Economics / Notes Grade 10 Nkangala District/2024

NKANGALA DISTRICT
ECONOMICS NOTES
TOPIC 5: DYNAMICS OF MARKETS
GRADE: 10
YEAR: 2024

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 Economics / Notes Grade 10 Nkangala District/2024

UNIT 1: UTILITY, VALUE AND PRICES

 Utility: is the satisfaction (enjoyment) that a consumer obtains from consuming a
product.
 Types (forms) of utility are: form, place, time and possession
 Utility of form: the product must be in the right form to be able to satisfy the consumer’
want e.g. for a person who wants a chair, a tree has no utility until it is cut and its wood
processed in to a chair.
 Utility of place: the item must be at the right place for the consumer to use and obtain
satisfaction from using it. Example a cell phones gives high utility in a place with
network coverage but low utility where there is no network.
 Utility of time: the product must be available at the time when they are needed to satisfy
a want. Example, a warm jacket can give high satisfaction on a cold day than on a hot
day.
 Utility of possession: A product only give utility if the person concerned has it in his/her
possession. For example, for one to get utility from a warm jacket on a cold day, he/she
must own/possess such a jacket.

CHARACTERISTICS OF UTILITY
• Utility differ from person to person:
 A product may give high utility to one person, but no utility to another e.g. a book can
have high utility to a person who love reading and low utility to one who does not like
reading.
• Utility is immeasurable: the amount of satisfaction one gets from a product cannot
be measured scientifically as there is no standard way to measure utility. Economists
use imaginary units of measurement of utility called utils.
• Utility is not the same as usefulness: some products are harmful but still give
satisfaction to some people e.g. cigarette is not useful to one’s health but a smoker
still obtains utility from it.
• Utility diminishes with quantity: as more of the product is consumed, the level of
satisfaction decreases.
• Utility influences willingness to pay the price: consumers are more willing to pay
the price for the products which give them high utility(satisfaction) than those which do
not.

MARGINAL UTILITY AND THE LAW OF DIMINISHING MARGINAL UTILITY

 Marginal utility is the additional utility gained from consuming one additional unit of a
product.
 Law of diminishing marginal utility: As consumption of the product increases, the
utility (satisfaction) obtained from it decreases.
 The more one consume additional units of a product the more the utility will decrease
with each unit. For example, if a person has enjoyed drinking a can of cold drink, the
enjoyment (utility) will decrease when she/he drink the second can because the thirst
is no longer as high as before.
 The more she/he drinks, the less utility will be obtained from each additional units.

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 Economics / Notes Grade 10 Nkangala District/2024

 Total Utility: is the overall satisfaction that a consumer obtains from his/her
consumption of a particular product.
 It is obtained by adding all the utility obtained from all the units consumed.

Utility from drinking cans of cold drink

Quantity (cans) Utility per can Total
of cold drink (Diminishing Marginal Utility) utility
0 0
1st 30 30
2 nd 15 45
3 rd 8 53
4 th 2 55
5 th 0 55
6 th -2 53

 The first can of cold drink gave the highest satisfaction of 30, because the consumer
is very thirsty.
 Total utility is also 30 and marginal utility is also 30.
 The second can of cold drink gave a satisfaction of 15, because the thirst has
decreased a bit. The total satisfaction increased to 45 (30 + 15), but the marginal utility
is 15 (utility has decreased by 15) compared to the previous unit)
 The fifth can gives the utility of 0 and the total utility is 55 (55 + 0)
 The sixth can gives negative utility (-2). This means further drinking gives
dissatisfaction/ displeasure to the consumer, even the total Utility decreased by 2
utils.
DIMINISHING MARGINAL UTILITY GRAPH

30
Utility per can of cold drink

15

4
2

-2 1 2 3 4 5 6

Number of cans of cold drink

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 Economics / Notes Grade 10 Nkangala District/2024

TOTAL UTILITY GRAPH

55

53
Total utility

45

30

1 2 3 4 5 6
Nu
Number of cold drinks cans

VALUE
 Exchange value: is represented by the amount of money a consumer is willing to pay
in exchange for a particular product. The higher the amount of money a consumer is
willing to pay, the higher the value he/she attach to the product.
 More often people are willing to pay high price for goods that give them high utility.
 Utilitarian value: it is the amount of satisfaction a person obtains from a product.
Some products have only utilitarian value and no exchange value e.g. rainfall is
important as it gives water that we need but no one can sell rainfall.

PRICE
 Price is the amount of money offered to obtain a product.
 In modern markets the value of a product is expressed in terms of price.
 Price is used to compare the value of one goods to another.
 The relationship between utility, value and price
 People are often willing to pay higher price in exchange for products that give then
high utility.

