NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

TABLE OF CONTENTS
Page No.

QUESTION 1

Manipulating existing products

Attribute analysis
Existing products
Brainstorming
Metaphorical analogy

2-3

QUESTION 2

4-5

QUESTION 3

Direct and indirect taxation

Characteristics of a close
corporation
5 facts about the market economy
Importance of entrepreneurs to the
economy
References

6-7

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

QUESTION 1
1.1
Manipulating existing products

This involves improving an existing type of service or product. This

is a cost effective method as well as an easier method for a small
business to improve on a product or service. An improved product
can sometimes be considered a new product. The entrepreneur
should do market research to determine whether or not there is a
need for the altered product.

1.2
Attribute analysis

During this process attributes and features of existing products and

services are analyzed and listed. Alternatives to these attributes are
taken note off. Through an attribute analysis ways of improving
existing products are searched for.

1.3
Existing products

A product may be defined as a combination of utilities which satisfy

needs and are offered by the business to the consumers. The
consumers can take note of it, obtain it, and use it. When
establishing a new/own business the entrepreneur should, in his/her
choice of the product, concentrate on consumer products. These
products are available immediately for use.

1.4
Brainstorming

Brainstorming is a method through which various types of ideas are

generated. Once ideas have been compiled and no new ideas can
be added, the list should then be evaluated and the most feasible
ideas selected.

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

1.5
Metaphorical analogy

This method uses solutions to specific problems to solve analogous

problems in different contexts. By analogy, an elderly person could
use an electric device developed to serve as a defense mechanism
against attacks.

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

QUESTION 2
2.1
Direct and indirect taxation
Compulsory payments to the government and most important source of
government income
Classified into two main categories:
-

Direct taxation: Personal taxation is the most important form of

direct taxation. Personal taxes paid on the taxable income of
individuals, companies, partnerships and close corporations. South
Africa has a progressive personal tax system in which means that
people with higher incomes contribute higher percentages as
opposed to those with lower incomes. This also means that when
your income increases, the percentage tax that is payable also
increases.
Indirect taxation: Value-added tax (VAT) , customs and excise
duties are the most important forms of indirect taxation. After
personal taxation, V AT is the government' s largest source of
income.

2.2
Characteristics of a close corporation

A close corporation consists of one but not more than 10 members.

These members must be natural persons. Businesses that are legal
entities may not be members of a close corporation.
The business name must end with CC
A close corporation has an unlimited existence. It remains a legal
entity irrespective of any changes in membership.
A close corporation does not issue any shares. The interest of a
member is known as members funds in the corporation and is
expressed as a percentage of the total members funds in the
corporation.
To facilitate the transfer of the members interest, the corporation
may buy the interest of a member who has died or resigned.
Each person who wishes to become a member of the corporation
must, at registration, contribute either money, property, or a
service.
4

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

The internal relationship between member can be stipulated in a

collaboration agreement. If such an agreement is not concluded the
Act will stipulate the internal relations.
Each member can bind the corporation to a transaction which is
concluded within the business of the corporation.
Members possess limited liability, except where a member still owes
money to the corporation or as security.
There is no difference, as in the case of a company, between the
owners and the management of a close corporation.
A close corporation need not have profitability as its objective.
If the corporation has profitability as its objective, the profit belongs
to the corporation and not to the members-until such time as a
proper distribution is declared.
The close corporation is established with the registration of a
founding declaration in which certain information is contained. The
founding declaration is comparable with the memorandum of
association of a company.
The administration stipulations of the Act are uncomplicated. No
compulsory meetings and auditing of the books are prescribed. An
accounting official who should draw up the financial statements
must be appointed. Any substantial dishonesty must be brought to
the notice of the Registrar.
The Act requires that a close corporation must comply with certain
solvency and liquidity requirements when certain payments are
made. After such payment the assets of a close corporation must be
more than its liabilities. The close corporation must be able to pay
the debts it incurs in the normal run of the business.

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

QUESTION 3
3.1
5 facts about the market economy

Market economies are known in countries where people have

individual property rights and where the price system functions
properly. These countries are wealthier than other countries and are
otherwise known as capitalist countries.
In a market economy, prices tell people what to produce, how much
to produce, what skills to acquire and so on. Prices help us to use
the different elements of knowledge in society in the most efficient
way possible.
In the market economy if you add in self interest, you automatically
and necessarily also act in someone elses interest. This is referred
to as the invisible hand. When acting out in your own interest, an
invisible hand simultaneously directs you to act in other peoples
interest even if that wasnt your intention. We all share goods and
money with our families, however we also try to help those in need.
Values and morals such as honesty, responsibility, and respect are
of vital importance because without these attributes a market
economy cannot survive.
In a market economy people try and make money for themselves
and their families. Sellers of products become competitors and each
try to convince the consumer to purchase the product from them
and not the other. Each producer searches for new and better ways
to produce their products and to sell them cheaply. Often these
sellers make mistakes which leads them to completely closing down
their businesses.
The price system plays a very important role in modern society
where people buy and sell products and services. Price is
determined by the buyer or consumer. A customer is to hand his/her
money to seller in exchange for the product/service, only then will
the transaction take place. The seller cannot force the buyer to hand
over money. Costs are the expenses are person incurs in buying,
6

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

selling, marketing, transporting, or producing the product. Other

costs such as incurred accounts, running an office and so on. With
all these costs involved the sellers have to set competitive prices if
they wish to sell their produce.

3.2
Why entrepreneurs are important to the economy

Entrepreneurs create job opportunities. In countries all over the

worlds small businesses, especially in the informal sector, create
more jobs than large companies.
Entrepreneurs initiate the production process. They are responsible
for producing goods and services. The entrepreneur combines
labour, capital technology and raw materials or components in the
production process. The production process has a wide range of
meaning and includes trading activities or rendering services.
Without entrepreneurs natural resources remain underground and
undeveloped. Entrepreneurs are needed to build the economy of a
country. Although South Africa is rich in natural resources, this does
not build a strong economy or increase its wealth. Some countries,
such as Japan, have few natural resources but most of their citizens
are entrepreneurs. They import raw materials, process them, and
export them throughout the world.
Entrepreneurs are catalysts to generate wealth and a higher
standard of living. This is an outstanding feature of the free market
system as compared with socialism. Entrepreneurs usually employ
other people, which improves their standard of living. In buying
products from other businesses, entrepreneurs benefit those
businesses.

NAME : EKTHA NANKOOMAR

48325961
MODULE CODE: PST 311 L

STUDENT NUMBER:
ASSIGNMENT 1

REFERENCES
PST311L Study Guide for Economic Literacy and Entrepreneurship