BBA Economics Report: South African Economy and Policy Analysis

This economics report, prepared for a BBA program, delves into key economic concepts and their practical applications. The report begins by outlining the methods economists use to analyze cause and effect, including natural, economic, and statistical experiments. It then explores demand and supply dynamics, using the wine market as a case study to illustrate price and quantity relationships. The report examines factors influencing labor demand and supply, as well as the determination of equilibrium wages. Furthermore, the report analyzes the differences between monetary and fiscal policies, with a specific focus on how the South African government utilizes discretionary fiscal policy through budgeting and taxation, and how monetary policy actions impact exchange rates. Finally, the report provides an argument on the impact of expansionary policies on inflation.

ECONOMICS BBA

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Explaining methods through which economists attempt to disentangle cause and effect......1
QUESTION 2...................................................................................................................................2
2.1 Drawing demand and supply curve considering given information.................................2
2.2 Updated situation in wine market when price per bottle is 60.........................................2
2.3 Updated situation in wine market when price per bottle is 15.........................................2
2.4 Impact on quantity and price of wine while production increases...................................2
2.5 Graphically presenting impact on wine market................................................................3
QUESTION 3...................................................................................................................................3
3.1 Elements influencing to the demand and supply of labour..............................................3
3.2 Method by which equilibrium wage derived....................................................................4
QUESTION 4...................................................................................................................................4
4.1 Segregation among monetary and fiscal policy................................................................4
4.2 Describing ways through which South African government use discretionary fiscal policy
................................................................................................................................................4
4.3 Critically analysing that in which ways monetary policy actions taken in South Africa
change exchange rate..............................................................................................................5
4.4 Argument on the statement provided...............................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Economics is a topic in which production of goods and services, their consumption as
well as exchanging wealth. It is one of the vast branch of knowledge through which performance
of an economy is to be assessed. The present study reflects various ways which are supportive to
economists for attempting to disentangle cause as well as effect. Second part of the project
reflects on the supply and demand as well as equilibrium price concept. Apart from this, it
focuses on factors which are affecting to the demand as well as supply of labour in the economy.
At the end of report, monetary and fiscal policies are focused along with impact on exchange rate
with reference to the South African economy.
QUESTION 1
Explaining methods through which economists attempt to disentangle cause and effect
In order to make effective analysis of any economic aspect some models and theories are
considered by economists. Among them one of the highly used model is disentangle cause and
effect. In order to attempt this particular aspect basically three models attempted by economists
which include natural experiment, economic investigation and statistical experiment. The first
model helps to understand impact one economy due to one element which changes according to
the nature. The second model used by economists in order to take effective decisions as well as
derive effect of every factor at one time (What Is Economics?, 2016). Apart from this, statistical
model considered by economists in order to determine correlation among two variables and
assess that one factor affect actually on another on not within an economy.
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QUESTION 2
2.1 Drawing demand and supply curve considering given information
2.2 Updated situation in wine market when price per bottle is 60
In the wine market when price of per bottle charged at 60 then quantity supplied and
demanded both will change. In the above situation, supply and demand is 140 bottles and after
changing prices quantity demanded and supplied will decline and enhance respectively in the
market. Therefore, demand and quantity of wine bottle will be nearby 80 and 155 units
respectively.
2.3 Updated situation in wine market when price per bottle is 15
If price of wine bottle is 15 then quantity demanded will enhance and supplied decline as
compared to the above conditions. Therefore, supply and demand at price 15 will be 75 and 160
units respectively in the wine market.
2.4 Impact on quantity and price of wine while production increases
When farmers produce more number of products i.e. wine then quantity of supply will
affect in a positive direction. Therefore, quantity supplied will enhance in the economy which
lead to fall in prices of wine (Krain, 2017). Hence, as farmers manufactures mode wine then
price will reduce and supplied quantity improve.
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2.5 Graphically presenting impact on wine market
At the previous situation price in the market determined at 30. In the present condition
supply of the wine bottle is declined with 40 bottles at each and every week. On the basis of
updated condition, in the wine market price factor affects up to the higher level. After declining
quantity supplied, price of each bottle increased from 30 to 40.
QUESTION 3
3.1 Elements influencing to the demand and supply of labour
The market at which particular type of the labours supply to the company on various
levels of the wages is considered as the labour market. In this basically two factors involved
which are like demand and supply and affects from list of elements in the economy. Those
factors which create impact on the labour's demand are like; changes in the utilising another
elements of production other than labour force, fluctuations in the technology level, changes in
demand of product produced in the firm and increase or decrease in number of companies
(Factors affecting demand for labour, 2017).
Apart from this, supply of labour is also affected by various kinds of factors in the
economy. Such aspects are like: real or minimum wage rate settled by authority framework and
labour union, overtimes working, obstacles to enter in market, substitute occupations etc. Along
