*GHANA ECONOMICS ANSWERS*
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3a)
Production is a process of workers combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals.
Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human wants and needs. The degree to which the needs are satisfied is often accepted as a measure of economic well-being. In production there are two features which explain increasing economic well-being. They are improving quality-price-ratio of goods and services and increasing incomes from growing and more efficient market production.
3b).
The three main sectors of the economy are:
Primary sector – extraction of raw materials – mining, fishing and agriculture.
Secondary / manufacturing sector – concerned with producing finished goods, e.g. factories making toys, cars, food, and clothes.
Service / ‘tertiary’ sector – concerned with offering intangible goods and services to consumers. This includes retail, tourism, banking, entertainment and I.T. services.
4a)
Co-operative Society :-
A co-operative society is an association of individuals who voluntarily pool their resources and carry on the business for their own welfare and not for a profit seeking business. It is democratic form of organization in which the consumers are the owners of the business. From manager to clerk all are the owners of the business and all the management is in their hands. In this organization capitalist is not involved.
4b)
i) Easy Formation:
Compared to the formation of a company, formation of a cooperative society is easy. Any ten adult persons can voluntarily form themselves into an association and get it registered with the Registrar of Co-operatives. Formation of a cooperative society also does not involve long and complicated legal formalities.
ii) Limited Liability:
Like company form of ownership, the liability of members is limited to the extent of their capital in the cooperative societies.
iii) Perpetual Existence:
A cooperative society has a separate legal entity. Hence, the death, insolvency, retirement, lunacy, etc., of the members do not affect the perpetual existence of a cooperative society.
iv) Social Service:
The basic philosophy of cooperatives is self-help and mutual help. Thus, cooperatives foster fellow feeling among their members and inculcate moral values in them for a better living.
v) Open Membership:
The membership of cooperative societies is open to all irrespective of caste, colour, creed and economic status. There is no limit on maximum members.
vi) Tax Advantage:
Unlike other three forms of business ownership, a cooperative society is exempted from income-tax and surcharge on its earnings up to a certain limit. Besides, it is also exempted from stamp duty and registration fee.
vii) State Assistance:
Government has adopted cooperatives as an effective instrument of socio-economic change. Hence, the Government offers a number of grants, loans and financial assistance to the cooperative societies – to make their working more effective.
viii) Democratic Management:
The management of cooperative society is entrusted to the managing committee duly elected by the members on the basis of ‘one-member one -vote’ irrespective of the number of shares held by them. The proxy is not allowed in cooperative societies. Thus, the management in cooperatives is democratic.
4c).
i) Directly from members themselves
ii) From retained surpluses generated by the cooperative business
iii) From outsiders.
i) Directly from members
Members help finance the operations and growth of the cooperative through:
- one-time or annual membership fees
- member contributions with no individual ownership attached, such as service fees.
- member share capital
- individual member deposits with the cooperative which may be used for business
- deferred payment to members for part or all of their produce delivered to the cooperative
Member share capital represents individual member commitment to the cooperative form of business. It also identifies the individual member’s financial stake. It is withdrawn only when the member leaves the cooperative. Some other forms of member contributions, usually related to patronage, are more variable but once given cannot be withdrawn and hence are a particularly useful form of cooperative capital.
ii)
From cooperative business surpluses :
Funds created through the retention of cooperative business surpluses that are not directly allocated to members are another important source of cooperative capital. This is a long term source of funds since most cooperatives’ rules allow these funds to be distributed only when a cooperative is liquidated. Unlike loans, or individual member deposits, the cooperative does not have to pay interest to use these funds. Of course, retaining such funds by the cooperative also represents a cost to the individual members who otherwise would have had that portion of the surplus allocated to them. Members willingly accept this cost when the benefits it creates for them are clear and worthwhile.
This source of funds from retained surpluses is often called “institutional capital” and represents the collectively-owned wealth of the cooperative.
iii)
From outsiders
In addition to institutional capital and member capital, cooperatives often make use of external sources of funds to run their operations or to finance investments. These non-member sources of funds may include cooperative or commercial banks, suppliers, government or donor agencies. External funding may be provided in different ways:
· as a grant
· as a short-term loan
· as a long-term loan
· as trade credit offered by a supplier.
Commercial providers of funds, such as banks, generally provide credit or loans that are legally secured by collateral (pledged assets of the cooperative). They are motivated by profit and seek to minimise risk. Non-commercial providers, such as governments or donors, generally provide credit on more generous terms at below market rates of interest or provide grants. Their motivations may be social, political or economic - often a mixture of all three.
5a)
The division of labour is the separation of tasks in any economic system so that participants may specialize. Individuals, organizations, and nations are endowed with or acquire specialized capabilities and either form combinations or trade to take advantage of the capabilities of others in addition to their own. Specialized capabilities may include equipment or natural resources in addition to skills and training and complex combinations of such assets are often important, as when multiple items of specialized equipment and skilled operators are used to produce a single product. The division of labour is the motive for trade and the source of economic interdependence.
5b).
i) Increase in Productivity:
The greatest advantage of division of labour is that it increases immensely the productivity per worker. This point can be illustrated by the famous example of pin making given by Adam Smith. The process of pin making is divided into 18 distinct operations.
Ten men make 48,000 pins in a day. One worker may, therefore, be considered to have made 4,800 pins in a day. In the absence of division of labour one man could have made only one pin in a day or at the most only 20 pins. Thus, with the division of labour the productive capacity of the individual and of the community has greatly increased.
ii) The Right Man in the Right Place:
Another great advantage is that the work under division of labour is allotted according to the ability and capacity of the individual worker. This ensures a high degree of efficiency as the right man is put in the right job. Thus, it eliminates the possibility of fitting a square peg in a round hole.
iii) Dexterity and Skill:
The worker becomes highly skilled and acquires high degree of dexterity because of the repeated performance of the same operation. As the age-old dictum goes, practice makes a man perfect. The worker acquires perfection in his skill because he has to carry out the same operation over and over again. This adds to his productivity.
iv) Inventions are facilitated:
Another significant advantage is that it promotes the development of new ideas and better techniques of doing the work. It is due to the fact that when a worker is performing the same operation over and over again, he can think of doing that process in a better and improved manner. Even some mechanical device may occur to him to do that task easily and more efficiently. Thus, division of labour results in inventions of new machinery and better tools.
5c)
i) Monotony:
As a worker has to do the same work again and again he starts losing interest and pleasure in the work. The work becomes monotonous in nature and boredom arises.
ii) Lack of responsibility:
Under division of labour, the final product is not the output of a single person but the creation of several workers. Therefore, no individual can be held responsible if anything goes wrong. Involvement of workers in their work is reduced.
iii) Lack of job pride:
As a worker performs only a part of the job, he cannot take pride in the final output. There is little pleasure of creating something. Specialised workers may lose jobs due to changes in the process of work. Traditional craftsmanship declines.
iv) Too much interdependence:
Division of labour leads to interdependence between individuals, firms, industries and countries. Failure of any one link due to strike, war, breakdown in transport and communication, depression, etc. may cause great harm.
Inferior output by one worker may spoil the quality of the entire product. Specialists know only a single process of production. In case of unemployment, they find is difficult to get jobs.
v) Limited market:
The extent of division of labour is limited by size of the market demand. Division of labour is possible only when the scale of production is large. Large scale production is not always possible and it suffers from the evils of factory system.
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