South Africa in 2015/2016 experienced its worse drought in
100 years. The agricultural and manufacture output dropped drastically. The
drought decreases the supply of agricultural products. This caused the supply
curve to shift to the left.

New Technology

South African
government invested money on innovation hub. Many student were sent in other
countries such as China and Cuba to enquire new skills and technology for
improving the economy of the country. Industries also invested in new
technology. Example the courier service companies are using the GPS to locate
the address for delivery to save on time to go around searching for the address.
Because of the use of technology, the output levels increase causing the supply
curve to shift to the right.

Government Policies:

South Africa passed
some legislation and policies from 1999 with the aim of controlling consumption
and make revenue Abedian  &Jacobs :
2001. One of the policy was to increase from 0.12 cent per cigarette to 0.38c
in 2009/10. The goal of policy was to reduce the cigarette consumption and
prevent the negative impact caused by it. The supply curve shifted to the left
because of the low supply of the cigarettes.

 

 

Factors that can affect the demand curve of
raw water to shift

Change in Taste and
Preferences

The consumption of
poultry meat in South Africa increased by almost 80% from 21.5 kg per person
per year in 2000 to 80.5 kg per person per year in 2014. As chicken is
relatively expensive and generally available in most places, it grows to be
most important protein source in the diet of majority of South Africans (Burgin
2015). This resulted to steady economic growth and increase in average income
levels of South Africans since 2000. This cause the rightward shift of the
demand curve.

 

Population

According to the World Bank (2015), since 1994 in South
Africa the working age population has grown by 11 million and comprises 65% population
of 54.9 million in 2015. Therefore, more people in employment mean more
production, more income and more spending. This expansion of South Africa’s
workplace presents the country with a demographic window of opportunity for
increase economic growth and better living standard (World Bank:2015). Because
of the increase in population the demand curve will shift to the right.

 

Question 3

South Africa is a welfare developing state. A
country leading with inequalities, with the highest poverty rate and with
challenges in education, health, crime and employment.

Social grants are the one of the many tools
used to make sure that people faced with those challenges have something to
live on, this is the way our government is trying to reduce unemployment but
again we need to look at our economy and how will it be affected in the long
run.

Since these social grants are paid out of taxes
the country might find itself unable to pay these social grants due to
insufficient money received from tax payers.

 

My proposal is to build an economical enabling
Infrastructure. Economic enabling Infrastructure refers to the basic physical
systems of country’s or community’s population, including roads, utilities,
water, sewage, etc.

Having good quality Infrastructure in South
Africa will have a positive effect in economic growth meaning increase in job
creation and increase foreign direct investment to improve tax revenue. An
increase in economic growth will result in increase in Gross Domestic Product
of a country.

 

 

Question 4

I
would choose the option of ensuring that my child is on Discovery medical aid
because

to me health is the main
priority and discovery medical aid will give my child access to private
hospital care, meaning the opportunity cost will be the quality health care
instead of good quality education.

 

 In South Africa, we have a very poor public
health services as compared to public education. The South African
Constitution’s Bill of Rights says
that everyone has the right to have access to health care services. Yet more
than 80 percent of the nation’s population has no medical insurance and depend
on a public health system with too few doctors and poor facilities, resulting
in treatment delays. (Bloomberg Quick Take : 2017)

 The country’s poorest people have access to
free services and medicines at about 4,200 public clinics, but these facilities
have been badly managed and are hampered by broken equipment, medicine
shortages and insufficient numbers of staff.

Business
Day newspaper found that out of the 1,427 facilities inspected in the four
years through March 2016, only 6 percent of them passed their inspections on
criteria ranging from drug availability to infection control.

 The biggest reason cited by doctors leaving South
Africa’s public sector is the poor working conditions. Medical Aid scheme will
help me to pay for my child’s health care needs.

Taking
the child to the private school can be costly and in case the medical condition
for the child become a challenge it will be more expensive taking him/her to
the private hospital, sometimes the child will end up to the public hospitals
which are having all the challenges stated above.

 

Question 5

Examples
of Monopoly and Oligopolistic Competition

Retail Sector – Monopolistic CompetitionWater Sector-Oligopolistic CompetitionOil and gas Sector-Oligopolistic Competition

Both Monopoly and
Oligopoly are market competition models that are imperfect

meaning that they show
some characteristics of Imperfect competition. In perfect competition, there
aren’t barriers to entry and exit in the market place, there are a large, even
infinite, number of buyers and sellers, and every buyer and seller is a “price
taker,” meaning no one has the power to set prices.