with this, enhancement in occupational quality of the workforce, characteristic i.e. non-monetary
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of particular job and net migration of employees also influenced to the supply of labour in the
economy (Riley, 2015).
3.2 Method by which equilibrium wage derived
In an economy, equilibrium point reflects to a situation at which demand and supply of
particular aspect are equal. Further, on the graph when both the curves like supply and demand
intersect then price of that factor or product is determined in an appropriate manner. In the given
schedule as supplied and demanded labour hours increase and decrease consistently then wage
rate affect in negative direction. Moreover, after considering law of equilibrium, wage rate will
be determined at the condition in which supplied and demanded hours are equal (Ferreira and
et.al., 2017). In the present case scenario, hours of labour supplied and demanded both are same
at the 35 hours where wage rate is worth of 50. Hence, equilibrium wage in the present schedule
will be 50 where both the aspects i.e. supply and demand is 35 labour hours.
QUESTION 4
4.1 Segregation among monetary and fiscal policy
A method which is considered by central government of the country in terms of taxation
for making changes in economic conditions is identified as fiscal policy. Apart from this, when
central bank of a country make changes in the money supply within economy is called as the
monetary policy. Further, regulatory or administration body of fiscal and monetary policy is
finance minister and central bank receptively. Changes in the fiscal policy made on the yearly
basis while monetary policy changes according to the economic status. Apart from this, relation
of fiscal policy is with the government income and expenses while monetary policy relates with
banks and credit control (Surbhi, 2015). When talking about the objective then fiscal policy
focus on economic growth while another on economic stability.
In the South African economy changes in the monetary policy are made by two
frameworks. One is the South African Reserve Bank, it assesses market condition and on the
basis of that plan for changing monetaery policy is prepared. Second party involved for setting
this policy in South Africa is Monetary Policy Committee (MPC).
4.2 Describing ways through which South African government use discretionary fiscal policy
A policy which is related to the monetary terms in an economy in order to stimulate
economy in favourable situation is known as the discretionary fiscal policy. It is used to make
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changes in flow of money and grow the economy. The government of South Africa uses this
specific policy in two ways like budget procedure as well as taxation. Under the first method, it
makes changes in the budget on the yearly or half yearly basis. As level of budget enhances and
declines in the selected country then overall economic condition comes into control. Apart from
this, tax code method is taken into account by the South African government where it either
enhance the tax rates or declines (Amadeo, 2017). The situation in which flow of money is
higher i.e. inflation in the country then taxation increases which lead to decline this condition
and vice-versa. Henceforth, as pet the give ways government of this country undertakes
discretionary fiscal policy. However, as tax rates and budgets fluctuates then directly affect to the
flow of money due to which prices influenced up to the greater extent.
4.3 Critically analysing that in which ways monetary policy actions taken in South Africa change
exchange rate
The policy which overall relates to the financial aspect or money in the country is called
as the monetary policy. On the other hand side, exchange rate also come under the monetary
terms due to which this policy has greater impact on it. It can influence on the rate of exchange
in three stages which are like incomes, prices as well as interest rates. When central bank or
MPC of South Africa makes changes in the policy then income of population affects up to the
greater level. As income or revenue increases then demand of products and services also and
resulting is rising in price factor. Further, flow of money enhances in the economy where central
bank raise level of interest rate (Denton and et.al., 2017). In the country when rate on interest
increases or decrease then create direct impact on exchange rate. Hence, it can be criticised that
actions taken by South Africa in terms of monetary policy then rate of exchange highly
influence.
4.4 Argument on the statement provided
Expansionary policy is majorly related to the non-monetary aspect and inflation is totally
depends on the financial term. Therefore, when government of South Africa make changes in the
expansionary policy then inflation rate will not affect.
CONCLUSION
It can be summarised from the above analysis that, economists attempt to assess
disentangle cause and effect of any economic aspect using three models like natural, economic
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and statistical experiment. Further, when quantity supplied of wine product fluctuates then create
impact on price in inverse direction. Apart from this, the situation at which supplied and
demanded labours hours both are same then equilibrium wage rate is derived i.e. 50 in the
present case. Moreover, it can be concluded that due to changing in monetary policy by South
African government then it creates impact on the exchange rate.
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REFERENCES
Books and Journals
Denton, G. and et.al., 2017. Economic planning and policies in Britain, France and Germany.
Routledge.
Ferreira, J. J. and et.al., 2017. Effects of Schumpeterian and Kirznerian entrepreneurship on
economic growth: panel data evidence. Entrepreneurship & Regional Development.
29(12). pp. 27-50.
Krain, M., 2017. The effect of economic sanctions on the severity of genocides or politicides.
Journal of genocide research. 19(1). pp. 88-111.
Online
Amadeo, K., 2017. Discretionary Fiscal Policy. [Online]. Available through:
<https://www.thebalance.com/discretionary-fiscal-policy-3305924> [Accessed on 22nd
September 2017].
Factors affecting demand for labour, 2017. [Online]. Available through:
<http://www.dineshbakshi.com/a-level-economics/government-microeconomic-
intervention/revision-notes/509-factors-affecting-demand-for-labour> [Accessed on 22nd
September 2017].
Riley, G., 2015. Labour Market – Supply of Labour. [Online]. Available through:
<https://www.tutor2u.net/economics/reference/labour-market-supply-of-labour>
[Accessed on 22nd September 2017].
Surbhi, S., 2015. Difference Between Fiscal and Monetary Policy. [Online]. Available through:
<http://keydifferences.com/difference-between-fiscal-policy-and-monetary-policy.html>
[Accessed on 22nd September 2017].
What Is Economics?, 2016. [Pdf]. Available through:
<https://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/
0273718975.pdf> [Accessed on 22nd September 2017].
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