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 Economics / Notes Grade 10 Nkangala District/2024

UNIT 1: MARKETS
 Description
 A market is a place where buyers and sellers meet to do business.
 A market is a contact or communication between buyers and sellers to exchange
goods and services.
 Examples of markets are:
 A physical place e.g. a shop
 Internet
 Advertisement (e.g. in a newspaper)

 COMPOSITION OF MARKETS
 The following conditions (requirement/ criteria) must exist for a market to exist
 There must be a person who wants to buy goods or services (i.e. the person
must have money to pay)
 There must be a person who wants to sell goods or services
 Quantities to be bought and sold must be available
 There must be a market price.

UNIT 2: KINDS OF MARKETS

 There are two main types of markets namely, perfect market and imperfect markets.

Discuss in detail, perfect and imperfect markets (Possible essay)

Perfect market: Characteristics

 There is large number of buyers and sellers in the market.
 Every individual seller is so small and cannot influence the price.
 All sellers are price takers as they must sell at the market price
 The product sold are homogeneous, meaning they are identical in regard to quality,
size or shape.
 It therefore does not matter from whom the consumer buys the product as they are
not different
 There is freedom to enter into and exit from the market.
 Participants have full information (perfect knowledge) about the market conditions.
 Buyers have complete knowledge about price, quality and availability of products in
the market.

 Imperfect market : characteristics

 Three types of imperfect market are monopoly, oligopoly and monopolistic markets.
 The number of sellers are one in monopoly, few in oligopoly and many in
monopolistic market.
 Examples of monopoly is Eskom, oligopoly is banks and monopolistic is shops.
 The sellers have control over the prices of their products because they are price
setters.
 The products sold by monopoly firms are unique (they have no close substitute)

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 Economics / Notes Grade 10 Nkangala District/2024

 The products sold in monopolistic market are heterogeneous.

 Products sold in the oligopoly market are homogenous and heterogeneous.
 There are barriers to enter the imperfect market. Things such as money and
patents prevent others to enter the market.
 There is incomplete information about the market conditions e.g. there is no enough
information about where the products prices are low.

Summary of the characteristics of types of markets
Imperfect market
Characteristic Perfect market monopoly oligopoly monopolistic

Number of Many sellers ONE Seller Few big firms Large number
businesses of small firms

Nature of the Products are Products are Products are Products are
product homogenous unique homogeneous differentiated
and
heterogeneous
Market entry Completely free Entry is  Entry is  Entry into the
entry completely difficult. market is easy
blocked
Information Complete Incomplete Incomplete Incomplete

 World markets/ Global markets

 Markets (perfect & imperfect) are not only local and national, they are also global.
 Globalisation of markets is possible because of technology such as internet.
 Buyers and sellers in different countries are able to meet through technology and do
business.

Advantages of world (global) markets

 Consumers are given a wider choice of goods and services
 Global markets enable a country to produce what it is good at and import what it does
not produce.
 Entrepreneurs can learn from one another across the world.
 Globalisation creates co-operations among countries of the world.

Disadvantages of world (global) markets

 Firms often move their production factories to countries where labour is cheap,
therefore other countries suffer high unemployment because of this,
 It causes brain drain as skilled workers often move to where wages are higher. Brain
drain is when skilled workers leave a country to live in other countries.
 Natural resources are over- used as firms produce for whole world.
 During times of emergencies (e.g. lockdowns) countries can suffer if they do not
produce many kinds of products

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 Economics / Notes Grade 10 Nkangala District/2024

UNIT 4: DEMAND
 Demand: is the quantity of goods or services that consumers are willing and able to
buy at a given time

Elements of demand/ conditions for demand

 There are certain conditions that must take place for demand to exist, they are:
 The need/want for the product: for a person to buy (demand) a product,
he/she must have a need/want which can be fulfilled by consuming the
product.
 The ability to pay: the buyer must be able (afford)to pay the money set as
price. In other words, wanting a product is not enough, for a demand to exist
one must want the product and have money to pay for it.
 The willingness to pay: The buyer must be willing to pay the price. This
means wanting the product and having the money is not enough, the buyer
must also be willing to pay the price.

