What, How, and For Whom

Introduction

The three economic questions that define the discipline’s core in a social and economic setting are what to make, how to create, and for whom to produce. It indicates that to meet the needs and desires of its residents, every community must address the concerns. Cyclical unemployment occurs whenever the economy is facing a downturn or depression. There is always some mass unemployment in societies where people have the freedom to move from one job to the next. The Gross Domestic Product (GDP) is a widely used metric of an economy’s production or productivity. The ongoing COVID-19 epidemic is inflicting disaster on South Africa’s small and micro businesses and will almost certainly leave an indelible mark.

Three economic questions that form the foundations of the discipline

To address the needs of its residents, every city must answer three essential economic questions:

-What type of product should we create?

-How should we go about making it?

-For whom should we make it?

What?

Due to limited labor, intermediate goods, and time – frame, economists should pick what to generate. The bulk of primitive businesses is centered on generating necessities, which have been the most basic requirements of life. Nevertheless, as the economy grows, the market has more funds to spend on non-essentials such as entertainment and schooling. In a free economy, economic forces dictate productivity. Goods will be desired by customers, hence firms and businesspeople will manufacture them. In a centrally planned economy, the current regime may choose to produce new essential utilities that aren’t even lucrative but increase economic wellbeing (Aitken, 2019).

How?

The entrepreneur will try to make products in the most lucrative and cost-effective way feasible. This motive is driving the advancement of technology and more efficient manufacturing techniques, such as the assembly line. The government may be able to restrict production processes to prevent ecological harm (Athey, 2018).

For whom?

In a market economy, products are supplied to someone who can purchase them. It might be performed through a basic bartering system or, in more advanced economies, through prompt payment. In more ethical societies, we may try to create products and services for people who cannot afford them. Most World economies, for instance, offer free medical care at the time of its use (Aum et al., 2021).

The three economic questions that define the discipline’s core in a social and economic setting are what to make, how to create, and for whom to produce. It indicates that to meet the needs and desires of its residents, every community must address the concerns. Furthermore, society solves resource distribution and scarcity by addressing economic challenges. Resources include tangible goods, labor, technology, and capital. Scarcity, on the other hand, relates to the idea that people’s wants or desires will always outweigh the available resources to meet their aims (Banerjee and Duflo, 2019).

Labor and Unemployment

The South African government, as well as other enterprises and investors, must identify and address a need or demand amongst the majority of South Africans. If improved transportation is necessary, for instance, entrepreneurs, investors, and government stakeholders will see the necessity to manufacture vehicles including automobiles, motorcycles, and even bicycles. Customers’ tastes, social position, and money all have an impact on the availability of various options. Some individuals prefer automobiles to motorbikes, while others choose bicycles (Brodeur et al., 2021).

Following recognition of the need and demand for new modes of mobility, manufacturers, government stakeholders, investors must learn how to build vehicles, motorcycles, and bicycles. This will require obtaining raw materials, having the knowledge and expertise to incorporate ingredients into the production process, and, eventually, establishing a distribution plan for a wide range of markets (Cuéllar-Martín et al., 2019).

The numerous markets answer the question of who the things are aimed for. The goods will be distributed to the appropriate markets based on a variety of characteristics including social class, affordability, tastes and preferences, pricing.  both sales and means of transportation will increase. Higher-income people choose autos over bicycles, whilst those with lower socio-economic status choose bicycles. The answers to the questions raise the standard of living in society (Forsythe and Wu, 2021).

Labor and the unemployment rate

Unemployed = 3,000,000

Employed = 8,000,000

House wives and students (not working) = 9,000,000

People who can’t work (>64 years and < 16 years) = 10,000,000

1. Size of the labor force

The workforce is the aggregate number of people seeking work, both the employed and unemployed people.

Size of labor force = 8,000,000 + 3,000,000

                                = 11,000,000 individuals

1. Labor force participation

The workforce participation rate is a percentage of an area’s people employed that take part in the labor supply, either by actively working or looking for work; it shows the proportion of the supply of labor actively involved in the country’s income as a proportion of the total working population. The labor force participation rate is determined by taking the total population of the workforce by the number of individuals in the labor force.

