Economics / Notes Grade 10 Nkangala District/2025
NKANGALA DISTRICT
ECONOMICS NOTES
TOPIC 2: BASIC ECONOMIC PROBLEM
GRADE: 10
YEAR: 2025
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Economics / Notes Grade 10 Nkangala District/2025
TOPIC 2: BASIC ECONOMIC PROBLEM
The basic problem facing all nations is scarcity (shortage) of resources.
Resources such as money, time, land, capital, entrepreneurship and labour are
available in limited quantities.
UNIT 1: SCARCITY PROBLEM
There are two categories of scarcity which are: absolute and relative scarcity.
Absolute scarcity:
It is when a person may have the money to buy a particular product, but there is a total
lack of supply of the product. For example, when one has money to buy fat cakes but
no one in the area produces them.
During famine, even rich people will be unable to buy food because they will not be
available.
Relative scarcity
It is when goods and services are available, but people have no money to buy them.
E.g. when designer products are available but most people’s incomes do not allow
them to afford such products.
1.2. ECONOMIC AND FREE GOODS
Goods consumed by human beings are classified under two categories which are free
goods and economic goods.
Free goods: have the following characteristics
These are goods that are unlimited in supply and have no price.
They belong to no one, for example, air, sunlight, wind, rain.
They have usage value but no exchange value. This means while these goods can be
used to satisfy human wants, they cannot be sold.
They do not indicate the wealth of the person consuming them.
Their supply is beyond the control of human beings.
Economic goods: have the following characteristics
They are available in limited quantities e.g. clothes, land, cars, houses etc.
A price must be paid for economic goods to be consumed.
They have both usage value and exchange value. This means people use them to
satisfy their wants and can also sell them to earn money.
Ownership of economic goods indicates the level of wealth of an individual. For
example, the more cars a person has the wealthier he/she is.
The supply of economic goods is controlled by human beings.
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Economics / Notes Grade 10 Nkangala District/2025
1.3. ALTERNATIVES AND CHOICES
Alternatives: because of the unlimited nature of human wants, every resource
available often has more than one wants that it can be used to satisfy. This means
there is always alternative uses for available resources. E.g. a person may have R300,
but may be faced with alternative wants such as buying a jacket or buying a pair of
shoes.
In other words, for every want satisfied there is an opportunity given up for satisfying
an alternative want.
Choice: because it is impossible to satisfy all wants, a person has to choose the wants
that he/she will satisfy with available limited resources.
The consumer always aims to satisfy wants that are important first. The aim of every
consumer is to maximise utility (satisfaction) from consuming goods.
1.4. OPPORTUNITY COST
It is the economic value of the alternative want that has been given up. For example,
if an individual has R300 and decides to use it for buying shoes instead of a jacket,
the enjoyment received from having a jacket is given up (left out/ sacrificed).
This means the goods that are chosen must give more utility (satisfaction) than those
given up.
Opportunity cost can apply to things that do not involve money as well, e.g. a choice
between using available time for studying or for partying. If you choose to study
because doing well in school is of high importance to you, you will lose the chance of
entertaining yourself which you anyway regard as less important.
UNIT 2: THE BASIC PROCESSES
To satisfy human wants, three basic processes should take place. They are
production, exchange and consumption.
2.1 PRODUCTION
Production is the creation of goods and services to satisfy human wants.
Goods are tangible (physical) products e.g. chairs, while services are intangible (non-
physical) products e.g. education, body massage.
To produce goods and services four factors of production are needed, and they are
Natural resources/land: are all resources occurring in nature e.g. minerals, forests,
land, water. The reward for natural resources is rent.
Labour: is mental and physical effort used in the production of goods and services.
Labour as a factor of production is rewarded with wages and salaries.
Capital: refers to all the machines and equipment used in the production of goods and
services. E.g. trees are processed with machines to make furniture.
Entrepreneurship: it is the skill needed by the person who opens the business to
produce goods and services. The entrepreneur combines capital, labour and natural
resources to produce goods.
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Economics / Notes Grade 10 Nkangala District/2025
Entrepreneurs (producers) should decide on what product to produce, how to produce
their product and for whom they are producing the product.
Small and big producers are important in the economy as they all contribute to the
country’s total production.
2.1.1 Categories/ kinds of production
There are three kinds of production that take place in an economy namely: primary,
secondary and tertiary production
Primary production: deals with the extraction of basic raw materials from nature.
Examples are farming, mining, forestry, fishing etc.
In South Africa, primary production is the smallest of the three sectors.
Secondary production: involves the processing of natural into finished goods.
Manufacturing industries change products of primary sector in to usable goods, e.g.
timber into a table, gold into jewellery, crude oil into petrol.
Secondary sector is three times bigger than the primary sector in South Africa.
Tertiary production: involves the production of services.
These include services such as distribution of goods (e.g. transport, retails), personal
services such as haircut, public services such as police service.
In South Africa, tertiary production is the largest of the three sectors.
2.1.2: Specialisation and division of labour
It is when firms focus their resources of producing one product. Example, a firm may
specialize in the production of jackets and coats.
Specialisation include division of labour which is when a worker performs only a
small part of the production activity. For example, one worker may specialise in
cutting the fabric, another may put in buttons etc.
Specialisation can be a way to reduce the problem of scarcity.
The advantages of specialisation are:
High quality products can be produced as mistakes are reduced.
More products can be produced / higher economic growth.
Standard of living can improve as people have more goods to choose from.
In producing goods and services, firms can either engage in capital intensive
production or labour intensive production.
Capital intensive production
It is when a firm use a lot of machinery and less labour in producing goods and
services.
