Economic and Management Sciences
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Economic and Management Sciences
Study guide
Grade 7
Lesson elements
LEARNING AIMS
What you should know at the end of the lesson (taken from CAPS)
DEFINE
Definitions of concepts to be able to understand the content
TIPS
Sample
Any information, other than the content, to guide you through the learning process
ACTIVITY
Questions throughout the lesson that must be answered in order to test your knowledge of the lesson
STUDY/REVISION
Time spent to study the content in conclusion of the unit and in preparation for the test or examination
Preface
Welcome to Economic and Management Sciences. The subject deals with the efficient and effective use of different types of private, public or collective resources to satisfy human needs. Economic and Management Sciences is a practical subject that equips learners with real-life skills for personal and communal development. The content is applicable to the unique South African situations with regard to communities, businesses, etc.
Here are some tips on how to use the study guide:
• It is essential that you work through all the units in the study guide.
• Each lesson contains appropriate activities you need to complete to better understand the lesson
• It is important that you read magazines and newspapers on various topics covered in the study guide to acquire in-depth knowledge of the topics.
• You need to know what is happening in the economy and finances of the country.
Recommended books
Via Afrika Economic and Management Sciences Grade 7 Learner’s Book (P Bean, S de Bod, B D Houghton, M Kleyn, T Kotze, E L Llewellyn, A Marx, J N T Mbotho, B. Ndlovu, C.S.F. Trollip) and Study & Master Economic and Management Sciences Learner’sBook (M. Barnard, A. Voges, C. de Nobrega) can both be used as a supplement to this study guide. It is always good to refer to other textbooks to gain more knowledge about a certain topic.
Study tips
Economic and Management Sciences mainly consists of three sections, namely the economy, entrepreneurship and financial literacy. You must be able to clearly distinguish between these three sections. You will have to complete a great amount of work during the year. It is important that you use the correct study methods to prepare for tests and examinations.
Here are some study tips you may use:
• Skim each unit before the work is explained.
• Listen attentively as 70% to 80% of learning and understanding occurs while the work is being explained.
• Make sure you read and understand each word or term used in the lesson. Use the glossary at the back of the study guide or a dictionary.
• Focus and concentrate on each step of the section that is discussed. Do not let your mind wander.
• Actively participate in the lesson by asking questions and giving answers.
• Revise the work that has been completed every day.
• Try to identify different types of questions every day and make notes.
• Ask for help if you need it. It is important to understand all the work before proceeding to the next section.
UNIT 1: THE ECONOMY
Lesson 1: History of money
LEARNING AIMS
At the end of this lesson, you must be able to:
• understand what a traditional society is.
• fully discuss bartering.
• distinguish between promissory notes, coins, paper money and cheques
• understand electronic banking.
• have a proper understanding of the role of money.
In this lesson, we will learn how societies (such as traditional societies) have evolved over time. We are also going to learn about the role that these societies played in the development of bartering, which led to the invention of money.
After you have learnt about traditional societies and bartering, you will have to apply what you have learnt by exchanging some of your possessions with friends and family. For example, you can swap books, marbles or other toys for something you want from them. This will be a practical, first-hand experience of how bartering works.
1.1 Traditional societies
A traditional society refers to a society in which certain traditions, beliefs, rituals and customs characterise the society. These traditions, beliefs and customs are passed on from one generation to the next and they form the foundation for the society. The Khoi-San is an example of a traditional society.
Thousands of years ago, people used to supply their own needs. Traditional societies were dependent on nature and their environment to meet their basic needs. They were known as hunter–gatherers because they hunted wild animals for meat, fished and used wild plants for food and medicine in order to survive Each person in the society fulfilled a duty, for example, men hunted and built shelters while women collected all kinds of different plants and cared for the children.
These societies were self-sufficient and independent from anyone else Only very few societies still have traditional customs today and still maintain this way of life
DEFINE
Dependent: Requiring someone or something which you are unable to do without
Independent: Not depending on someone or something for your livelihood or survival
Self-sufficient: Needing no outside help in satisfying one’s basic needs, especially with regard to providing food Society: A community of people living in a particular region and sharing traditions, beliefs and customs
1.2 Bartering
The first economic system was a subsistence economy, which meant that people only produced enough of something they needed. For example, they planted maize for maize meal and kept cows for milk.
Societies differed in that some could not produce everything they needed in order to survive. One society may have had maize, cattle or sheep, for example, while another may have had goats, wheat and other vegetables such as potatoes or beans.
Sample
As different societies/people came into contact with one another, they soon realised that the other societies/people had things they wanted, which they were unable to produce themselves
This created a huge problem that left the societies/people with three options:
1. They could take the item they wanted, in other words, steal it.
2. They could kill the owner of the item and then steal the item
3. They could find something that they had which the other society/person wanted and then exchange these items.
The first two options usually led to lots of trouble, which made the third option the best. This is called bartering.