1. Number of unemployed people

The total number of unemployed individuals is the number of people looking for employment and as well as the number of individuals aged 16 to 64 who are not employed due to circumstances including being full-time students or housewives.

Number of unemployed people = 3,000,000 + 9,000,000

                                                   = 12,000,000 people

1. Unemployment rate

The unemployment rate is the percentage of the workforce that is out of work.

The rand/dollar exchange rate is now R11.50 to the US dollar.

1. US cents required to buy R1.00

1 USD à R 11.50

100US cents a 1150 cents

? a R100 

1. How much would you have to spend in Rands if you bought an economic textbook for 45 USD?

1 USD à R 11.50

45 USD à?

1. New exchange rate R 11.80 to the dollar

An increase in the cost of the Rand from R11.50 to R11.80 for one USD indicates that the USD has appreciated while the Rand has depreciated.

1. How much will the textbook price at 45USD cost for the new exchange rate?

1 USD à R 11.80

45USD à?

1. Explaining how a change in exchange rates results in ‘winners’ and ‘losers.’

Whoever wins and whoever loses is determined by the exchange rate policy. The mix of products and the significance of moneyed interests, particularly urban purchasers, impact a country’s exchange rate policy tendency. Regulation and degree are critical factors to consider. When all other circumstances are equal, international debtors, economic companies, and organizations heavily involved in cross-border commerce and finance will favor a stable exchange rate. Firms with a large number of tradable items will choose for a lower exchange rate. Companies that have extensive foreign currency transactions will want a stronger currency. How changes in the exchange rate are reflected in domestic pricing is a critical variable. Currency depreciation benefits tradable producers (Ghate and Mazumder, 2019). The higher a country’s engagement in currency policy, the more open it is and the fewer the obstacles.

What is this R200 known as in economics and how will it impact future international purchases you make?

R200 is referred to as a customs duty tax. Customs duty is the tax paid on commodities when they are transported over state lines. In simplified terms, it is a tax levied on imported and exported goods. The government uses this obligation to generate revenue, protect local businesses, and limit the flow of goods. The customs levy raises the future pricing of imported goods, increasing the price of the book by R200.

Difference between frictional and cyclical unemployment

Cyclical unemployment occurs whenever the economy is facing a downturn or depression. The aggregate demand for goods and services in the economy does not increase steadily. A time of rapid increase in aggregate demand is followed by periods of slow growth or a decrease in economic growth (Goldfarb and Tucker, 2019). This process is known as the economic cycle. Whereas the economy is in a downturn, company growth is gradually slowing. Sales collapse as a result of insufficient demand for the goods and services they produce, as well as some individuals, lose their jobs. Whenever aggregate demand increases again, though, the converse occurs, and joblessness decreases. For instance, during the South African economic cycle downturns between December 2007 and August 2009, aggregate demand for products dropped, resulting in the loss of many jobs (Haberl et al., 2020).

It is unemployment caused by a lack of effective demand. When the business cycle reverses, demand for products and services falls. As a result, workers are laid off. During bad economic times of crisis, this form of unemployment escalates. Because recessions or depressions are common phases of economic cycles in developed nations, this sort of unemployment is known as cyclical unemployment. During the Economic Crisis, for instance, the jobless rate reached 25%. That indicates that one out of every four persons was eager and able to work but couldn’t find it! The majority of this unemployment was classified as cyclical. Unemployment ultimately fell back to pre-crisis levels (Hagens, 2020).

Because it takes time to find work or transition from one job to another, frictional unemployment arises. Individuals will constantly be shifting from one job to another at any given time. Even when there are opportunities in the market, persons who are leaving one profession or starting a new career do not usually find jobs straight soon. This type of unemployment is unavoidable and is not considered a serious problem (Hornstein and Kudlyak, 2020). There is always some mass unemployment in societies where people have the freedom to move from one job to the next.

Frictional unemployment occurs when job seekers do not instantly find work. They are regarded as jobless while seeking jobs. The level of frictional unemployment is determined by how frequently employees change jobs and how long it takes to find new ones. When currently fractionally jobless people find work, new frictionally unemployed people emerge, and therefore there is always this frictional unemployment in the society due to defects or an inadequate market knowledge about employment prospects (Jakovljevic et al., 2020). Since the unemployed are individuals who have either left their previous occupations deliberately and are hoping for better opportunities, including those who have joined the labor force for the first round and are seeking jobs based on their gained abilities.

