1. Africa Economics

2. Types of Economic Systems
Traditional: An economy in which customs and habits from the past are used to resolve most economic issues of production and distribution
Command: An economy in which most economic issues of production and distribution are resolved through central planning and control (typically a government)
Market: An economy that relies on a system of interdependent market prices to allocate goods, services, and resources
Most countries have a MIXED economy located on a continuum between pure market and pure command.
3 Economic Questions:
What to produce?
How to produce?
For whom to produce?

3. Economy of Nigeria Mixed economy Spends .9% of GDP on education
Heavily dependent on oil (37% of GDP in 2006)
18% agriculture
50.9% industry
31.1% services
Poor infrastructure

4. Economy of South Africa
Mixed economy
Spends 5.4% of GDP on education
21.7% unemployment (high)
9% agriculture
26% industry
65% services
2 economies:
1 that is very similar to those of developed countries
1 with a very poor infrastructure

5. Voluntary Trade Benefits Buyers and Sellers (Review)
Specialization encourages trade between countries
EX: Nigeria specializes in oil production, while its neighbor specializes in agriculture. Can these two benefit from trading with each other?
Trade barriers:
Tariffs
Embargos
Quotas

6. International trade requires a system for exchanging currencies between nations. Why?

7. Factors That Influence Economic Growth: Nigeria and South Africa
4 factors: land, labor, capital, entrepreneurship
Human capital can influence GDP positively and negatively
Low education/training = low GDP
High education/training = high GDP
Investment in capital can influence GDP positively and negatively
Low investment in capital = low GDP
High investment in capital = high GDP
South Africa
Nigeria
Land
Yes
Labor
Capital No
Entrepreneurship
% of GDP spent on education
5.4%
0.9%
GDP per capita
$10,400
$2,200

8. The distribution of diamonds, gold, uranium, and oil affects the economic development of Africa
When a country has natural resources and mines them efficiently, they will have a higher GDP
Entrepreneurship: A characteristic of people who assume the risk of organizing productive resources to produce goods and services

9. Vocabulary to know:
Standard of Living: The level of subsistence of a nation, social class or individual with reference to the adequacy of necessities and comforts of daily life
Quotas: In international trade, the limit on the quantity of a product that may be imported or exported, established by government laws or regulations
Entrepreneurship: A characteristic of people who assume the risk of organizing productive resources to produce goods and services
Tariff: A tax on an imported good or service
Market Economy: An economy that relies on a system of interdependent market prices to allocate goods, services, and resources
Specialization: A situation in which people produce a narrower range of goods and services than they consume
Capital: Resources and goods made and used to produce other goods and services. EX: buildings, machinery, tools and equipment
Command Economy: An economy in which most economic issues of production and distribution are resolved through central planning and control (typically a government)

10. Vocabulary (cont.)
Traditional Economy: An economy in which customs and habits from the past are used to resolve most economic issues of production and distribution
Gross Domestic Product (GDP): The market value of all final goods and services produced in a country in a calendar year
Human Capital: The health, education, experience, training, skills, and values of people (also known as human resources)
Opportunity Cost: what you must give up to obtain something else, the second best alternative
Export Subsidy: government financial assistance given to a firm that allows a firm to sell its product at a reduced rate; this makes the product more competitive when exported to other countries
Tariff: taxes imposed on imported goods
Quota: limits placed on the quantity of an imported good
Product Standards: a “hidden” barrier; most countries set their own standards for product safety, packaging, content, etc.; if a standard for a product in Country A is lower than a standard for a product in Country B, Country A will have to spend money to meet Country B’s standards if they wish to sell in that country

11. Can you answer these questions?
What are the three types of economic systems?
What are the three economic questions that must be asked when creating a new product or business?
What are the similarities and differences of the economic systems in South Africa and Nigeria?
How does specialization encourage trade between countries?
How do tariffs, quotas, and embargos serve as barriers to trade?
Why does international trade require a system for exchanging currencies between nations?
What is the relationship between investment in human capital (education and training) and gross domestic product (GDP)?

12. Can you answer these questions?
What is the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP)?
How does the distribution of diamonds, gold, uranium, and oil shape the economies of Africa?
What is the role of entrepreneurship in Africa?
What is the difference between and intermediate and a final good or service?
What is an example of a consumer good or service? (a government good or service? An investment good or service?)