The few workers hired are meant for running the machines.
Labour intensive production
It is when a firm use more workers than machines in its production of goods.
Even though the firm may use some machine, production is mostly dependent on the
availability of workers.
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Economics / Notes Grade 10 Nkangala District/2025
Main types of products (goods and services):
Production process results in different types of products produced and the main types
are: consumer goods, capital goods and services.
Consumer goods: are goods people use to satisfy their human needs and wants.
They are divided into three kinds, durable, semi-durable and non-durable (will be
explained under the topic of consumption)
Capital goods: are goods that are used to produce other goods e.g. machines, tools,
buildings/factories.
Services: are intangible products as they cannot be touched or felt but they are
needed by consumers e.g. doctor service and businesses e.g. maintenance service
for firm‘s machine.
2.2: EXCHANGE
Exchange is a process whereby products move from producers to consumers.
Exchange is also called trade and it takes place in markets.
Because of specialisation, large quantities of goods are often produced. This results
in surpluses traded (bought and sold) in markets.
Market: a place where buyers and sellers meet to do business. Two types of markets
are the market for goods and services and the market for factors of production.
2.2.1 Market for goods and services:
is where consumers buy goods and services to satisfy their wants.
Kinds of markets for goods and services
Wholesale markets: are markets that connect producers and retailers.
Wholesalers buy products in bulk directly from the producer and then sell to retailers.
Retail markets: are markets from which consumers exchange their money for final
products. Goods sold are ready for consumption (final goods).
Producers also pay attention to these markets so that they can produce what the
consumer wants.
Products that are bought in larger quantities are often produced in larger quantities.
Service markets: are markets from which services are bought and sold. Services such
as education, medical services, and hairdressing services are traded in this market.
International markets: the markets in which goods and services from different
countries in the world can be bought and sold.
Imports and exports take in international markets.
Exports are when a home country sell its products to other countries e.g. South Africa
sells platinum to England.
Imports are when a home country buys goods from another country e.g. S. Africa
buys television sets from Japan.
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Economics / Notes Grade 10 Nkangala District/2025
2.2.2 Markets for factors of production
It is a market in which factors of production are bought and sold.
Labour is exchanged for wages and salaries, capital for interest, land for rent and
entrepreneurship for profit.
2.3 CONSUMPTION
Consumption is the act of using goods and services to satisfy human wants.
Types of consumer products:
people spend their money on the following types of consumer goods:
Durable goods: goods that can be used over a very long period (many years)
examples, cars, house, furniture
Semi – durable goods: these are goods that can used for several years e.g. clothing,
car tyres, cell phone. The difference between semi –durable and durable goods is that
the length of time for using semi - durable goods is shorter than that of durable goods.
Non –durable goods: are goods that can be used only once and they no longer exist
after being used e.g. food, (after eating the food will no longer exist), medicine, petrol.
Services: are intangible products that are used to satisfy human wants e.g. health
services, education, hair dressing services etc.
Types of consumers
All participants in a country’s economy are consumers of goods and services, they
are: households, businesses and government.
households: buy goods and services to satisfy their human wants (see types of
consumer goods explained above)
Businesses/Firms/producers: buy capital goods such as machinery, equipment,
buildings etc.
Government: spend money on providing public goods such as health, education,
roads etc.
UNIT 3: HUMAN RIGHTS AND THE ENVIRONMENT
[Link] rights
They are rights that every person should have and they are prescribed in the
country’s constitution.
The human rights in the South African constitution are:
Everyone is equal before the law
Right to dignity
Right to freedom of security and privacy
Right to political choice
Right to freedom of movement
Right to choose profession/occupation/trade freely
Right to fair labour practice
Right to healthy and protected environment
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Economics / Notes Grade 10 Nkangala District/2025
Right to adequate housing
Right to health care, food and social security
Right to education
Right to access to information
The South African government has provided laws for protecting human rights of
workers examples are:
Basic Conditions of Employment Act,
Labour Relations Act,
Occupational Health and Safety Act,
Employment Equity Act.
The National Credit Act is a law that protects the rights of consumers in the credit
market.
Even with these human rights available in the constitution, there are still many
people whose rights are still being violated daily in the work places and in
businesses. It is important that every individual know their rights so as to be able
to exercise them.
Various organisations are available to protect consumer rights by ensuring that the
laws are being followed in South Africa e.g.
the National Consumer Commission,
the Ombudsman for goods and services,
the National Credit Regulator
3.2: The environment
Increased economic growth is important for improvement in the quality of lives of
people, but it has a negative effect on the environment for these reasons:
More economic activity results in more pollution e.g. factories
pollute air, rivers and land.
The earth's natural resources are used up at a faster rate.
Therefore, countries under the United Nations often meet to try to agree on
measures that can be taken to reduce environmental damage (or to increase
environmental protection).
Some of the measures to reduce environmental damage/ increase
environmental protection are:
Green tax: this is a tax on production and consumption of goods that pollute the
environment.
Government action: measures such as educating people about the importance of
the environment to their lives are important.
Public action: citizens should act in a way that they protect the environment e.g.
using rubbish bins instead of littering
Decreased reliance on fossil fuel: a reduction in the usage of fossil fuel such as
coal to produce electricity can improve the air quality considerably. This means the
usage of renewable sources of electricity should be increased.
Environmentally friendly technology: firms should be encouraged to use
cleaner technology to reduce air pollution. Example, the development of unleaded
petrol which does not pollute the environment (NB leaded petrol pollute the
environment as it releases poisonous gases through the car exhaust pipes).