Table of Contents

Question 1
The law of demand.
Question 2
2.1 Defend this statement:
“There is an inverse relationship between the rate of inflation and the
unemployment rate.”
2.2 Describe various ways in which a trade union can try to increase the minimum
wage rate.
2.3 Provide a critical review of South Africa’s labour market. Be sure to include
six characteristics of the labour market, at least five challenges facing the labour
market, and the latest developments in the labour market.
2.4 Explain the relationship between labour supply and elasticity in South Africa’s
public sector.
Question 3
Assess South Africa’s current economic climate and argue whether the
government should apply an expansionary or restrictive fiscal policy. Ensure that
you discuss the impact of your chosen policy on the budget.
Question 4
4.1
a) Aggregate net investment in South Africa in a given year and GDP for that year.
b) Aggregate net investment and the real rate of interest in the same year and
country.
4.2 Consider the following equation, and explain the meaning of each of the
coefficients:
Y = 2 + 3x1 + 4x2
4.3 With respect to estimated regression equations, why do the coefficients in
different estimated equations differ from one another?
4.4 Defend or argue against the notion that regression analysis is an ideal method
to use at your workplace to prove causality, especially with statistically
significant relationships.

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Question 5
5.1 What does line B1 refer to?

5.2 Is it fair to say that all choices on I1, I2 and I3 give the same amount of utility?
Substantiate your answer.
5.3 Explain whether indifference curve I1 and I3 is obtainable.

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Question 1
Introduction
The law of supply and demand combines two fundamental economic theories to explain how
changes in the price of a resource, good, or service affect its supply and demand. As prices
rise, so does supply, but demand falls. In contrast, as prices fall, supply becomes constrained
and demand rises.

Levels of supply and demand for various prices can be represented as curves on a graph.
These curves converge at the market-clearing price, where supply and demand are equal. This
intersection represents the market's price discovery process.

The law of supply and demand combines two fundamental economic theories to explain how
changes in the price of a resource, good, or service affect its supply and demand. As prices
rise, so does supply, but demand falls. In contrast, as prices fall, supply becomes constrained
and demand rises.

It is important to note that supply and demand may not always react in the same way to price
changes. Price elasticity describes how much price fluctuations affect a product's demand or
supply. Demand variations will be more pronounced for products with a high price elasticity of
demand. In contrast, because people cannot easily live without them, the price of necessities
will be relatively inelastic, implying that demand will fluctuate less in response to price
fluctuations.

Price determination based on supply and demand curves presupposes an open market where
buyers and sellers can choose whether to engage in business or not based on the price. Taxes
and regulations, supplier market power, the presence of substitute goods, and economic cycles
are only a few examples of the variables that might change the shape or location of supply or
demand curves. However, the commodities impacted by these external influences continue to
be susceptible to the basic principles of supply and demand as long as buyers and sellers have
agency. Let's now think about how supply and demand react to price changes in turn.

The law of demand states that, all other things being equal, demand for a commodity changes
inversely to its price. In other words, the level of demand decreases as price increases.

Since consumers' spending power is constrained due to their restricted resources, demand for a
given good or service declines as prices rise. In contrast, as the product becomes more
affordable, demand increases.

Demand curves consequently slope downward from left to right, as shown in the graph below.
The income impact describes changes in demand levels as a result of a product's price in
relation to consumers' resources or income.

There are, of course, exceptions. One is Giffen items, which are commonly inexpensive
essentials also referred to as subpar goods. When incomes increase, demand for inferior goods
declines as people switch to higher-quality options. However, the substitution effect causes a

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product to become a Giffen good when its price increases and its demand increases as a result
of consumers using more of it in place of more expensive alternatives.

Veblen goods, which are luxury items that appreciate in value and thus produce higher demand
levels as their prices grow since the price of these luxury products signifies (and possibly even
increases) the owner's status, are at the other end of the income and wealth spectrum.
Thorstein Veblen, an economist and sociologist, created the idea and came up with the term
"conspicuous consumption" to characterize it. Veblen goods are named after him.