Frictional unemployment is caused by voluntary job transfers within a society. It happens all the time, even in a rising, stable macroeconomic environment. Employees who choose to quit their jobs in pursuit of new opportunities, as well as those who enter the labor force for the first instance, form frictional unemployment. It excludes employees who stay in their present job till they pick a new one because they are never jobless. It is constantly present within the economy. It adds to the overall job situation and is a component of natural jobless, which would be the lowest rate in an economy as a result of economic forces and labor mobility. Underemployment also shows the number of workers who are out of work unwillingly, either due to a lack of skills or technological substitution (Jones, and Tonetti, 2020).

Workers who abandon their jobs in search of greater compensation contribute to frictional unemployment. In other circumstances, employees may quit their jobs to return to school or learn a new skill because they feel the talent would help them make more money. Others may leave the labor market for personal reasons such as caring for a family member, illness, retirement, or pregnancy. When employees return to the labor force to seek jobs, they are classified as having frictional unemployment (Korenman and Okun, 2019).

Additionally, each person’s unemployment is only temporary. Some people find a job, while others quit pursuing other chances, while yet others enter the labor force. For instance, whenever recent graduates join the job market, they often take 8–12 months before finding full-time work, or when an employed individual quits and begins looking for a new job opening (Lundberg and Stearns, 2019).

The Gross Domestic Product (GDP) is a widely used metric of an economy’s production or productivity. It is the total quantity of services and things produced inside a country’s borders over a certain period. GDP growth rate is possibly the single strongest predictor of economic growth, and GDP is a true depiction of the industry’s size. GDP is the total worth of all completed items in an economy at a given point in time. It is calculated by adding up consumption, investment, government spending, and net exports. GDP provides information on the size and performance of the economy. The growth rate of real GDP (GDP after inflation) is commonly used to evaluate the health of the economy. As a result, growth in real GDP indicates that economic performance is strong. A high real GDP indicates that consumption, investment, and government spending are all strong and that exports are typically higher than imports. As a result, there are both low unemployment and low inflation rates (Makridis, and Hartley, 2020).

Strengths

The advantages of utilizing GDP as an economic indicator include the following: GDP enables regulators and federal reserves to decide if the sector is shrinking or rising, whether it needs stimulus or restriction, and whether risks such as a slowdown or out-of-control hyperinflation are nearby. Lawmakers, economists, and businesspersons could use government revenue as well as commodity financial records, which form the basis for determining GDP, to assess the impact of variables such as fiscal and monetary policy, institutional disruptions such as a drastic increase in the cost of oil, and taxes and government policies on sequence elements of a financial system and the economy at large (Maliszewska et al., 2020). National accounts, in conjunction with best institutional frameworks, have proven to greatly lower the volatility of economic trends. GDP is used to indicate a country’s purchasing power at a certain point in time. This is because a country’s value rises as its actual GDP rises, and this has an impact on its currency. It also depicts the country’s higher living levels. With a high real GDP, it indicates that there is a high level of employment, implying that income levels are high as well as minimal inflation. This demonstrates that the people’s living levels are excellent.

Weaknesses

One of the weaknesses of GDP as an economic measure is that the value of activities that are not purchased in an industry is difficult to identify or assess. Undocumented participation is a more serious problem since many financial transactions are never documented. The terms “unregistered economy,” “underground economy,” “shadow financial system,” and “informal economy” are used to describe such transactions or activities, which include trafficking and tax fraud and result in a large underestimate of GDP (Mohsin et al., 2020). Another challenge with GDP is that cost estimates are frequently changed when better and fresh data are available. This might be frustrating for analysts since they never know if or how frequently the numbers will be updated. It does not account for the illicit market. There are operations such as the sale of narcotics and weapons that are not accounted for, and it is also difficult to assign a value to them. As a result, the value of living standards is skewed. It also ignores the issue of economic inequality (Storm et al., 2020).

