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ECONOMIC AND MANAGEMENT SCIENCES STUDY GUIDE Grade 7
A member of the FUTURELEARN group
Economic and Management Sciences Study guide
1807-E-EMS-SG01
Í2’È-E-EMS-SG01DÎ
Grade 7
CAPS aligned
Study Guide G07 ~ Economic and Management Sciences
CONTENTS
LESSON ELEMENTS.......................................................................................................... 5 PREFACE............................................................................................................................ 7 FORMAL ASSESSMENT PROGRAMME ........................................................................... 8 STUDY TIPS........................................................................................................................ 8 YEAR PLAN ........................................................................................................................ 9 UNIT 1: The economy ...................................................................................................... 10 LESSON 1: HISTORY OF MONEY ................................................................................... 10 1.1 Traditional societies ........................................................................................ 11 1.2 Bartering ......................................................................................................... 12 ACTIVITY 1..................................................................................................... 14 1.3 Promissory notes ........................................................................................... 14 1.4 Coins .............................................................................................................. 15 1.5 Paper money .................................................................................................. 16 1.6 Electronic banking .......................................................................................... 16 1.6.1 Using automatic teller machines (ATMs) ........................................................ 17 1.6.2 What is e-commerce? .................................................................................... 18 ACTIVITY 2..................................................................................................... 19 LESSON 2: NEEDS AND WANTS .................................................................................... 20 2.1 Basic needs of individuals, families, communities and countries .................... 20 ACTIVITY 3..................................................................................................... 22 ACTIVITY 4..................................................................................................... 23 2.3 Primary and secondary needs ........................................................................ 24 ACTIVITY 5..................................................................................................... 25 2.4 Unlimited needs .............................................................................................. 25 2.5 Limited resources to satisfy needs and wants ................................................ 26 LESSON 3: GOODS AND SERVICES .............................................................................. 26 3.1 Producers and consumers .............................................................................. 28 ACTIVITY 6..................................................................................................... 29 3.2 The role of households as producers and consumers .................................... 30 3.3 The effective and efficient use of goods and services .................................... 31 3.4 How to recycle and re-use goods to satisfy needs and wants ........................ 31 ACTIVITY 7..................................................................................................... 32 LESSON 4: BUSINESSES ................................................................................................ 33 4.1 Formal and informal businesses ..................................................................... 34 ACTIVITY 8..................................................................................................... 35 4.2 The formal and informal sector ....................................................................... 36 4.3 Types of businesses ....................................................................................... 36 ACTIVITY 9..................................................................................................... 37 4.4 Advantages and disadvantages of formal and informal businesses ............... 38 4.5 The role of formal and informal businesses as producers and consumers ..... 39
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Study Guide G07 ~ Economic and Management Sciences
4.6 The effect of natural disasters and health epidemics on formal and informal businesses ...................................................................................................... 39 UNIT 2: Financial literacy ................................................................................................ 41 LESSON 5: REVISION ...................................................................................................... 41 5.1 Traditional societies and bartering .................................................................. 41 5.2 Promissory notes, coins and paper money ..................................................... 42 5.3 Electronic banking .......................................................................................... 42 5.4 Needs and wants ............................................................................................ 43 5.5 Goods and services ........................................................................................ 43 5.6 Formal and informal businesses ..................................................................... 44 ACTIVITY 10................................................................................................... 45 LESSON 6: ACCOUNTING CONCEPTS .......................................................................... 47 6.1 Accounting concepts ....................................................................................... 47 ACTIVITY 11................................................................................................... 50 LESSON 7: INCOME AND EXPENSES............................................................................ 51 7.1 Personal income ............................................................................................. 51 7.2 Personal expenses ......................................................................................... 51 7.3 Personal statement of net worth ..................................................................... 51 ACTIVITY 12................................................................................................... 53 7.4 Types of income that businesses receive ....................................................... 53 7.5 Types of expenses that businesses have ....................................................... 54 7.6 Savings and investments of businesses ......................................................... 55 LESSON 8: BUDGETS ..................................................................................................... 55 8.1 Definition of a budget ...................................................................................... 55 8.2 Personal income and spending ....................................................................... 56 8.3 Personal budget .............................................................................................. 56 8.4 Business budget ............................................................................................. 58 ACTIVITY 13................................................................................................... 58 UNIT 3: Entrepreneurship ............................................................................................... 