The partial equilibrium supply and demand economic model, created by Antoine Augustin
Cournot and first published as a book in 1838, and widely popularized thirty years later by Alfred
Marshall, aims to describe, explain, and forecast changes in the price and amount of goods sold
in competitive markets. The model can only approximate a market with imperfectly competitive
behavior. It is one of the most fundamental models of several modern economic schools and
formalizes the views put forth by some economists prior to Marshall. It is frequently employed as
a fundamental building block in a broad variety of more intricate economic models and theories.
A market economy is best understood by some economic schools using the theory of supply
and demand since it explains how many resource allocation choices are made. Supply
schedules in this partial equilibrium model are fixed by unidentified forces, in contrast to general
equilibrium models.

The quantity of output on the market is referred to as the supply. In other words, it is the plan
that specifies how much of a product producers are willing to sell for a specific price. For
instance, if the price is R0.75 per lb and the market price is R0.90 per lb, the potato growers
might be willing to sell 1 million pounds of potatoes. The cost of production and the market price
of the good will be the primary factors of supply. When the price is more than or equal to the
minimum cost on the average variable cost curve, the supply curve for a given firm is directly
calculated from its marginal cost curve. Since diminishing marginal returns apply, supply curves
are typically depicted as upward-sloping. However, as will be discussed later, this need not be
the case.

A supply curve generally has an upward sloping shape, as was previously mentioned. The
supply curves do not always incline upward, though. A well-known illustration of this is the labor
supply curve, which bends backward. When a person's pay rises, they are more willing to work
more hours, but when their pay reaches a very high level, like R1,000 000 per hour, their
willingness to work actually declines. The supply curve for utility producing firms is typically
another illustration of an unconventional supply curve. The marginal cost (supply curve) for
these businesses is frequently shown as a constant because a sizable amount of their overall
costs are in the form of fixed costs.

Demand is a financial desire that is supported by purchasing power. In other words, it is a

strategy or relationship that expresses how much of a good consumers are willing and able to
purchase at various prices, providing all other non-price aspects remain constant. For instance,
if the price of potatoes is R0.75 per lb, a customer might be willing to buy 2 lbs of them.
However, if the price is R1.00 per lb, the same customer could only be willing to buy 1 lb. A
demand schedule that displays the quantity desired at each price can be created. Plotting the

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quantity demanded at each price results in a line or curve that can be used to show it on a
graph. A demand equation can also be used to mathematically describe it.

A demand curve typically has a downward sloping shape, as previously mentioned. The
demand curve for the majority of items, if not all of them, follows this rule. Rare instances of
products with upward-sloping demand curves may exist. A Giffen good is one with an increasing
slope on the demand curve.

Conspicuous spending cannot account for the presence of Giffen goods because purchasing an
expensive item elevates one's status, which implies that there are other factors at play besides
price. In fact, it's questionable if a Giffen good really exists. Although clearly arbitrary, examples
of ostentatious consumption could include the Bugatti Veyron. It is also possible to think of the
societal phenomenon known as "bling" in this way. And it accurately consumes supply and
demand.

According to mainstream economic theory, supply and demand linkages are constructed,
described as equations, and then factors that cause "stickiness" between supply and demand
are taken into account. The analysis of "trade-offs" made in the "market," which is the
negotiation between sellers and purchasers, is then conducted. Analysis is done to determine
whether a seller's ability to sell is no longer as valuable as other opportunities. This has to do
with "marginal" costs, or the cost of making the final good that can be sold, vs the possibility of
utilizing the same effort to do anything else.

The demand curve's slope (downward and to the right) tells us that when the price is lower,
more will be purchased. On the other hand, the supply curve's slope (upward and to the right)
indicates that producers are more eager to increase output as the price rises. The equilibrium
point is where these curves intersect. Producers will be willing to supply Q units over a period of
time at a price of P, and buyers will demand the same number. P is the equilibrating price that
balances supply and demand in this example.

Instead of using the more common curves, straight lines are depicted in the pictures. This is
normal when analyzing the simplified links between supply and demand because the general
linkages and takeaways from the supply and demand theory are unaffected by the curve's
shape. Because they have no effect on the market clearing price and won't unless there are
significant changes in supply or demand, the shape of the curves distant from the equilibrium
point is less likely to be significant. Therefore, supply and demand straight lines with the
appropriate slope will convey the majority of the data the model can provide. In any event, it
might be challenging to pinpoint the curve's precise shape for a particular market. However, the
basic shape of the curve, particularly its slope around the equilibrium point, does affect how a
market will respond to variations in supply or demand.