When assessing GDP, living standards are estimated, such as average income levels, but income disparity is not taken into account because not everyone earns that much. Furthermore, environmental issues are not taken into account. There may be a rise in output, which will result in contamination of the environment. The expenses of pollution are not included in the GDP calculation. Additionally, the quality of the items is not taken into account. GDP may rise as a result of most people repeatedly purchasing poor and low-cost items. This harms economic growth as measured by GDP (Tan, 2020).

How small business owners are managing the 4th wave

As the fourth wave of the epidemic approaches, small company owners confront increased obstacles. The ongoing COVID-19 epidemic is inflicting disaster on South Africa’s small and micro businesses and will almost certainly leave an indelible mark. Smaller businesses must devise strategies to deal with unusual circumstances, assisted by government action and economic instruments and regulations. Small businesses play an important part in economies, employing over 80percent of the nation’s workforce in official and medium-sized businesses. They are, however, typically the least durable in crucial conditions.

They frequently have fewer accessible money, client networks, and marketing crisis management capabilities than larger corporations. Unexpected COVID-19 upsets are putting a further burden on South African small businesses, which are already grappling with a weakening economy. Several small businesses have been seeing their revenues collapse as a result of the shutdown, and the majority have had to cut back on corporate spending to survive and thrive. Protecting and assisting small businesses during this period of economic insecurity is critical, not only because their survival and recovery are expected to be a harbinger for the sector as a whole, but also because of their critical role in job expansion and development (Yokota, 2018).

During the Covid-19 outbreak, which was one of the most prominent challenges they faced, only a smaller percentage of small businesses were able to access government and commercial credit. Additionally, the majority of private capital reserves, with a large amount of cash going to enterprises older than 5 years. Business output has been impeded by a lack of money, and with a 4th wave of the epidemic on the horizon, the situation is growing grave. Even though assets are accessible, a scarcity of financial comprehension and business expertise continues to be a key barrier to businesses obtaining the essential support. Smaller companies have had to cut down their expansion ambitions and hunt for new methods to market their products due to weak consumption.

There are several things that small business owners may do to help lessen the problem and safeguard their company during the fourth wave of the pandemic. Numerous areas include economic security, exposure to various markets and regions, a strong distribution network, strong customer participation, a healthy staff, and an effective post-crisis strategy. Small business entrepreneurs utilize technology to reach out to new customers and provide a distinct perceived value. Small businesses may leverage the internet and innovators to increase their capacity and efficiency at lower costs, hence removing their size disadvantage in comparison to bigger organizations. Small businesses can focus on important competitive environments in their production process, goods, and procedures, and use the proper technology levers to boost competitiveness, including selling themselves on social media channels and allowing digital product purchasing.

They are developing more specific market entrance strategies. Small businesses may create a more planned and complete market plan to build a customer base while lowering the risk of concentrating solely on selling to one to three key clients. Small business owners are also concentrating on raising production and income to mitigate the effects of the pandemic. Most small businesses have concentrated on increasing sales and regulating cash flow. Small businesses that focus on organizational reductions can increase efficiency and revenue while potentially growing capacities. Smaller businesses should also improve their workers’ talents and abilities, as well as boost their workers’ management. Small businesses on a rapid growth trajectory may find it challenging to scale up, particularly if they are still actively involved. Small businesses may provide more opportunities for top officials to concentrate on generating and organizing for constant improvement by partaking in competency development, especially at the top management level.

State aid is especially important in re-energizing small businesses following the covid epidemic and planning for the pandemic’s current wave. The current regime may assist by funding efforts that promote small businesses as important suppliers and by improving the overall innovation program. In such unprecedented circumstances, the government can also participate in skillsets required by small enterprises, including offering free training on planning and organizing for money to business owners. During and after the recession, the current regime may also inspire innovation, discovery, and progress, as well as provide specialized and enterprise assistance to small businesses, including early finance for some organizations and extended assistance to everyone else.

Conclusion

To conclude, this is a clear indication of the three economic questions that define the discipline’s core in a social and economic setting are what to make, how to create, and for whom to produce. It indicates that to meet the needs and desires of its residents, every community is expected to address the concerns. It can be seen that cyclical unemployment occurs whenever the economy is facing a downturn or depression. There is always some mass unemployment in societies where people have the freedom to move from one job to the next. The Gross Domestic Product (GDP) is a widely used metric of an economy’s production or productivity. The ongoing COVID-19 epidemic is inflicting disaster on South Africa’s small and micro businesses and will almost certainly leave an indelible mark.