60 LESSON 9: REVISION ...................................................................................................... 60 9.1 Accounting concepts ....................................................................................... 60 9.2 Personal income and expenses ...................................................................... 61 9.3 Personal statement of net earnings ................................................................ 61 9.4 Types of income that businesses receive ....................................................... 62 9.5 Types of expenses that businesses have ....................................................... 62 9.6 Savings and investments ................................................................................ 63 9.7 Budgets........................................................................................................... 63 ACTIVITY 14................................................................................................... 64 LESSON 10: THE ENTREPRENEUR ............................................................................... 66 10.1 Definition of an entrepreneur .......................................................................... 66 10.2 Characteristics of an entrepreneur .................................................................. 66 10.3 Skills of an entrepreneur ................................................................................. 68 10.4 Entrepreneurial actions of buying, selling, producing and making a profit ...... 69 ACTIVITY 15................................................................................................... 70 LESSON 11: STARTING A BUSINESS ............................................................................ 73 Š Impaq
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Study Guide G07 ~ Economic and Management Sciences
11.1 Needs and wants of consumers ...................................................................... 73 11.2 Analysis of strengths, weaknesses, opportunities and threats ........................ 74 ACTIVITY 16................................................................................................... 75 11.3 Goals .............................................................................................................. 75 11.4 The concept of advertising .............................................................................. 77 ACTIVITY 17................................................................................................... 79 11.5 Budget for Entrepreneur’s Day ....................................................................... 79 11.6 Use of recycled materials................................................................................ 79 11.7 Simple cost calculations.................................................................................. 80 ACTIVITY 18................................................................................................... 81 LESSON 12: ENTREPRENEUR’S DAY ........................................................................... 82 12.1 Hosting an Entrepreneur’s Day ....................................................................... 82 12.1.1 Developing a business plan ......................................................................... 82 ACTIVITY 19................................................................................................... 84 12.1.2 Marketing of your business .......................................................................... 86 12.2 Statement of income and expenses ................................................................ 88 LESSON 13: INEQUALITY AND POVERTY .................................................................... 89 13.1 Causes of socio-economic imbalances ........................................................... 90 13.3 Education and skills to fight inequality and injustice ....................................... 92 ACTIVITY 20................................................................................................... 93 13.4 Urban and rural challenges ............................................................................. 94 13.4.1 Challenges of rural areas ............................................................................. 94 13.4.2 Challenges in urban areas ........................................................................... 94 13.5 Creating sustainable job opportunities ............................................................ 95 UNIT 4: The economy ...................................................................................................... 96 LESSON 14: REVISION .................................................................................................... 96 ACTIVITY 21................................................................................................... 97 LESSON 15: THE PRODUCTION PROCESS .................................................................. 99 15.1 Definition of production ................................................................................... 99 15.2 Inputs and outputs ........................................................................................ 100 15.3 Sustainable use of resources........................................................................ 101 15.4 Calculation of economic growth .................................................................... 101 15.5 The meaning of productivity .......................................................................... 102 15.6 The effect of productivity on economic growth .............................................. 102 ACTIVITY 22................................................................................................. 103 15.7 Technology in the production process .......................................................... 104 15.8 Contribution of technology to improve productivity and economic growth .... 105 LESSON 16: SAVINGS ................................................................................................... 106 16.1 Personal saving ............................................................................................ 106 16.2 Purpose of saving ......................................................................................... 107 16.3 History of banks ............................................................................................ 108 16.4 The role of banks .......................................................................................... 108 16.5 Open a savings account at a bank ................................................................ 109 16.6 Community saving schemes ......................................................................... 109 16.7 Financial organisations ................................................................................. 110 3
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Study Guide G07 ~ Economic and Management Sciences
16.8 Financial institutions and organisations that promote entrepreneurship ....... 110 ACTIVITY 23................................................................................................. 111 ACTIVITY 24................................................................................................. 112 GLOSSARY..................................................................................................................... 116 BIBLIOGRAPHY ............................................................................................................. 119
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Study Guide G07 ~ Economic and Management Sciences
Make sure you read and understand each unit contained within the lesson. Use the glossary in this study guide or a dictionary. Focus and concentrate on each step of the section that is being discussed. Do not let your mind wander. Actively participate and be involved in the lesson by asking questions and giving answers. Revise the work that is completed every day. Read the pages carefully. Try to identify different types of questions every day and make notes. Ask for help if you need it: It is important to understand all the work before proceeding to the next section.