It is important to keep in mind that the supply and demand curves are both drawn as functions
of price. Both are not shown as functions of one another. Instead, the way the two functions
interact is a good representation of what happens in the market. The curves also provide a price
measurement method that is reasonably neutral. In reality, supply and demand apply to any
kind of asset or good used to measure price.

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Desire for something tends to rise when there is a greater demand for it. This could be seen as
a rise in demand. The rise in demand might also be the result of altered consumer preferences,
where the same customers now want more of the same product than they did previously.
Because more is wanted at each price point, increased demand can be visualized on the graph
as a rightward shift in the curve. An illustration of this would be an increase in the demand for
coffee. The demand curve will change as a result, moving from the original curve D0 to the new
curve D1. As a result, the equilibrium price increases from P0 to P1, which is greater. As a
result, the equilibrium quantity rises from Q0 to Q1, which is higher. In this case, we can
conclude that there has been a rise in demand, which has led to an expansion of the supply. In
this case, we can conclude that there has been a rise in demand, which has led to an expansion
of the supply.

On the other hand, if demand declines, the opposite occurs. Demand that starts at D1 and
declines to D0 will result in a contraction of the supply as the price and quantity required
decline. Keep in mind that this is just a result of shifting demand. The amount offered at each
price is the same as it was prior to the change in demand (both Q0 and Q1). The fact that the
demand is different is the reason why the equilibrium quantity and price are different.

Conclusion
Consumer decision-making in response to price fluctuations is explained by the law of
demand. When a good's price increases, there is less demand for that good in the
market, presuming other factors that affect demand remain constant. This is how people
naturally make purchases. This occurs as a result of consumers' reluctance to spend
more money because they are concerned about running out of money.

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Question 2
2.1
The macroeconomic analysis demonstrates a clear relationship between inflation and
unemployment rates (Savov, Mirkovich, Kazakov, Yotova, Gechev, Statev, Rakarova, Atanasov,
1998). The Short-Run Philips Curve, whose theoretical foundation is based on the following
lines of reasoning (Carlin, Soskice, 1990; Layard, Nickell, Jackman, 1991, 2005; Franz, 1994;
Stock, Vogler-Ludwig, 2010), visually illustrates the negative relationship between them: While
firms base their judgments on the prices of the goods and services they offer on labor costs per
unit of production, workers and employees aim for greater real salaries. The balance between
claims for the amount of wages and the level of pricing for the goods and services provided is
necessary for equilibrium to be achieved. Wages are based on predicted prices; if the
unemployment rate is lower, the increase will be greater; and vice versa.

The Phillips curve shows that unemployment and inflation have an inverse connection in the
short run, but not in the long run. The short-run Phillips curve (SRPC), which depicts various
ratios of unemployment and inflation, is where the economy is always located. While changes to
the overall SRPC correspond to changes in the SRAS (short-run aggregate supply) curve,
movements along the SRPC correlate to changes in aggregate demand. When unemployment
is at its natural rate, the long-run Phillips curve is vertical. If the natural rate of unemployment
changes, the long-run Phillips curve will shift.

2.2
The capacity of an individual or an organization to negotiate a favorable outcome is known as
bargaining power. There is an unequal distribution of negotiating power between employers and
employees on the labor market. Employers often hold the power of negotiation and reserve the
ability to choose pay and working conditions.

Employees frequently band together in an organization like a trade union in order to defend their
rights and strengthen their bargaining position.

Workers who band together to defend and advance their own rights form a trade union.

Collective bargaining refers to the procedure through which a trade union negotiates salaries
and working conditions with an employer on behalf of employees. Collective bargaining is used
to decide the market wage rate. Additionally, employers can choose how many employees to
pay this wage to.

The amount of money paid to employees per unit of time (hour, day) or per unit of output is
known as the wage rate.

The level of employment is directly impacted by changes in wage rates. Employers will hire
fewer workers as wage rates rise, resulting in a decline in employment. As a result, employment
levels will rise as a result of firms hiring more workers as pay rates decline.

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The primary role of trade unions is to negotiate greater worker salaries. Let's first look at how
wage rates are determined before learning how this is done.

When the supply and demand curves for labor (D and S) cross, a wage rate is established.

Through collective bargaining with employers, trade unions seek to maintain and enhance the
terms and conditions of workers, particularly those who are union members. Success of unions
is largely determined by their bargaining power, which is based on their capacity to limit the
employer's supply of labor, and the willingness of employers to offer above-market pay
(Freeman and Medoff, 1984).

