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Inside Collection (Course): Economic and Management Sciences Grade 8
WHEN YOU HAVE COMPLETED THIS SECTION, YOU WILL BE ABLE TO EXPLAIN INFLATION AND THE REASONS FOR FLUCTUATIONS IN THE INFLATION RATE.
INFLATION
The information quoted below was published in a newspaper during August 2002. Read the article and answer the questions that follow:
Statistics South Africa has indicated that the CPI (Consumer Price Index) – the all-inclusive measure of inflation – has increased by 10,6% in July. The increase is the result, among other factors, of a 5,2% increase in housing costs as compared with June this year. The increase in interest rates of commercial banks from 15% to 16% in June was offered as reason for the steep increase in housing costs.
Housing, food and transport make up more than half of the CPI basket of goods. Steep increases in these components explain the rise in inflation. Refer to the following table:
THIS IS WHY CONSUMERS HAD TO DIP DEEP INTO THEIR POCKETS
Item %-increase since July 2001
HOUSING 16,76%
FOOD 16,83%
MEDICAL COST 12,72%
TRANSPORT 6,72%
(Source: Standard Bank)
Food prices this year made a considerable contribution to the inflation monster. Mr Craig Irwing of the Consumer Insight Agency, who investigates consumer affairs on behalf of large enterprises, regards the price increases as a call to prioritise. He said that consumers will have to decide what they will sacrifice – this will probably be unavoidable. The big question will just be what? Will it be an extra school shirt or a bottle of wine? Mr Irwing suggested that it will hopefully in most cases be the luxury item.
Ms Basson of Salon Karin expects that fewer people will visit hair salons. She suggested that clients will prefer to apply colour and take care of their hair at home rather than count cents.
Although most families try to eat out from time to time, they spend less per meal. A manager at Spur asserts that clients now order 200g rather than 500g steaks. Whereas they used to eat out twice a month, they can now afford to do so once a month at most.
Medical services have been hit hardest by inflation increases. Patients increasingly inquire about generic equivalents of costly medicines.
(August 2002 - Die Burger)
Housing:
Transport:
Food:
Medical costs:
INFLATION
Do research on the following topics and hand in a written report.
Learning Outcomes (LOs)
LO 1
the economic cycle
The learner will be able to demonstrate knowledge and understanding of the economic cycle within the context of ‘the economic problem’.
Assessement Standards(ASs)
This is evident when the learner:
describes the historical development of money and its role in societies and their economies;
discusses how trade (import and export) addresses the economic problem (choice and opportunity cost), as well as the role of banks in investing in the economy;
explains how different economic systems address the economic problem (e.g. planned, market and mixed economies);
discusses the role, rights and responsibilities of trade unions;
discusses the role, rights and responsibilities of trade unions;
ACTIVITY 1: Inflation
Causes of price increases
Housing: Increases in interest rates (3 times in 2002).
Transport: Increases in fuel prices (several times in 2002).
Food: Increases in food prices resulting from rising costs (continuous during 2002).
Medical costs: Deterioration of the exchange rate of the rand, which raises the prices of imports.
Cost inflation, because the above refers to input costs that lead to rising prices.
ACTIVITY 2: Inflation
Research regarding:
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Last edited by Siyavula Uploaders on Apr 6, 2009 4:06 pm -0500.