YEAR PLAN UNIT 1 2 1 3 4 5 6 2
7 8 9 10
3
11 12 13 14
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DATE STARTED
LESSON
15 16
DATE COMPLETED
The economy: History of money The economy: Needs and wants The economy: Goods and services Entrepreneurship: Businesses Revision Financial literacy: Accounting concepts Financial literacy: Income and expenses Financial literacy: Budgets Revision Entrepreneurship: The entrepreneur Entrepreneurship: Starting a business Entrepreneurship: Entrepreneur’s Day The economy: Inequality and poverty Revision The economy: The production process Financial literacy: Savings
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Study Guide G07 ~ Economic and Management Sciences
Unit
UNIT 1: The economy INTRODUCTION In the first part of the lesson we will look at traditional societies and bartering, and how these two concepts relate to each other. It is very important to visit relevant websites to read up on the subject in order to build up an in-depth knowledge about the concepts. At the end of the traditional societies and bartering sections, you must put the information into practice, for example by practising bartering with friends and family. In Lesson 1 the following main points will be discussed:
Traditional societies
Bartering
IMPORTANT TERMINOLOGY
Societies Self-sufficient Independent Produce Bartering Value Metals
LESSON 1: HISTORY OF MONEY
LEARNING AIMS After you have completed this lesson, you must be able to: understand the meaning of traditional societies. fully discuss bartering. distinguish between promissory notes, coins and paper money. understand electronic banking. have a proper understanding of the role of money. © Impaq
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1.1
Unit
1
Traditional societies
In this lesson an overview is given on traditional societies. It is important that you read more about traditional communities to get a more in-depth understanding. Thousands of years ago, man supplied in his own needs. Traditional societies used nature to gather resources to meet their basic needs. These type of societies were self-sufficient and independent. Traditional communities hunted to get meat, used plants for food and medicine and also made their own clothes. These societies used everything they produced to survive in the wild. An example of a traditional society is the Khoi-San. Today there are very few societies that are still self-sufficient and independent.
Picture 1: http://www.onlinedebate.net/forums/showthread.php/21866-South-african-cultures-and-life-styles Picture 2: http://blog.discoversouthafrica.co.za/leisure-and-things-to-do/share-in-the-khoi-san-culture/ Picture 3: http://www.keerwedersafaris.com/content.php?secid=13&menuid=5 Picture 4: http://www.tribalartbrokers.net/
The above photos are examples of self-sufficient, traditional societies. They produce their own goods and hunt for food that is needed for survival. DEFINE Produce: To make something e.g. maize, vegetables, fruit, clothes and furniture. Self-sufficient: Providing for yourself. Independent: Needing nothing from someone else. Societies: Groups of people in different places.
TIP
a.
Read up on traditional societies to learn more about their lifestyle and history.
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Study Guide G07 ~ Economic and Management Sciences
Unit
Bartering
The first economic system was a subsistence economy. This means that people only produced that which they needed. They planted maize so that they could make maize meal to eat, and kept cows for milk. Therefore we say that they were self-sufficient and independent. They needed nobody else to satisfy their needs. Some societies could, however, not produce everything they needed in order to survive. Some societies, for instance, had maize, cattle or sheep, where others had goats, wheat and other vegetables like potatoes and beans. This is how societies differed, and soon they realised that other societies had things they wanted, but could not get themselves. This was a big problem, thus they had three options: 1. Take the item, in other words steal it. 2. Kill the owner of the item and then steal it. 3. Find something that they themselves had that the other person wanted, and then exchange the items. The first two choices usually led to lots of trouble, thus the third option was used most of the time. This is called bartering. The picture below is an example of bartering.
The basket of apples is exchanged for the chicken. Source: http://lastoneeating.wordpress.com/tag/barter-economy/
These societies were nomadic by nature, which means that they moved from one place to another and one season to the next to trade. As the societies moved, they traded with different groups they found on their way.
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Unit
1
However, with bartering some problems arose:
1. It was difficult to equate the worth of the goods, as certain groups attached more value to an item than others.
Problems that arose with bartering 2. Some goods that were bartered were only available at specific times in the year and could not be stored, e.g. food.
3. Certain goods that were exchanged were difficult to carry, e.g. a goat or cattle.
To solve the second problem, people started trading with items that would not rot easily. First, shells, salt and clay tablets/disks were used. People quickly started using more precious metals. The metal was melted to form a disk or coin. Metals quickly became more popular than shells, salt and clay discs. DEFINE Bartering: It is when you have an item and you exchange it for another, e.g. you exchange a CD for a friend’s DVD. Value: The value of something is determined, in other words, what you will pay for something in money, e.g. a plastic chair’s value is much less than a real oak chair. Metals: Examples of metals are iron, aluminium, copper, etc.
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Unit
FOR THE CURIOUS Sometimes the metal we use to make coins are considered more valuable than the coin itself. In other words, a person can make more money by melting the coin and selling the metal than using the coin. When this happens, the government changes the coin to make it cheaper to manufacture. ACTIVITY 1
This activity is based on traditional societies and bartering. Thoroughly read through the questions below and give a suitable answer for each. 1. 2. 3. 4. 5.