The proportion of all workers that a union represents increases its bargaining power, which
raises the union wage premium (Freeman and Medoff, 1981; Lewis, 1986; Stewart, 1987;
Schumacher, 1999; Forth and Millward, 2002). Union-negotiated salaries have less of an effect
on the employer's cost competitiveness when the vast majority of workers in a given industry
are covered by collective bargaining than when rival companies have easy access to non-union
labor. This is due to the fact that all competitors must pay above-market wages. In industries
with low price elasticity of demand, such as those with monopolistic or oligopolistic production,
unions are more likely to be successful in raising wages because employers can cover
additional costs from above-average profits or pass the costs on to consumers without having to
worry about being undercut by rival producers.

Typically, it is considered that unions influence covered workers' wages directly through pay
negotiation, which is how they provide a union wage premium. However, there are numerous
ways in which a salary gap between union members and non-members can develop. The first is
the ability of unions to restrict employers' ability to reduce wages in tough times compared to
their uncovered counterparts, which manifests as a countercyclical increase in the premium
(Blanchflower and Bryson, 2002). The second is that union-induced wage increases may restrict
worker admission into the union sector or lead to job losses that boost the supply of labor in the
non-union sector, resulting in lower earnings when compared to those earned in the covered
sector. The "threat" effect, in which non-union companies raise their salaries to ward off the
possibility of unionization, is a third union wage effect that could reduce the union wage disparity
(Rosen, 1969; Freeman and Medoff, 1981; Farber, 2003).

The idea of "a fair day's pay for a fair day's labor" has long served as a guide for union wage
policy, meaning that payments are linked to employment rather than personal characteristics.
As a result of this wage standardization policy and efforts to end wage discrimination based on
race, gender, and handicap, salary disparities are frequently reduced (Blau and Kahn, 2002).
The position of unionized workers in the pay distribution, the union premium associated with
various worker categories, and the degree of centralization and coordination in collective
bargaining all affect whether unions genuinely reduce wage differentials.

Additionally, unions might influence wages more subtly. For instance, their "voice" modifies the
incentives employers and employees confront when investing in their human capital and
lengthens employment duration, which is itself frequently connected with greater compensation.

2.3

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Graph for Rate of Unemployment

Graph for rate of Inflation

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The foundation of decent employment is equal opportunity and equitable treatment in the labor
market. Unfortunately, there are also further barriers that prevent women from gaining
employment in South Africa and throughout the world. Once they are employed, appointments
to roles with authority and jobs with specific industries or qualities remain elusive.

The foundation of decent employment is equal opportunity and equitable treatment in the labor
market. Unfortunately, there are also further barriers that prevent women from gaining
employment in South Africa and throughout the world. Once they are employed, appointments
to roles with authority and jobs with specific industries or qualities remain elusive. The South
African labor market is more favorable for males than it is for women, according to the Quarterly
Labour Force Survey for the second quarter of 2021. Regardless of ethnicity, men are more
likely to be employed than women, but women are more likely to be engaged in unpaid labour.
Males are more likely than women to be employed, and men are also more likely than women to
be in the labor force (men's labor force participation rate is greater than women's), and men's
unemployment rates are lower than those of women. According to the official definition of
unemployment, the rate of unemployment among women was 36,8% in the second quarter of
2021 compared to 32,4% among males. During this time, the unemployment rate for black

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African women was 41.0%, compared to 8.2% for white women, 22.4% for Asian/Indian women,
and 29.9% for women of other races.

The enlarged definition indicates that in the second quarter of 2021, the unemployment rate for
women was 48,7%, which was 8,1 percentage points higher than the rate for men.

43,4% of all employees in the second quarter of 2021 were women. Men made up 66,9% of
those in managerial positions, while women made up 33,1%. Overall, domestic and elementary
work occupations employed close to a third (30,1%) of all people with jobs in the second quarter
of 2021. While men controlled the majority of employment, women predominated in the
domestic worker, clerical, and technical fields. Men held only 5,5% of the domestic worker
positions, while women held only 11,9% of the craft and associated trade employment.

The Decent Work Agenda includes fundamental workplace norms and employee rights as a
core component. Approximately three quarters (75%) of employees have access to paid sick
leave in the second quarter of 2021. Men made up 76.4% of the population, whereas women
made up 73.3%. During this time, 83,5% of employees were eligible for maternity or paternity
leave. In the second quarter of 2021, more men (89%) than women (76%) had the right to
maternity leave.