The demand schedule/table

Price of chips packet Quantity demanded

R6 100
R5 200
R4 300
R3 400
R2 500
R1 600

(Using demand schedule to draw) demand curve

R6
R5
Price per packet chips

R4
R3
R2
R1
0 D

0 100 200 300 400 500 600

Quantity of packet of chips

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 Economics / Notes Grade 10 Nkangala District/2024

 Law of demand: at higher price less quantity is demanded, and at lower price higher
quantity is demanded. This means there is an inverse/opposite relationship between
price and quantity demanded.
 At a higher price of R6 per packet, only 100 packets will be bought. As the price
decrease to R5 the quantity demanded increase. at a very lower price of R1 the
quantity bought is the highest at 600 packets.
 A change in price causes a change in quantity demanded.
Quantity demanded: is the number of products that will be bought at a particular price
e.g. at R2, five hundred (500) packets of chips will be bought

CHANGES IN DEMAND
 The following factors can cause a change in the whole demand, which means the
whole demand curve (all the quantities) shifts.
 Change in demand can be an increase in demand or a decrease in demand.

 Factors affecting demand/ causing change in demand

 Change in income: increase in consumer income allow them to more goods or
different goods than before. Decrease in income lead to a decrease in demand.
 Change in consumer taste: consumer taste often influenced by factors such as
fashion and advertising. If a product is in fashion, more of it can be bought than
before.
 Change in price of substitute products: substitute products are products that satisfy
the same wants as a particular product e.g. beef and chicken. A demand for a
product can increase if the price of its competitive products increase. E.g. the
demand for chicken can increase if the price of beef increase. some of the people
who used to buy beef will now buy chicken.
 Change in price of complementary products: complementary goods are goods that
are used with other goods e.g. sugar and tea. A decrease in price of tea can
increase the demand for tea and also the demand for sugar (even if the price of
sugar has stayed the same).
 Population size: the more the population grow, the more goods and services will
be demanded. Decrease in population leads to a decrease in demand.

Demand schedule/table showing increase in quantities

Price of packet chips Old quantity New quantity demanded

demanded
R6 100 150
R5 200 300
R4 300 450
R3 400 600
R2 500 750
R1 600 900

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 Economics / Notes Grade 10 Nkangala District/2024

Change in demand (Increase in demand)

D1
D

R6
R5
Price per packet chips

R4
R3
R2
R1
0 D1
D

0 100 200 300 400 500 600 700 800 900

Quantity of packet of chips

 The demand for chips increased because of the increase in the factors affecting
demand (ceteris paribus – all thigs being the same). This means we assume that
nothing else except the mentioned factors can cause a change in demand

Demand schedule showing decrease in price and quantities

Price of packet chips Old quantity New quantity demanded
demanded
R6 100 50
R5 200 150
R4 300 200
R3 400 250
R2 500 300
R1 600 350

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 Economics / Notes Grade 10 Nkangala District/2024

Change in demand (decrease in demand)

D1 D
R6
R5
Price per packet chips

R4
R3
R2
R1
0 D
D1

0 100 200 300 400 500 600

Quantity of packet of chips

 The demand for chips had decreased, due to factors such as decrease in income of
consumers, decrease in price of substitutes (e.g. peanuts snacks) and decrease in the
popularity of chips etc. These are factors that affect demand.
 The price of the product has not changed.
 The demand curve shifts to the left indicating that at every price the quantity demanded
has decreased. Because all the quantities have changed, the demand curve also shift
to the left of the original demand curve DD.

 MOVEMENT ALONG THE DEMAND CURVE VS SHIFT OF DEMAND CURVE

 Movement along demand curve: is when quantity demanded change as price
change. These various quantities that change are on the same demand curve (see
page 9).
 Shift of demand curve: occurs as a result as change in demand which can be caused
by one or more of the factors that can cause a change in demand (change in income,
price of complements, population size etc.)
 The whole demand curve shifts as all quantities change at every price level.
 Increase in demand cause demand curve to shift to the right, while a decrease in
demand cause demand curve to shift to the left.

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 Economics / Notes Grade 10 Nkangala District/2024

UNIT 5: SUPPLY

 Supply is the quantity of goods or services that the producers are willing and able to
offer for sale at a particular time at a particular price.
 Law of supply: if the price of the product increase, the quantity supplied will also
increase (ceteris Paribas – all things being equal). If the price of the product decrease
sellers will offer decreased quantity for sale. The reason is that sellers would want to
sell at the highest possible price to make highest profit.
 There is a positive relationship between quantity supplied and price.

Supply schedule/table
Price per onion Quantity supplied
R3.00 600
R2.50 500
R 2.00 400
R1.50 300
R1.00 200
R0.50 100
Supply curve
S

R3.00
R2.50
Price of bananas

R2.00
R1.50
R1.00
R0.50

0 100 200 300 400 500 600

Quantity supplied

 Less quantity is supplied at lower price e.g. R0.50 for 100 onions, but as the price
increase the seller will also increase the quantity offered for sale e.g. at the highest
price of R3.00 per onion, the seller offers 600 onions for sale.