What did traditional societies do to survive in the wild? Give an example of a traditional society. Which problems arose during bartering? Define the term nomadic community. Give examples of goods used for bartering.
1.3
(3) (2) (3) (2) (5) TOTAL: 15
Promissory notes
During the course of time, metals became increasingly popular and there was a big demand for metals. These metals were exchanged for other goods. The problem with metal however, was that it was too heavy to transport easily, and traders had to carry metals and use a scale to weigh it when bartering occurred. Due to this reason, bartering took place very slowly. The people who were involved with the bartering of metals and gold used goldsmiths to store the gold and metals for them, and when they needed it they could simply get it from storage. Let us look at the following scenario to better explain the above-mentioned: Peter has gold and metals that he cannot carry with him, as it is very heavy. He wants to ask John, who is a goldsmith, to store his gold by putting it in a safe until he would need it. John will hand Peter a document in which he confirms that he will store the metals and gold, and in the document it will also be confirmed that when Peter wants the gold or metals, he can get access to it. If Peter has a buyer who wants to buy the gold and metals, he can give this document to the buyer in order to get the gold from John. These documents were called promissory notes. Promissory notes are signed by all the parties involved, and in this scenario it will be Peter, John and the buyer to confirm the agreement. http://glenngohr.wordpress.com/2008/05/22/apiece-of-bread-could-buy-a-bag-of-gold Š Impaq
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Unit
1
The picture below is an example of a promissory note:
Source: http://www.allbusiness.com/glossaries/promissory-note/4946031-1.htm
1.4
Coins
Say you live in a country where there is no money. All transactions are clinched by way of bartering and agreements. You get up in the morning and find that there is no cereal for breakfast. Your mom asks you to catch a chicken to pay for a few packets of cereal at the corner café.
Coins
Antique Coins, www.egyking.info
What a tedious way of living! It is of course so much easier to hand the café owner a banknote, to settle your school fees by cheque and to buy your bus ticket with a few coins. Money was invented because it is easy to use and brought cost savings in trade. Even Foto:about Antieke Muntstukke, www.egyking.info for the most primitive economy with a limited range of produced goods, direct bartering is too expensive and complicated to make trade possible. The first metals that were used as money in the olden days were iron, tin and copper. Later, silver and gold were also used, and today we have coins of different alloys (metal mixtures). Metals have quite a few advantages as payment method above other things, especially because of its durability. Wheat and rice can become mouldy, cattle and sheep die, but metal is almost indestructible. Metals have long been used as payment method in the form of pieces or bars. Every time when business transactions were done, they had to be weighed and tested. This was still very inconvenient, and then people came up with the plan to use metal pieces of a set weight with some or other design engraved on it. This was the establishment of coin money. (Adjusted and translated from: www.mieliestronk.com/geld.html)
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Study Guide G07 ~ Economic and Management Sciences
Unit
Paper money
Since the early years of the 1800s, banknotes were issued by different commercial banks in the Cape and later in Transvaal, the Orange Free State and Natal. These notes could be exchanged for gold coins. The South African Reserve Bank, our country’s central bank, was founded in 1920. The Reserve Bank issued its first notes in April 1922, and South African banknotes could be cashed for gold until 1932. As trade expanded, and especially after dealers started doing business Source: http://ewn.co.za/2013/12/-04/Rand-hits-three-week-low further from their headquarters, it became unsafe and cumbersome to work with coin money. Just think of the nuisance to count and transport thousands of gold coins, and how easily it could be stolen. The banknote was initially merely a promise that the note could be exchanged for this or that amount. With time, this developed into money itself. South Africa’s first paper money came into circulation in the 1780s with the introduction of the Rixdollar (Rijksdaalder in Dutch). (Adapted and translated from: www.mieliestronk.com/geld.html)
1.6
Electronic banking
IMPORTANT TERMINOLOGY Bank Deposit Deposit slip Receipt Withdrawal Let us think of the different banks that are available in South Africa. Absa, FNB and Standard Bank are only a few examples. Can you think of more examples of banks in South Africa? Banks provide different services to their clients and also offer options to invest their money and to save. You can put your money in a savings account and then they will invest it for you (preserve) and you can earn interest on it. You can withdraw money, do transfers to other bank accounts, etc. Electronic banking (or e-banking) involves the use of bank cards, cellphones, smartphones and computers to do your banking transactions. The Internet can be used to pay for goods and services. © Impaq
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Unit
E-banking makes it possible for clients to do their banking without physically going to the bank. They can do their banking any time of the day in the comfort of their home or office. Today, most banks have their own websites that help people do their banking electronically. Transactions can be done electronically with a bank card at an ATM, on a computer at home, or by using a secret code and a telephone. During telephonic transactions, a bank clerk uses a computer to do the transaction on your behalf. The transaction takes place immediately. Banks offer services to people and businesses, like giving them a bank statement every month. Examples of banks in South Africa:
1.6.1 Using automatic teller machines (ATMs) After you have opened an account, the bank clerk will issue you a plastic card to use at an ATM. You can use this card to deposit money into your account or to withdraw money from there. You just first have to key in your personal identification number (PIN) into the machine. ATMs are usually available outside banks and in shopping centres. ATMs enable users to withdraw or deposit money 24 hours a day. Source: http://sacredspaces2004.files.wordpress.com/2012/11/standard_bank_atm_2.jpg
TIPS
Keep your bank card in a safe place. Do not give your PIN to other people. Be vigilant at an ATM when you withdraw money.
