We have established that economics is the study of how society uses its limited resources to satisfy some of our unlimited wants and needs To deal with the economic problem of scarcity each and every society, whether it's capitalist, or communist, socialist or some other kind of system, needs to answer the following three fundamental questions.
What goods and services to produce
Since we cannot produce all the goods and services that people need and want we need to decide what is the best combination of goods and services that we should produce. This decision then requires that we allocate our scarce resource to the production of these goods and services.
This is indeed a very complicated decision since we need to decide what kind of food and how much of it to produce, what kind of houses and how much houses to build, what kind of education to provide, how much health care and countless more decisions about televisions, clothes, cell phones, beer, cold drinks, etc. We also need to answer the question about what kind of capital goods, that is the machines and tools we use in the production of goods and services, we need to produce. And we to do this under the condition that our resources are scarce which implies that we cannot produce everything and that once a resource is allocate to the production of a good it is not available for the production of another good.
We are all aware of the pressing shortage of housing in South Africa today. But do we really know whether we should build houses or rather concentrate on providing more food? Is the production of food not more important than providing houses? Do we know how much more food could be produced if we built fewer houses?
How to produce the goods and services
Through the process of production our scarce our resources are combined to produce the desired goods and services. It is possible to produce the same product by using different combination of our scarce resources and the challenge to society is to find the most efficient way of producing goods and services. This efficiency requirement is very important since our resources are limited and we cannot afford to waste it by producing the wrong goods and services and/or produce the desired combination of goods and services in an inefficient way. The more effectively and efficiently resources are used, the more goods and services can be produced, and the more needs and wants can be satisfied. So, efficient and effective use of our scarce resources contributes to economic growth and the wealth of our nation.
We as a society are again confronted with difficult decisions. If for instance we decide to build houses should it be built with bricks, wood or concrete blocks? In New York, most construction uses steel or concrete - there is not an abundance of timber for building - whereas in Knysna there are a lot of timber homes, because there are ample and well managed forests. Should we make use of unskilled labour or should we rather use sophisticated building techniques which require large capital outlays?
For whom to produce
We produce goods and services to satisfy people’s needs and wants. But which people’s needs and wants? Who gets the houses, the food, the computers, the cars that we have produced. This question deals with the distribution of goods and services and it is one of the most challenging questions to answer.
Activity
Do the following activity on the three fundamental questions:
Read the following extract from an article which appeared on the website of The New Age newspaper on 4 December 2015 and answer the questions:
Limited university space shuts out scores of students
BATANDWA MALINGO
Thousands of university applicants have been turned away as universities across the country struggle to accommodate growing numbers of young people wanting to study.
At least seven major universities in the country had received a combined total of more than 300 000 first year applications for placements next year, but fewer than 50 000 were accepted for the new academic year.
Admissions had reportedly become competitive and universities were able only to admit a limited number of students.
The number of spaces available was reportedly in line with the enrolment plan approved by the Department of Higher Education and Training.
More than 90 000 first-year applications had been received by the University of Johannesburg, with only 10 500 accepted.
The University of Western Cape received 50 000 applications and had taken a mere 4 500, while Wits University accepted 6 300 students from more than 65 000 applicants.
Rhodes University took in 1 800 from 7 830 applicants while the University of Cape Town accepted 4 200 from more than 19 000 applicants.
Nelson Mandela Metropolitan University had 6 056 students from more than 50 000 applications.
The application period for all these institutions had ended and those whose applications were unsuccessful were urged to find alternative institutions to study.
Source: http://www.thenewage.co.za/limited-university-space-shuts-out-scores-of-students/
Indicate whether you agree or disagree with the following statements:
It is clear from the article that in terms of the question of what to produce the South African society decided to allocate its resources in such a way that its higher education institutions can accept approximately 50 000 new students in 2015.
You should agree since only 50 000 new students can be accommodated at our higher education institutions
Think again.
You should agree since only 50 000 new students can be accommodated at our higher education institutions
The number of students that were admitted is less than the number of students that applied to study at higher education institutions.
You should agree since the number of students that were admitted is 50 000 while the number that applied were 300 000.
Think again.
You should agree since the number of students that were admitted is 50 000 while the number that applied were 300 000.
To increase the number of places the South African society needs to allocate more resources to higher education institutions which can be done very easily since it has an abundance of resources.
The statement is only partially correct. If we wish to increase the number of places we need to allocate more resources to higher education institutions but we cannot do it easily
The statement is only partially correct. If we wish to increase the number of places we need to allocate more resources to higher education institutions but we cannot do it easily
To answer the question for whom to produce, in this case who will be accepted to study, the South African society decided to award the places on a first come first serve basis.
Think again.
You should disagree since the allocation of the places is awarded on a number of criteria such as such as APS scores and scores for National Benchmark Tests as well as ability to pay.
You should disagree since the allocation of the places is awarded on a number of criteria such as such as APS scores and scores for National Benchmark Tests as well as ability to pay.