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Study Unit 3
The Public Sector
Now
more
Take
outyou
your know
text book.
Keep
itabout
next to the
you!
If the slide has a red
interdependence
in the
speech bubble that says
economy
the
READ
section and
so-and-so.
Then hit pause,
read the
monetary
sector.
Up
section and watch the slide
next,
the
public sector!
thereafter!
Remember, the
best way to learn
is to take notes
and ASK if you
dont understand.
Content
In this study unit you will learn more about:
The role of the government
Government intervention
Government failure
Nationalisation and privatisation
Fiscal policy and budget
Government spending
Financing of government spending
Taxation
Taxation in South Africa
Who really pays taxes
Read section
16.1 in
textbook
pg. 340
Watch 1601
DVD, for
more on the
role of
government
Read section
16.4 in
textbook pg.
349-350
3.2 Government
intervention
3.2 Continued
The government can intervene in five ways:
3. Government spending, the government can
influence the economy when deciding what
they want to buy. Government can make
transfer payments; that is when they make a
payment without receiving anything in return
4. Taxation is a powerful instrument. For example,
if the government want a more equal
distribution of income, they can tax the rich
more and the poor less.
5. Regulations and laws that affect the economy
Read section
16.5 in
textbook pg.
350-352
Watch 1601
DVD, for
more on
government
failure.
office
BUREAUCRATS
CAN FAIL:
Public
Government is not, like the private sector,
in constant
People
who
Officials
are appointed
competition. And no competition = inefficiency!
Bureaucrats
by the
bythey
thehave
Example: private sector businesses knows, if
bad service, clients will leave. But if yourgovernment
are not
satisfied with the bureaucrats at Home Affairs (when
issuing a passport or ID), you cannot go anywhere else!
OTHER FAILURES:
Rent-seeking: influencing government behavior to your
own advantage and societys disadvantage
Read section
16.6 in
textbook pg.
352-354
3.4 Continued
Privatisation means private companies
takes ownership of public enterprises.
Why?
1. If government expenditure decrease, then
income tax can be decreased
2. Private ownership is more efficient
3. Inefficient state owned enterprises costs
the government a lot! Privatisation
relieves government from some
expenditures. (improve budget deficits)
For
Against
Read section
16.7 in
textbook
pg. 354
Watch 1601
DVD, for
more on
fiscal policy
and the
budget
3.5 Continued
EXPANSIONARY FISCAL POLICY MEANS:
If the economy is weak (recession), it is like a slow moving
car.
The government should step on the petrol (meaning, they
should spend more). And the economy will gain speed!
Spending more means: increase government expenditure or
decrease income taxes.
If income tax decreases, people will have more money in
their pockets and consumption will increase!
3.5 Continued
Budget deficit =
TAXES
Government
Expenditure
TAXES
Government Expenditure
Read section
16.8 in
textbook
pg. 355-356
Study the
Changing consumer preferences
meaning of
Political and other shocks
each of these
reasons
Redistribution of income
and
Misconceptions andcarefully
entitlement
discuss it with
Population growth and
yoururbanisation
e-tutor
Read section
16.9 in
textbook
pg. 356-357
Read section
16.10 in
textbook
pg. 357-359
3.8 Taxation
Watch 1601
DVD, for
more on
different
taxes
Read section
16.11 in
textbook
pg. 359-362
3.9 Taxation in SA
Read section
16.11 in
textbook
pg. 359-362
David
first R112
receives
That
500
he
On the amount
David
more
than
equals:
pays
18%
between
David
receives
That
R112
500
R112501
and
tax
receives
more
than
equals:
R180
he
He000
pays
only 000
R10 Margin
pays 25% tax
R180
That
equals
30% taxTaxes
on
Income Bracket
paid
000 more
R10 000
al Rate
than R180
R 0 R 112 500000
18%
R 20 250.00
David gets
R190 000
per year.
25%
30%
35%
38%
Do you see?
R
874.gets
75
As16
David
richer, he pays
Ra
3 higher
000.00%
tax. That is a
PROGRESSIVE
tax system
Read section
16.12 in
textbook
pg. 362-364
E2
14.4
R14
10.4
D
0
Cigarettes
are
more
After
the
R4
tax,
the
Lets
draw
the
Suppose
cigarettes
expensive
now
the
consumer
willfor
pay
R16
demand
curve.
costs
R12,
and will
a
consumer
and the
producer
And
the
supply
R4
is is
getsin
R12
While
thetax
supplier
curve
The supply
curve
will
selling
lessWho
packs
than
levied.
will
shiftthe
back
by R4
before
Show
where
pay
R4?
Lets
Show
where
the
new
The
supplier
is
only
equilibrium
is
see
equilibrium
is of
receiving
R10.40
Show
the
Draw
thenew
market
each
pack
Show
the
equilibrium
price
equilibrium
price
and
and
remember
to
Both
carry
a tax
burden
quantity
and
quantity
name
the axes and
120150
Quantity cigarettes (Q)
(packs in thousands)
Your hard
work will
be
rewarded in
the exams