 CHANGES IN SUPPLY
 The following factors can cause a change (increase or decrease) in the whole supply
of a product.
 This means the all quantities offered for sale increase (or decrease).

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 Economics / Notes Grade 10 Nkangala District/2024

Factors that cause change in supply/ factors affecting supply

 Change in the size of industry: the bigger the industry, the bigger the supply possible.
If some of the producers leave the market, the total supply will decrease.
 Change in production methods: improved methods of production can result in an
increase in supply. Poor methods of production can lead to a decrease in supply.
 Change in cost of production: an increase in the amount spend on production will
result a decrease in quantity supplied. Lower production cost can lead to an increase
in supply.
 Price of substitute products: If the price of competing goods increases, the supply for
a particular product can decrease. E.g. if the price of tomatoes increase, a farmer can
choose to stop producing onions in order to start producing tomatoes. This will
decrease the supply of onions.
 Natural disasters: such as floods and earthquakes can reduce supply.

 INCREASE IN SUPPLY
Supply schedule
Price of onions Original Quantity New quantity supplied
supplied
R3.00 600 900
R2.50 500 800
R 2.00 400 600
R1.50 300 500
R1.00 200 400
R0.50 100 200

Supply curve showing increase in supply

S
S1
R3.00
R2.50
Price of bananas

R2.00
R1.50
R1.00
R0.50
S S1

0 100 200 300 400 500 600 700 800 900

Quantity supplied

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 Economics / Notes Grade 10 Nkangala District/2024

 Due to the factors affecting change in supply e.g. new type of fertilizer, the
production and supply of onions increased.
 The price of the product (onion) is still the same as before, so the increase in
production due to new method (fertiliser) has resulted in the increase is quantities
offered for sale at each price level.
 The supply curve then shifts to the right, to indicate the increase in supply.

 DECREASE IN SUPPLY
Supply schedule
Price of onions Original Quantity New quantity supplied
supplied
R3.00 600 500
R2.50 500 400
R 2.00 400 300
R1.50 300 200
R1.00 200 150
R0.50 100 50

Supply curve showing a decrease in supply

S1

R3.00
R2.50
Price of bananas

R2.00
R1.50
R1.00
R0.50 S1

0 100 200 300 400 500 600 700 800 900

Quantity supplied

 The factors that causes change in supply, e.g. the price of competing product caused
the farmer to use part of his farm to produce tomatoes since their price is high.
 This resulted in the decrease in supply of onions and the supply curve shifted to the
left.

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 Economics / Notes Grade 10 Nkangala District/2024

MOVEMENT ALONG SUPPLY CURVE vs SHIFT OF SUPPLY CURVE

 Movement along supply curve: is caused by a change in the price of the product.
 The change in quantity happens along the original supply curve. An increase in price cause
an increase in supply and a price decreases causes the quantity supplied to decrease,
(therefore these are movements along same supply curve).
 Shift of supply curve: it caused by change in factors that affect supply (page 13).
 The price of the product has not changed, but these other factors can cause an increase in
supply. This causes the supply curve to shift to the right.
 When the supply decrease due to the factors affecting supply, the supply curve shifts to the
left.
UNIT 6: PRICE FORMATION (Possible essay)
Market equilibrium, effect of change in demand, factors affecting demand, effect of
change in supply, factors affecting demand
1. Market equilibrium
 Market equilibrium is when demand and supply of a product are equal.
 Market equilibrium price is the price at which demand and supply are equal.
 The quantity bought and sold at market equilibrium price is called equilibrium quantity.
 The point where demand and supply intersect (meet) is called equilibrium point.
Demand and supply schedule for chocolate bars
Price of chocolate Quantity Quantity Shortage or surplus
demanded supplied

R30 10 50 40 (surplus)
R25 20 40 20 (surplus
R20 30 30 0 (equilibrium)
R15 40 20 -20 (shortage)
R10 50 10 -40 (shortage)

Market equilibrium graph

Price D
S
R30 SURPLUS
(Demand < Supply)
R25
E
R20

R15

SHO R TAGE
R10
(Demand > Supply)
S D

0 10 20 30 40 50 Quantity demanded and supplied

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 Economics / Notes Grade 10 Nkangala District/2024

 Market equilibrium price is R20, at which demand and supply are equal.
 Equilibrium quantity is 30 chocolate bars.
 At any price below R20, demand is higher than supply for e.g. at R10 demand is 50
while supply is 10. There is a shortage of 40 chocolates.
 At any price above the market equilibrium price, there is over supply (surplus) of
chocolate bars. For e.g. R25 price, quantity supplied is more than quantity demanded
by 20, as 40 is supplied but only 20 is demanded.