References

Aitken, A., 2019. Measuring welfare beyond GDP. National Institute Economic Review, 249, pp.R3-R16.

Athey, S., 2018. The impact of machine learning on economics. The economics of artificial intelligence: An agenda, pp.507-547.

Aum, S., Lee, S.Y.T. and Shin, Y., 2021. Inequality of fear and self-quarantine: Is there a trade-off between GDP and public health?. Journal of Public Economics, 194, p.104354.

Banerjee, A.V. and Duflo, E., 2019. Good economics for hard times. PublicAffairs.

Brodeur, A., Gray, D., Islam, A. and Bhuiyan, S., 2021. A literature review of the economics of COVID?19. Journal of Economic Surveys, 35(4), pp.1007-1044.

Cuéllar-Martín, J., Martín-Román, Á.L. and Moral, A., 2019. An empirical analysis of natural and cyclical unemployment at the provincial level in Spain. Applied Spatial Analysis and Policy, 12(3), pp.647-696.

Forsythe, E. and Wu, J.C., 2021. Explaining demographic heterogeneity in cyclical unemployment. Labour Economics, 69, p.101955.

Ghate, C. and Mazumder, D., 2019. Employment targeting in a frictional labor market. Indian Growth and Development Review.

Goldfarb, A. and Tucker, C., 2019. Digital economics. Journal of Economic Literature, 57(1), pp.3-43.

Haberl, H., Wiedenhofer, D., Virág, D., Kalt, G., Plank, B., Brockway, P., Fishman, T., Hausknost, D., Krausmann, F., Leon-Gruchalski, B. and Mayer, A., 2020. A systematic review of the evidence on the decoupling of GDP, resource use, and GHG emissions, part II: synthesizing the insights. Environmental Research Letters, 15(6), p.065003.

Hagens, N.J., 2020. Economics for the future–Beyond the superorganism. Ecological Economics, 169, p.106520.

Hornstein, A. and Kudlyak, M., 2020, February. Why Is Current Unemployment So Low?. Federal Reserve Bank of San Francisco.

Jakovljevic, M., Timofeyev, Y., Ranabhat, C.L., Fernandes, P.O., Teixeira, J.P., Rancic, N. and Reshetnikov, V., 2020. Real GDP growth rates and healthcare spending–comparison between the G7 and the EM7 countries. Globalization and Health, 16(1), pp.1-13.

Jones, C.I. and Tonetti, C., 2020. Nonrivalry and the Economics of Data. American Economic Review, 110(9), pp.2819-58.

Korenman, S. and Okun, B., 2019. Gender differences in cyclical unemployment. In Structural Changes in US Labor Markets (pp. 177-195). Routledge.

Lundberg, S. and Stearns, J., 2019. Women in economics: Stalled progress. Journal of Economic Perspectives, 33(1), pp.3-22.

Makridis, C. and Hartley, J., 2020. The cost of COVID-19: A rough estimate of the 2020 US GDP impact. Special Edition Policy Brief.

Maliszewska, M., Mattoo, A. and Van Der Mensbrugghe, D., 2020. The potential impact of COVID-19 on GDP and trade: A preliminary assessment. World Bank Policy Research Working Paper, (9211).

Mohsin, M., Naseem, S., Zia?ur?Rehman, M., Baig, S.A. and Salamat, S., 2020. The crypto?trade volume, GDP, energy use, and environmental degradation sustainability: An analysis of the top 20 crypto?trader countries. International Journal of Finance & Economics.

Storm, H., Baylis, K. and Heckelei, T., 2020. Machine learning in agricultural and applied economics. European Review of Agricultural Economics, 47(3), pp.849-892.

Tan, J., 2020. Multidimensional Heterogeneity and Matching in a Frictional Labor Market–An Application to Polarization. Available at SSRN 3756701.

Yokota, K., 2018. Optimal employment in frictional business cycles and intertemporal discontinuity of demand duals and production.