Image 1.1: The Khoi-San are an example of a self-sufficient, traditional society
Because these societies were nomadic, they constantly moved from place to place. In this way, they traded with the other societies they met. They were therefore able to acquire many new items which they were unable to produce themselves because of a lack of resources or knowledge.
However, bartering created some problems:
Sample
For bartering to occur successfully, the two parties involved in the bartering process each needed to have what the other wanted.
Goods did not have a set value because different societies attached different values to items.
Problems created by bartering
Some goods were only available at certain times of the year and they could not be stored, e.g. perishable food.
To address the problem of certain goods being only available at certain times, people started trading in non-perishable items, such as shells, salt, clay discs and livestock The discovery of precious metals such as copper, silver and gold simplified bartering even further. The metal was melted into the shape of a disc or coin and because it was durable, portable and often had a set value attached to it, it quickly became immensely popular.
Image 1.2: A bag of fish is exchanged for a bag of maize
DEFINE
Bartering: Exchanging goods or services for other goods or services without using money
Durable: When something lasts a long time and it can withstand wear and tear
Livestock: Animals such as sheep, cattle, poultry, etc. which are raised for food
Nomadic: A way of living according to which people are constantly moving from place to place; they have no permanent home
Subsistence economy: When people only produce enough of something which they need
Value: The importance, worth or usefulness of something compared to something else, e.g. a genuine leather jacket that is worth far more than an ordinary cotton jacket
ACTIVITY 1
Answer the questions
1.3 Promissory notes
As precious metals became an increasingly popular bartering tool, the demand for these metals also increased. The problem with metal, however, was that it was too heavy to transport easily if not melted into a disc.
Traders had to carry the metals around wherever they travelled and had to use a scale to weigh these when bartering occurred. This slowed down the bartering process considerably The traders then came up with the idea of using goldsmiths to store their precious metals for them. When the traders needed the metals, they could simply retrieve it from storage –much like modern banking today. In a sense, goldsmiths may be regarded as the early bankers.
Study the following scenario to better understand promissory notes:
Peter has a great deal of gold that he cannot carry with him, as it is very heavy. He asks John, who is a goldsmith, to store it in a safe until he needs it. John hands Peter a document in which he confirms that he will store the gold. The document also states that Peter may have access to it whenever he needs the gold
If someone wants to buy the gold from Peter, he can give the document to the buyer for them to get the gold from John. This document is called a promissory note. Promissory notes are signed by all parties involved In this scenario, the parties involved are Peter, John and the buyer.
PROMISSORY NOTE
Amount: R50 000,00
Place: Pretoria
Date: 20/02/2020
I, Jenny Marx, promise to pay Albert Smuts the sum of R50 000,00.
Repayment is to be made in 300 equal payments at 6% interest, or as R322,15, payable on the 1st of each month, beginning on 01/03/2020 until the total debt is paid.
Jenny Marx signature
1.4 Coins
Suppose you lived in a world where money did not exist and where bartering was the only way of getting what you wanted. Let’s say you want to eat cereal for breakfast, but you discover that there is no more milk in the fridge. Because money does not exist in this pretend world, you cannot quickly go to the shop to buy milk. You first need to catch a chicken. Then you need to look for someone to barter with who has milk and who also wants a chicken. It is a lot of trouble to go to for milk.
Money was invented to replace bartering. As we have learnt, the bartering process was very time consuming People always had to look for other people to barter with, which was not always successful. Money was a much more convenient method used for trading.
Precious metals, such as silver and gold bars, had long been used as payment method Every time a business transaction was concluded, these bars had to be weighed and their
Image 1.3: An example of a promissory note
quality tested. This was still very inconvenient. People then came up with a plan to use metal pieces of a set weight, engraved with some or other design and value. This led to the emergence of coin money.
The face value of a coin is the value printed on the coin, e.g. 50c or R5. It was quite common for the value of the metal, of which the coin was made, to be greater than its face value. It then often happened that people melted down coins and sold it as scrap metal. Governments later started using cheaper metals such iron, nickel, zinc and tin to solve this problem.
1.5 Paper money
As trade expanded, and especially after dealers had started doing business further away from their headquarters, it became unsafe and cumbersome to work with coin money. Just think of the nuisance of counting and transporting thousands of gold coins, and how easily these could be stolen.
The banknote was initially merely a promise that it could be exchanged for a certain amount. With time, this developed into money itself, however. The first paper money used in South Africa came into circulation in the 1780s with the introduction of the rixdollar (rijksdaalder in Dutch).
Since the early 1800s, banknotes had been issued by different commercial banks in the Cape and later in the Transvaal, the Orange Free State and Natal. These notes could be exchanged for gold coins.