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1.6.2 What is e-commerce? When a debit card or a smartcard is used, we refer to this as e-commerce. These cards are similar to a telephone card. Customers can pay electronically for their purchases at shops that form part of the system. Shops apply to become members of an e-commerce network. They will then accept debit cards and smartcards as payment for goods and services. The holders of debit cards and smartcards will thus not need to have lots of cash or even a chequebook with them. Customers pay with a card, which is much safer than to have large amounts of cash with them. The amount of the current transaction is transferred electronically from the buyer’s account to the seller’s account. Buyers use the e-commerce system when they buy goods and pay for services via the Internet. Buyers send the details of their card via the Internet to the supplier of the goods or services. Some banks send out SMS messages to their clients to confirm that the transaction took place and that the money has been withdrawn from their account. The goods are then delivered to the buyer. Banks created websites whereby customers can do shopping 24 hours per day. SEP (Secure Electronic Payment), the facility for secure electronic payment, is used to pay for services and goods that are delivered to the customer. This is a safe way to buy or sell goods and services.
Source: http://krnb.com/kj-midday/2013/12/20/debitvs-credit-cards-which-is-safer-to-swipe/
DEFINE Bank: An institution that is seen as a safe place where you can save your money, withdraw money and different services are offered to you. Deposit: That is when you pay money into your bank account. Deposit slip: This is specific form that you fill in to deposit your money. Receipt: A voucher that you must keep safely and that serves as evidence that you paid an institution, person or bank. Withdrawal: When you draw money from your account, whether at the ATM with your card or with a withdrawal slip in the bank.
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Unit
ACTIVITY 2 Read the scenario below and answer the questions that follow. Sibo, a friend of Nadene, asks her about the opening and handling of a savings account. He earns money by delivering newspapers and really wants to save the money for future use. Nadene advises him to open a savings account at the bank. The bank clerk is very helpful and tells Sibo about the interest he can earn on his savings account. The clerk then gives Sibo an application form to complete at home. His parents or legal guardian will have to give him permission to open the savings account, as Sibo is still underage. The next day, Sibo takes the completed form back to the bank. He also deposits R300 into the new account as an opening balance. 1. 2.
3. 4. 5.
What does the abbreviation ATM stand for? Look at the following pictures of a bankcard’s front and back:
(1)
2.1 2.2 2.3 2.4
(1) (1) (1)
Write down the card number. When was the card issued? (Month and year) When does the card expire? (Month and year) Does the PIN appear somewhere on the card? Why do you think that is?
(2)
It is not always safe to use your card at an ATM. Make a list of all the precautions that have to be taken when you use an ATM. (3) Write down the names of different banks in South Africa. (6) Explain in your own words how an ATM works. (5) TOTAL: 20
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Study Guide G07 ~ Economic and Management Sciences
Unit
LESSON 2: NEEDS AND WANTS
LEARNING AIMS After you have completed this lesson, you must be able to: distinguish between a need and a want. identify different needs of individuals, families, communities and countries. distinguish between primary and secondary needs. understand the concept of unlimited needs and wants with limited resources. INTRODUCTION In this lesson we will look at the difference between a need and a want, as well as needs of families, communities and countries. Every person has his/her own particular needs and wants. IMPORTANT TERMINOLOGY Needs Wants Limited Unlimited 2.1
Basic needs of individuals, families, communities and countries
A need can be defined as something that we cannot go without. We need it to survive. For this reason, it is called primary needs. Examples of primary needs are food, clothes, housing and water. Without the above needs we cannot survive. A want can be defined as something that we really desire, but that we do not need to survive. For this reason it is called secondary needs. Examples of secondary needs (wants) are an Xbox/PlayStation, a luxury car, expensive clothes, etc.
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