2. Effect of change in demand while supply is constant

 If the demand of the product increase (more people want to buy the product) while
supply stays the same, the demand curve will shift to the right.
 This will change the market equilibrium point, price, and quantity.

D1

Price D
S
R30

R25
E1

E
R20

R15

D1
R10

S D

0 10 20 30 40 50

Quantity demanded and supplied

 Equilibrium was at the price of R20 and the equilibrium quantity was 30 bars of
chocolate. An increase in demand caused the demand curve to shift to the right.
 This means the intersection of the new demand curve and the supply curve will give a
new equilibrium price and quantity.
 The new market equilibrium price is R25 and the equilibrium quantity is 40.
 The new equilibrium point is E1.

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 Economics / Notes Grade 10 Nkangala District/2024

The equilibrium is achieved at a higher price because the demand has increased while
supply has not changed.

3. Factors affecting demand/ causing change in demand

 Change in income: increase in consumer income allow them to more goods or
different goods than before. Decrease in income lead to a decrease in demand.
 Change in consumer taste: consumer taste often influenced by factors such as
fashion and advertising. If a product is in fashion, more of it can be bought than
before.
 Change in price of substitute products: substitute products are products that satisfy
the same wants as a particular product e.g. beef and chicken. A demand for a
product can increase if the price of its competitive products increase. E.g. the
demand for chicken can increase if the price of beef increase. some of the people
who used to buy beef will now buy chicken.
 Change in price of complementary products: complementary goods are goods that
are used with other goods e.g. sugar and tea. A decrease in price of tea can
increase the demand for tea and also the demand for sugar (even if the price of
sugar has stayed the same).
 Population size: the more the population grow, the more goods and services will
be demanded. Decrease in population leads to a decrease in demand

4. Change (increase) in supply while demand is constant

Price D
S
R30

S1
R25

E
R20
E1
R15

R10

S D
S1

0 10 20 30 40 50

Quantity demanded and supplied

 If the supply of the product increases, the supply curve shifts to the right (S1S1).

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 Economics / Notes Grade 10 Nkangala District/2024

 This means there is too many products in the market than before.
 This will change the market equilibrium,
 The new supply curve will meet the demand curve at a price lower than the original
equilibrium price. This is because demand has not increased while supply increased.
 This new equilibrium price is R15 and the new equilibrium quantity is 40. The new
equilibrium point is E1.

5. Factors that cause change in supply/ factors affecting supply

 Change in the size of industry: the bigger the industry, the bigger the supply possible.
If some of the producers leave the market, the total supply will decrease.
 Change in production methods: improved methods of production can result in increase
in supply. Poor methods of production can lead to a decrease in supply.
 Change in cost of production: an increase in the amount spend for producing the
product will result a decrease in quantity supplied. Lower production cost can lead to
an increase in supply.
 Price of substitute products: If the price of competing goods increases, the supply for
a particular product can decrease. E.g. if price of tomatoes increase, a farmer can
choose to stop producing onions in order to start producing tomatoes. This will
decrease the supply of onions.
 Natural disasters: such as floods and earthquakes can reduce supply
(end of essay )
UNIT 7: FUNCTIONS OF MARKETS
Markets perform certain functions and the most important of them are:
 Bring supply and demand together
 Markets allow buyers and sellers to meet to exchange goods and services.
 Through the interaction of buyers and sellers, prices that satisfy both suppliers and
buyers can be determined.
 These prices are termed equilibrium prices.
 Allocation of resources
 The market sent information to producers about the product that consumers want.
 Therefore, the producers allocate the required resources in the right quantities to
produce the required products.
 ,These resources are labour, capital, natural resources and entrepreneurship.
 Due to the presence of markets, producers are able to supply the goods that can
maximise the buyers’ wants and by doing so they are able to make profits.
 Self-regulatory
 Market is able to regulate (control) itself because the actions of buyers will direct
suppliers on what to produce.
 If buyers want to buy more of a particular product, sellers will allocate more resources
to produce and supply that product.
 The market also determines the price at which each product is to be sold, e.g. if the
price is too high very few items will be bought,

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 Economics / Notes Grade 10 Nkangala District/2024

 if price is too low there will be a shortage in the market.

 The right price to sell at, is the market equilibrium price which is determined by demand
and supply.

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