The South African Reserve Bank, our country’s central bank, was founded in 1921. The Reserve Bank issued its first banknotes in April 1922, and South African banknotes could be cashed in for gold until 1932.
In 1961, the rand became the official currency of South Africa. The rand gets its name from the Witwatersrand area in Johannesburg where most of the gold deposits were discovered in South Africa
Image 1.4: Ancient coins
Image 1.5: The 50c and R5 coin used in South Africa
Image 1.6: Current South African R100 note
1.6 Cheques
Cheques have been a method of trading since the 13th century as a substitute of gold, silver, coins and paper money. Cheques enabled the buyer to make payments without carrying physical cash. It was used as a deposit payment. The buyer had to write out a cheque to the beneficiary who would then take it to their nearest bank to cash. The bank would take the cheque, analyse the information and make a payment to the beneficiary from the buyer’s available balance (bank account).
As technology advanced up until the 20th century, electronic funds transfers (EFT) became more popular. This led to cheques becoming obsolete. An electronic funds transfer is when the buyer makes a payment to the beneficiary via the internet.
On 2 October 2020 the South African Reserve Bank decided to phase out cheques as it had largely fallen out of use. Since 31 December 2020 cheques are no longer accepted as a payment method or deposit in South Africa
1.7 Electronic banking
South Africa has many commercial banks The five major banks (according to customer numbers) are Capitec, FNB, Standard Bank, Nedbank and Absa. Can you think of more examples of banks in South Africa?
A bank is a financial institution that provides various services to its customers. These services include using the money deposited by clients for investment or saving, granting loans at interest, and exchanging currency.
A bank often acts as a third party or intermediary to facilitate transactions between buyers and sellers. For example, if Jabu shops at a store and pays using his debit or credit card, the bank will ensure that the money is transferred from Jabu’s bank account to the store’s bank account.
Image 1.7: An example of a cheque
Electronic banking (also known as e-banking) involves the use of bank cards, cellphones, smartphones or computers to conduct financial transactions. E-banking allows customers to do their banking without physically going to the bank. They can do their banking any time of the day in the comfort of their home or office. Today, most banks have their own websites which enable people do their banking electronically (online or internet banking)
1.7.1 Using automatic teller machines (ATMs)
When a person opens a bank account, they receive a plastic card. A magnetic strip is found at the back of the card, on which all the accountholder’s financial information is stored. Some cards also have a chip on which this information is stored. This card can be used to pay for purchases at a pay point by swiping the card through a card machine slot or inserting it into the slot of the machine which will read the chip.
Such a card can also be used at an automated teller machine (ATM) to deposit money into your bank account or to withdraw money from it. An ATM is a machine located in convenient locations outside banks or in shopping malls, where customers can deposit or withdraw money without having to visit the bank. After the customer has placed their card in the ATM, they enter their personal identification number (PIN). A PIN is a secret code that ensures that only the customer has access to their money.
TIPS
• Be vigilant at all times when using an ATM.
• Keep your bank card in a safe place.
• Choose a PIN that is easy to remember but difficult to guess.
• Do not write down your PIN or share it with anyone.
• When entering your PIN at the ATM, cover the keypad so that nobody else can see it.
• Do not trust strangers who offer to help you at the ATM; only trust bank officials.
• Ensure that the card returned to you is in fact your card.
Image 1.8: The five major banks found in South Africa
Image 1.9: An ATM
1.7.2 What is e-commerce?
E-commerce (electronic commerce) refers to the activity of conducting transactions (buying and selling) electronically on the internet (online shopping) E-commerce usually takes place on retailers’ websites, e.g. Amazon and Takealot.
Before you can buy something from an online shop, you need to create an account. The account contains personal details, such as the customer’s name, contact details, delivery address and payment method details, e.g. credit card details. You need a debit or credit card to do online shopping. Some retailers will also allow you to make an electronic funds transfer (EFT).
Once you have created an account, you can search the retailer’s website for products. If you find something you want to buy, you simply add the product to your virtual cart or basket and proceed to the checkout to pay. Your purchase will be delivered to your specified address within a couple of days.
E-commerce has many advantages, which is why it is quickly becoming many people’s preferred way of doing business. Online stores are available 24 hours a day, which means customers are not limited to the business hours of a bricks-and-mortar store (physical store). Customers also have the convenience of being able to quickly compare prices from many different stores, saving them time and money. In addition, many online stores have a greater selection of products than some bricks-and-mortar stores because they don’t have the problem of stock taking up limited retail space
1.8 The role of money
Money refers to anything of value that is generally accepted as a payment method for goods and services, usually in the form of coins and banknotes. Since its early beginnings as an effective substitute for bartering, money has become so interwoven with modern society that we cannot imagine a world without it.