One of the 17 Global Goals that make up the 2030 Agenda for Sustainable Development is
decent employment. Progress toward various goals requires an integrated strategy. The
International Labour Organization (ILO) defines decent work as having access to opportunities
for work that is worthwhile and pays a fair wage, as well as security at work and social
protection for families, better prospects for social integration and personal growth, freedom to
express one's opinions and organize and take part in decisions that have an impact on one's
life, and equality of opportunity and treatment for all women and men.

The ILO and the UN both recognize social protection access as a fundamental human right. It is
one of the ILO's Decent Work Agenda's four strategic goals. Men were more likely than women
to have their employers make contributions to their pension or retirement fund in the second
quarter of 2021. Compared to 45.8% of women, little over half (51,3%) of male employees had
their employers make contributions to their pension/retirement fund. There were no differences
between men and women in terms of eligibility for the employer's medical aid benefit. 31.2
percent of both men and women qualified for this benefit.

The advancement of chances for decent work among men and women is facilitated through
social dialogue. It involves every manner of bargaining between diverse labor market
participants. 52,8% of women and 52,3% of men who worked there said their employer alone
decided on their annual compensation increase. Compared to 22,7% of women, 27,5% of male
employees had their wage increases negotiated by the union and the employer. 11,0% of
female employees had their yearly salaries negotiated through the negotiation council, as
opposed to 7,7% of their male counterparts.

Gender discrimination is still a significant issue in South Africa in a variety of social and
professional contexts, such as the job, the home, and educational institutions. The nation has
come a long way in advancing gender equality. Women's equality is protected by law and a

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special ministry in South Africa. The National Development Plan (NDP) urges local governments
to increase the representation of women at all levels of representation and in the setting of
budgetary priorities.

In municipal politics, however, women are frequently marginalized and excluded from decision-
making. It is difficult for women to participate in integrated development planning. The strategy
advises against gender violence and urges for persistent anti-racism and gender equity
activities across the nation. Additionally, it supports emphasizing women specifically in public
work.

Gender equality is essential for both sustainable development and economic prosperity.
Through increased productivity and technological innovation, the 2030 Agenda for Sustainable
Development Goals (SDGs) seeks to promote sustained economic growth. Effective strategies
to end forced labor, slavery, and human trafficking are essential for this, as are policies that
support entrepreneurship and job development. By 2030, full and productive employment as
well as respectable work for all women and men are to be attained.

Numerous studies conducted since April 1994 have demonstrated that the South African labor
market does not support luring foreign direct investment. Job tenure and mobility have not been
the focus of many research in South Africa due to the country's extremely high unemployment
rates. Instead, academics have focused heavily on labor market segmentation patterns, the link
between unemployment and incomes, and racial disparities in employment outcomes (Heintz
and Posel, 2008)

The whole population of South Africa that is either employed, available to work, or actively
seeking employment. Not all people who are of legal working age work. In South Africa, the
overall participation rate of people who are of working age in the labor force is roughly 62%.

Employment should not be confused with workforce participation. The labor force is made up of
both employed and unemployed people, not all of whom are necessarily employed.

The workforce consists of people who are employed right now. 13,447,000 South Africans were
employed in the country overall in 2012. People who are actively looking for job but are unable
to find it are classified as unemployed. One of the highest unemployment rates in the world is
found in South Africa. This definition indicates that South Africa's overall unemployment rate in
2012 was 25.2%. Of course, there are also some who have given up hunting for employment.
The unemployment rate would be 33.8% if the definition of unemployment were widened to
include these demotivated workers.

South Africa's economy grew at an average rate of 4.6% between 2003 and 2008, although the
2008 global financial crisis had a significant impact. By the conclusion of the fiscal year 2008 as
a result, the nation had lost about 800,000 jobs. The youth and those with less education were
the groups most impacted by job losses.

According to Statistics South Africa, only 7.4% of White people and 10.5% of Asian people are
unemployed, compared to 39.2% of Africans and 26.7% of Colored people. Women are more
likely to be unemployed than men are: 37.5% of women and 30.6% of men are unemployed.