A cartel is a special
case of oligopoly when competing firms in an industry collude to create
explicit, formal agreements to fix prices and production quantities. In theory,
a cartel can be formed in any industry but it is only practical in an oligopoly
where there is a small number of firms A cartel has less command over an
industry than a monopoly According to News 24 June 2017, two fire companies
(Fireco Gauteng has admitted cartel conduct.

Fireco Gauteng and
Afrion have admitted that they engaged in price fixing, market division and
collusive tendering in contravention of the Competition Act. Fireco Gauteng has
agreed to pay an administrative penalty of R909 000, while Afrion has agreed to
pay R327 000.

The
commission said its investigation found that from at least 1996 to 2015 the
companies had fixed prices, divided markets and tendered collusively when
bidding for tenders to install fire control and protection systems in new and
existing buildings.

 

 

 

 

 

 

Question
6

 

A cartel occurs when two or more firms enter
agreements to restrict the supply or fix the price of a product in an industry.

Cartel become harmful to small and medium
sized businesses and consumers by artificially raising prices, restricting
choice or reducing product quality or service.

 

Cartels are against the public interest because
cartels aim to Increase price; Distort normal workings of a competitive market   from
consumers to powerful vested interests. Successful cartels become an ‘easy’ way
to make profit, therefore it may discourage innovation and efficiency gains.

In South Africa cartel behaviour is
prohibited by section 4(1)(b) of the Act. The penalty for participation in a
cartel is a fine of up to 10% of the firm’s annual turnover. The firm also
faces the risk of damages claims by customers who may have suffered harm because
of the cartel activity.

It found that work done by South Africa’s competition authorities
in battling cartels in the cement and food industries has helped to reduce
prices, stimulate growth, including by allowing new entrants into some markets,
and helping hundreds of thousands of South Africans ward off deeper poverty.

 

Question
7

C-Class continues to be the best-selling model in Merc
Benz due to its high demand and lesser in price as compared to E Class Model. To
measure production efficiency of C Class, we need to look at how well a company
is producing its Mercedes-Benz to maximize its outputs while using the least
amount of resources. The price of Mercedes Benz C Class is cheaper than of E
Class which means the unit cost of C Class will be less that of E Class, when
production cost per unit of C-Class is cheaper the company will therefore
increase its production efficiency.

Variable costs  for C-Class will be higher than variable cost
of E-Class , the more production of C class will result in increase in Variable
Cost while Fixed cost remain the same both models.

Total Cost =TFC +TVC

The increase in TVC result in increase in total output
of C- Class. Mercedes leverage on the economies of scale, because they produce
more C-class on a larger scale but they must try and avoid Diminishing return
to scale. Diminishing return will be bad to business because it will lead to decrease
in output, decrease in Profit while more money will be spending on Variable
Cost.

 

 

Question 8

 

China’s industrial
production rose by 6.1 percent year-on-year in November of 2017, following a
6.2 percent gain in the prior month while markets expected 6.2 percent.

This implies that
China’s economy is booming. China achieves this by being very innovative,
investing in good technology, increase in employment and job specialization.

Also, due to good
scalability China products are cheaper than other countries.

 

If South Africa wants
to achieve a greater scale like China they should invest in good technology,
build more factories, do  research and development,
reduce in imports  and increase labor
specialization. This will result to an increase in total output and lower the price
of products as each worker will be doing what he/she do best.

 

If South Africa wants
to achieve a greater scale like China they can invest in the following:

Advanced Manufacturing

South African factories will have to pursue new
market and step up innovation and production. To achieve this it need to draw
its skilled labour to grow into globally competitive manufacturing hub focus on
high value added categories such as automotive, industrial machinery and
equipment as well as chemicals.

 

Infrastructure Production

Although South Africa is investing in
infrastructure, there are still gaps in electricity, water and sanitation.  The partnership between public and private
sectors can drive together three strategies to make infrastructure spending up
to 40% more productive: making maximum use of existing assets and increase
maintenance.

 

Service Exports

South Africa has high developed service
industries, but is captures only 2% of the rest of the sub Saharan Africa’s
market for service imports which is worth nearly half a trillion rand. The
export to the region could ramp up with the right investment, and government
can help by promoting regional trade deals.

 

Agricultural Transformation

 

The consumption of agricultural products is
rising,  throughout Africa and Asia.
South Africa could increase agricultural exports. This be the key drive of rural
growth, benefiting the nearly one in ten South Africans who depends on
substance or smallholder farming.

  
                     McKinsey Global Institute
(2015)