Money has the following four main functions:
• Medium of exchange: The most important role of money is that it can be exchanged for goods and services, eliminating the need to barter. Money, as a medium of exchange, overcame the limitations of bartering in finding a party who both has what you want and who wants what you have.
Image 1.10: E-commerce is a convenient way of shopping
• Measure of value: Money has a specific value attached to it, similar to goods and services. This makes it easier to compare the value of goods and services in terms of money, which is much quicker and simpler than bartering.
• Standard of deferred payment: Money as a standard of deferred payment allows credit to be granted to someone, which means one can buy goods now and only pay for them later.
• Store of value: The role of money as a store of value refers to its ability to be saved for future use. Its value must remain stable or increase over time to retain its purchasing power.
DEFINE
ATM: Automated teller machine, that is, a machine that gives clients access to financial transactions in public without the assistance of a cashier
Bank: A financial institution that uses money deposited by customers for investment or saving, grants loans at interest, and exchanges currency
Bricks-and-mortar store: A business that operates conventionally in a physical location rather than on the internet
Deposit: Money paid into a bank account for safekeeping
EFT: Electronic funds transfer, from one account to another by using a computerised system
PIN: Personal identification number, a secret code assigned to a bank card, ensuring that only a customer has access to the money in their account
Promissory note: A signed document containing a written promise by one party to pay a specified sum to another party at a specified date or on demand
Purchasing power: The value of money measured by the quantity and quality of goods and services it can buy
Withdrawal: Money taken/withdrawn from a bank account
ACTIVITY 2
Answer the questions.
1. What does the abbreviation ATM stand for? (1)
2. Study Image 1.10 and answer the questions:
2.1 Write down the card number. (1)
2.2 When (month and year) was the card issued? (1)
2.3 When (month and year) does the card expire? (1)
2.4 Is the PIN found on the card? Why do you think that is? (2)
3. Name FOUR safety tips when using an ATM. (4)
4. Write down the names of the five major banks in South Africa (5)
5. Explain in your own words how an ATM works. (5) TOTAL: 20
Lesson 2: Needs and wants
LEARNING AIMS
At the end of this lesson, you must be able to:
• distinguish between a need and a want.
• identify the basic needs of individuals, families, communities and countries.
• distinguish between primary and secondary needs.
• understand the concept of satisfying unlimited needs and wants with limited resources.
In this lesson, we are going to look at needs and wants. Needs and wants will affect the way individuals, families, communities and countries work, live and spend money. People’s needs and wants are unlimited, but the resources needed to satisfy these needs and wants are limited
Image 1.10: An example of a bank card
2.1 Difference between needs and wants
A need refers to something that is essential for our survival, which is why we refer to it as a primary need. Examples of primary needs are food, water, shelter, etc
A want refers to something we really desire, but we do not need it to survive, which is why we refer to it as a secondary need. Examples of secondary needs (wants) are cellphones, luxury cars, jewellery, etc.
2.2 Basic needs of individuals, families, communities and countries
The needs of individuals, families, communities or countries differ from one another, and availability of money determines how these needs will be satisfied.
• Basic needs of individuals and families
People need food, water and shelter to survive. How they satisfy these needs depends on how much money they have and their personal preferences.
• Basic needs of communities
A country’s government must satisfy the needs of its citizens These needs include housing for all residents of the community, running water, electricity, education, healthcare and road infrastructure. A country’s main source of income is generated by tax, which the government uses to provide for these needs.
• Basic needs of countries
Basic needs differ from one country to the next. Some basic needs of countries include the following:
o natural resources, such as gold, coal, trees and animals, used to produce goods.
o land on which agriculture can be practised, e.g. farming.
o money, to pay for infrastructure (roads, schools, hospitals, etc.).
o a skilled labour force, to develop the country.
Image 2.1: Examples of primary needs
Image 2.2: Examples of secondary needs (wants)
ACTIVITY 3
Study the picture of the shopping trolley and answer the questions.
1. What do the items on the grocery list tell you about the shopper? (1)
2. Do you think this person has electricity? Give a reason for your answer. (2)
3. Copy the table and fill in the items on the grocery list into the correct column. (14) NEEDS WANTS
Sample4. Use the words in the word bank to help you complete the sentences. (5) wants need live needs really Things that we 4.1 _____ want, because they make us look or feel good, are called 4.2 _____ Things that we 4.3 _____ to be able to 4.4 _____ are called 4.5 _____.
5. Study the pictures and answer the question
Arrange the pictures in the correct order, starting at what is most important and ending with what is least important for survival. (8)
TOTAL: 30
ACTIVITY 4
Answer the questions.
1. Copy the table and mark an (×) in the column where you think the item should go.
2. Copy the table and complete it by giving examples of businesses that provide in our needs/wants.