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Youth unemployment is extremely high, and over 62.4% of workers aged 15 to 24 are
unemployed. The age categories of 45–54 (18.4%) and 55–65 (11.5%) have the lowest rates of
unemployment. In comparison to those who graduated with a diploma or degree, unemployment
is higher among those who did not complete their high school education.

Each sector of the economy employs a different amount of people. In terms of growth over the
past few years, some industries have performed better than others. The largest employer in
South Africa is the wholesale and retail sector, which employs 22.8% of the labor force.
Community, social, and personal services (CSP), which employs 21.5% of the workforce, is the
next largest employer. Between 2010 and 2012, jobs in the manufacturing, utility, and
construction sectors all decreased.

The oversupply of unskilled labor is one of the major problems facing the South African labor
market. The government has pushed for a rise in skilled labor as part of its efforts to disperse
income in South Africa more fairly. Unskilled labor made up a still significant 28.9% of all
employment in 2012.

By enacting the Skills Development Act (SDA) in 1998, the government aimed to "up-skill" the
labor force (amended in 2003 and 2006). The Act aims to equalize job possibilities, enhance
investment in education and training on the labor market, improve the capabilities of the South
African workforce, and encourage employers to offer learning opportunities to their staff.

To achieve its goals, the Act depends on a coalition of the government, organized labor, and
organized business. According to the Act, the National Skills Authority (NSA) was established to
provide the Minister of Labour with advice on developing and implementing skills policy. The
NSA includes both organized labor and organized business. The Sector Education and Training
Authorities were also established by the Act. These authorities, which also include organized
labor and industry, are responsible for developing and carrying out sector-level policies. SETAs
create learnerships as one of the practical things they do to expand the skill base in respective
sectors.

The government has also enacted the following laws to strengthen and improve the South
African labor market:

The Employment Equity Act of 1998, the Basic Conditions of Employment Act of 1997, and the
Labour Relations Act of 1995

National Negotiation Councils were established in accordance with the Labour Relations Act to
enable collective bargaining of the minimum wages across various industries. These wages are
set by an agreement between organized labor and organized business in the NBCs, and they
vary widely.

The minimum pay varies depending on the sort of employment one holds, even within
industries. The existing minimum salaries in the taxi sector serve as an example of this, since
what is deemed an appropriate base income for drivers, administrative staff, and taxi rank
marshals fluctuates.

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Other than salary levels, a variety of factors affect the labor market. The following are some of
the variables that affect the labor supply:

Birth and death rates are among the factors that affect population growth. Greater potential
labor supply results from faster population increase.

Age distribution: The supply rises if the majority of the population is made up of people who are
economically active.

Geographic and occupational mobility are both included in labor mobility. The first has to do with
how simple it is for employees to relocate, which is influenced by things like salary,
transportation infrastructure, housing (housing), and job prospects. The second phrase has to
do with shifting from one position to another, and it depends on things like education and skill
levels.

The difference between immigrants' arrivals and departures from a country is known as net
immigration (emigrants).

Globalization increases cross-border labor mobility. The supply of qualified personnel is

influenced by the presence of education and training facilities.
2.4
Graph for Labour Market

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Graph for Labour supply and Elasticity

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The degree to which the labor supply reacts to a change in the wage rate over a specific time
period is known as labor supply elasticity.

The sensitivity of the labor supply to a change in the wage rate is known as wage elasticity of
supply.

The specific skills and educational requirements have an impact on this; the less elastic the
supply, the more rigid the skills and the higher, or more difficult to attain, the educational
requirements are.

Individuals are less susceptible to fluctuations in income if the function has a substantial
vocational component, such as nursing, making the supply more elastic.

A component affecting the supply is the time period being considered. In the short run, the
supply curve of labor has a tendency to be inelastic since it takes time for individuals to react to
changes in relative earnings.

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Question 3
Introduction
The minister made a passing reference to the necessity of striking a delicate balance between
protecting lives and livelihoods and promoting equitable prosperity. This balance is shown in this
budget. Risks are still considerable and the economic recovery has not been uniform. We must
go cautiously. We pledged in the 2021 MTBPS to set sail for economic expansion and fiscal
stability. This budget affirms that dedication. It stabilizes debt and reduces the budget deficit.
Additionally, it extends income and employment assistance to the most vulnerable people,
addresses issues with service delivery, and offers tax relief. The structural improvements our
economy requires cannot be replaced by these initiatives, though. Trade-offs must be made,
and they must be difficult.

