Namibia Regional Economics: FIN-111
a) Opportunity and sunk cost
Opportunity cost is the value of the next best alternative that must be sacrificed when you make a choice and it applies everywhere.
If a person chooses to use vacation time to travel rather than to do renovations on the house. Thus, the opportunity cost of the tour could be said to be the forgone home renovations.
Sunk costs are costs that were incurred in the past and cannot be recovered once spend e.g.
If a person spends N$10,000.00 to purchase a vehicle, the value of the vehicle, after five years will be less than the amount spend to purchase it. The N$10,000.00 is cost that is “sunk” and cannot be recovered once spend.
The opportunity cost can be seen as value and sunk cost as money/resources.
b) Inflation and interest rates
Inflation is a rise in the general level of prices of goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money.
Interest rate is the rate, normally expressed as percentage, at which interest is paid by borrowers for the use of money that they borrowed from a lender.
For example, if you borrow money from the bank to buy a house, the bank receives interest rate at a predetermined rate for accepting to use the funds and instead of lending it to the borrower.
c) Macro and microeconomics
Macroeconomics is a part of economics that deals with the performance, structure, behavior and decision-making of an economy as a whole.
In contrast, Microeconomics is a part of economics studying the behavior of individual households and firms in making decisions on the allocation of limited resources, how these decisions and behaviors affect the supply and demand of goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services.
d) GDP and GNI
GDP (Gross Domestic Product) is a measure of national income or national output and national expenditure produce in a particular country, whilst GNI (Gross National Income can be defined as the sum of value added by all resident producers plus any product taxes not included in the valuation of output plus net receipts of primary income from abroad.
The profits of a South African owned company operating in Namibia will only count towards South African GNI and Namibia’s GDP.
e) Positive and Normative Statement
Positive Statements, in economics, concerns what “is”, “was”, or “will be” and contains no indication of approval or disapproval. Positive statements are testable and are contrasted with normative statements, which do make value judgments whether a situation is subjectively desirable or not.
For example, the following statement is positive since it conveys factual, testable information about the world.
“The unemployment rate is currently at 9%”
Statement such as:
“The unemployment rate is too high.”
is a normative statement since it includes value judgment and is of a prescriptive nature.
Different Economic Systems
All countries face a scarcity problem and must make decisions about what to produce, how to produce and for whom. How these decisions are made depends on the economic system a specific country uses. Thus, economic system is the way in which a country’s economy is structured, organized and managed.
In other words, economics systems can be seen as a set of rules or understanding that governs how scarce resources are used to produce goods and services that satisfy human requirements.
There are three main economic systems, namely capitalism, command and mixed economies.
A. Capitalism Economic System
This is an economic system based on private property and the market. It gives property rights to individuals and businesses and they own all the factors of...
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