This year, the global economy is projected to expand by 4.4%. This is less than the 4.9% we
projected when we submitted the MTBPS. Many nations implemented measures to control the
coronavirus's Omicron variant's spread. In addition, the pace of the global economic recovery
has been constrained by ongoing imbalances in global value chains.

The South African economy is not immune to these developments on a global scale. Our
projected rate of economic growth for 2021 has been reduced from 5.1% at the time of the
MTBPS to 4.8%. This revision takes into account both the effects of changes in the external
world and our own particular difficulties. In the second half of 2021, commodity prices, which
had helped to sustain our economic recovery, began to slow. Additionally, the advances we
earned in the first half of the year were further undermined by violent disturbances in July and
limits put in place to control the third wave of COVID-19. The pace of the recovery was also
hampered by industrial action in the manufacturing sector and the resurgence of load shedding.
A real GDP growth rate of 2.1% is anticipated for 2022. The average GDP growth rate for the
ensuing three years is predicted to be 1.8 percent.

Since the MTBPS, tax collections have been substantially greater than anticipated. We now
project R1.55 trillion in tax income for the years 2021–2022. This is R62 billion more than what
we anticipated four months ago and R182 billion more than what we anticipated for the Budget
last year.

This comes after an R176 billion shortfall for 2020–21 as compared to projections in the 2020
Budget. Due to increasing commodity prices, the mining industry has been the main source of
this pleasant surprise. He added that a summer is not made up of a single swallow. Our
economy's capacity has not increased as a result of the improved revenue performance. As a
result, we are unable to prepare for ongoing expenses based on fluctuations in commodity
prices. To be clear, any long-term spending increases must be paid so as not to deepen the
budget deficit. Additionally, we have observed an increase in revenue from other industries and
taxation tools including the value-added tax and personal income tax. He also mentioned that
the South African Revenue Service was founded 25 years ago this year. We commend SARS
on reaching this significant milestone because they are essential to the economy. We also

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applaud the present infrastructural upgrades being made at border crossing points like Beit-
bridge to encourage more trade.

The minister further said that almost R308 billion has been spent on saving failed state-owned
businesses. Frontline services and infrastructure have been cut by R257 billion since 2013. With
this Budget, we break with this trend and refocus on the essential duties of the executive
branch.

Expansionary policy.

It is highly recommended for the South African government to adopt an expansionary policy. A
sort of macroeconomic policy that seeks to support monetary development is the expansionary
or loose policy. To effectively control the drawback of financial cycles during an economic
slowdown and recession, the whole policy prescription of Keynesian financial features must be
employed. Catch the 3 catastrophic financial crises as the economy slows.

Although the risks and costs associated with an expansionary policy are well known, they might
also involve macroeconomic, microeconomic, and political economy issues. Supporting total
interest is the main objective of the expansionary strategy in order to make up for declines in
private demand.

Monetary policy and fiscal policy are the two types of expansionary policies. While expansionary
fiscal policy concentrates on higher government investment in the economy, expansionary
monetary policy targets increased money supply.

When the government increases the amount of money in the economy, expansionary fiscal
policy is used. They do this by utilizing budgetary instruments to either cut taxes or raise
expenditure, both of which offer people and businesses more money to spend.

Spending by the government and tax cuts: is the idea that the government may promote
economic activity during times of financial tightness by giving consumers more power over
money.

The idea behind expansionary policy is that by stimulating greater financial activity, the overall
economy will expand, making up for any short-term shortages with long-term monetary growth.
However, expansionary policy simply increases the spending deficit or reduces overflowing
momentarily.

This is due to the fact that, if thoughtfully targeted, even a relatively limited stimulus can have a
multiplier effect over the entire economy. Contrarily, a contractionary fiscal strategy involves
raising taxes or cutting back on government expenditure, which causes the aggregate demand
to shift to the left.

The fundamental advantage of expansionary fiscal policy is that, when implemented properly, it
produces results quickly.

It increases profitability since it aims to increase the money supply. Additionally, there is a high
demand for goods and services, and businesses prepare to increase both the quality and
quantity of output.

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In particular during a downturn, it supports the nation's economic growth and development. It is
therefore frequently adopted during low-development stages. It causes a greater overflow of
capital into the economy and reduces declines in loan applications and interest rates.

A further benefit of expansionary fiscal policy is the restoration of organizations' and consumers'
confidence.

Conclusion
The demand for labor is rising as a result of the growth in income and profit. Organizations
believe that it is profitable to expand operations and hire new employees before financing is
made simpler. As a result, it aids in lowering unemployment.

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Question 4
4.1
The total amount of all equity securities owned by Investors, both directly and indirectly, when
adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations,
liquidations, reclassifications, mergers, consolidations, or other events. The total monetary or
market worth of all the finished goods and services produced within a nation's boundaries
during a certain time period is known as the gross domestic product (GDP). It serves as a
thorough assessment of the state of the economy in South Arica because it is a wide indicator
of total domestic production.

The GDP can provide investors with useful information about the economy's health, consumer
spending patterns, the state of residential and commercial investment, and the direction of
prices for products and services. A healthy economy typically benefits businesses and their
profits, which may lead to higher stock prices.

Rising inflation may be indicated by rising costs for goods and services, which can affect bond
prices and yields. In summary, GDP offers a picture of the health of the economy over a certain
time period and can be used to inform financial choices. No investment strategy is guaranteed
to be profitable, and all investing carries risk, including the potential loss of principle.

4.2

Amultiple regression model has the form Y = 2+ 3X1+ 4X2. As X1 increases by 1 unit (holding
X2 constant), Y will A Increase by 3 units B. Decrease by 3 units C. Increase by 4 units D
Decrease by 4 units.

4.3
They alter as a result of the independent variable's impact on the dependent variable.

The pattern of change in the dependent variable as a result of change in the independent
variable linked to the coefficient is shown by the coefficient of a regression equation.
Furthermore, multiple data sets are used to create the coefficients.

To be more precise, the effects will undoubtedly vary from one another because various
coefficients reflect the influence of change in dependent variable owing to change in
independent factors.

Let's use an example where the income changes due to changes in age and education are
shown by a regression equation.

Y = edu * a1 - age * a2

Here, there are two coefficients: a1 and a2, one of which is the age coefficient and the other is
the education coefficient. Both have distinct signs. Since income will rise if education rises and
vice versa, the coefficient is in the positive range. Age-related decreases in income and vice
versa cause the coefficient to be negative.

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Now, the impact of education on income cannot be equaled by the impact of age. As a result,
the coefficients are different.

4.4
A statistical method called regression analysis is used to assess the relationship between two or
more variables. Regression analysis aids an organization in better decision-making by enabling
them to comprehend what their data points signify and make use of them accordingly. This
potent statistical tool is used by data specialists and business analysts to eliminate irrelevant
variables and choose the crucial ones.

Better judgments and an understanding of the consequences of those actions are essential for
organizations to operate smoothly and efficiently. Businesses gather information about sales,
investments, expenses, and other factors, then analyze it to find ways to improve. Regression
analysis is a tool that aids organizations in making sense of data that is then utilized to develop
understanding of an organization. Regression analysis is a tool used by data scientists and
business analysts to make strategic business decisions.

Regression analysis is used to transform the gathered data into useful knowledge.
Organizations are embracing data-driven decision making, which does away with antiquated
methods like guesswork or assuming a hypothesis and ultimately enhances the productivity of
work within an organization. This examination offers the organization's management unit useful
advice. Given the abundance of data, it is possible to analyze and comprehend the data in order
to get useful insights and operate shrewdly.

Regression analysis is a tool used by organizations to forecast future events. For given
particular values of the dependent variables, the business analysts anticipate the man of the
dependent variables in this procedure. Numerous crucial uses of multivariate linear regression
exist, including estimating sales numbers and developing growth strategies.

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Question 5
5.1
Line B1 represents the opportunity cost of foregoing popcorns over cool drink. The more money
that is spent on popcorns, the lesser money that is spent on cool drink and the more money
spent on cool drink the lesser the money spent on popcorns.

5.2
No. Choice made on I1, I2 and I3 have different amounts of utility. I1, has less utility followed by
I2 and I3 has the highest utility. I1˂I2˂I3.

5.3
Indifference curve I1 is obtainable because it is using less resources than the available
resources, therefore it is easily obtainable.

I2 is also obtainable but it is exploiting all the available resources. It shows the minimum usage
of the available resources therefore it is obtainable.

I3 is not obtainable. The available resources are not enough to achieve indifference in curve I3.

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