Contents

1.1 INTRODUCTION ................................................................................... 3

1.2 THE ROLE OF BUSINESS IN SOCIETY ....................................................... 4
1.3 NEEDS AND NEED SATISFACTION ........................................................... 6
1.3.1 Maslow’s hierarchy of needs ..................................................................... 6
1.3.2 Society’s scarce resources ....................................................................... 8
1.4 THE MAIN ECONOMIC SYSTEMS ............................................................. 13
1.5 THE NEED-SATISFYING INSTITUTIONS OF THE MARKET ECONOMY ............... 17
1.6 THE NATURE OF BUSINESS MANAGEMENT............................................... 18
1.7 SUMMARY ......................................................................................... 21
1.8 REFERENCES .................................................................................... 24

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LESSON 1: THE BUSINESS WORLD AND BUSINESS MANAGEMENT

This lesson will require approximately SIX notional hours. Figure 1.1 represents an
overview of lesson 1.

1.1 Introduction

1.2 The role of business in society

1.3 Needs and need satisfaction

1.4 The main economic system

1.5 The need-satisfying institutions of the market economy

1.6 The nature of business management

1.7 Summary

Figure 1.1: Visual overview of the lesson

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1.1 INTRODUCTION
This lesson discusses the role of business in society and explains how a business
organisation in a market economy employs the limited resources of a nation – including
its natural resources, human resources, financial resources and entrepreneurship – to
satisfy the need for products and services. The lesson gives an overview of the main
prevailing economic systems in the world and explains how the business organisation
functions in a market economy. Against this background, the purpose and nature of
business management is examined.

LEARNING OUTCOMES

When you have worked through lesson 1, you should be able to do the
following:
 Critically discuss the role of business in society.
 Explain the needs of society and how need satisfaction occurs.
 Discuss the three main economic systems in the world.
 Explain the differences between need-satisfying institutions and non-profit
institutions.
 Explain the inherent nature of business management.

KEY TERMS

Maslow’s hierarchy needs

entrepreneurship capital
natural resources human resources
market economy socialism
command economy business organisations
government non-profit organisations
business management mixed economy

Click on the Additional Resources tab for the comprehensive Multilingual glossary for
MNB1501.

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1.2 THE ROLE OF BUSINESS IN SOCIETY
The business activity generally involves the transformation of resources into goods and
services to meet society’s needs. Business, however, cannot operate without society at
large. It is important to understand how closely any business organisation is linked to the
society in which it operates. Some of the roles that businesses play in society are
indicated in figure 1.2.

Provide employment

Supply products and services which satisfy consumer needs/wants

Preserve natural resources

Generate income

Social responsibility

Influence the country’s economy

Provide taxes to the government

Figure 1.2: The roles of businesses in society

Businesses provide employment to the members of the society in which they operate.
They employ people, providing them with incomes that they can spend, and in this way,
they can boost the economy of the community. Businesses increase the level of taxation
for a local community and ensure that the money remains in that society. Furthermore,
businesses decrease poverty levels in a society; more and more people become
entrepreneurs as others also get employed. Businesses contribute to a country’s
economy by bringing growth and innovation to the society where the business is
established.

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A business also acts as a social platform by providing a place to meet or interact outside
the family, thus providing a sense of community. The needs and values of a society have
a strong influence on what a business does. For example, if the people in the society are
very aware of the need for protecting the environment, they will soon bring pressure to
bear (often through the news media) on any business that pollutes the environment with
its waste materials. Businesses should not only be aware of their influence on the physical
environment, but also of the effect their business activities have on consumers, the
economy at large and their competitors.

Through the spheres of social responsibility, consumerism (a social force that protects
consumers against unsafe products and malpractices by exerting moral and economic
pressure on businesses) and the prevention of environmental damage, for example, a
society can persuade an organisation not to pollute or damage the environment or to fix
prices. Just like a society can influence its business organisations, these organisations
can have a significant influence on the society. By developing new products, businesses
can influence the behaviour patterns of people in a particular society. Just think of the
impact that the electronics industry (with its production of smart phones, e-cigarettes and
e-printing, for example) has had on the social life of our society. The success of
businesses also has a major impact on the prosperity of a society. In a town such as
Secunda, for example, Sasol employs many of the inhabitants. If Sasol were to go
bankrupt, thousands of people would be left jobless, and the entire town would be
affected.

Open the link below to watch the video about the role of business in society.

Time: 3:11 minutes

[Link]

In the next section, you will learn about needs and need satisfaction.

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1.3 NEEDS AND NEED SATISFACTION
Human beings have various – and seemingly unlimited – needs. Society, however, has
limited resources to satisfy those needs and so a choice has to be made on how best to
utilise those resources. Most of us would like to live in a mansion, drive a luxury car, own
a seaside cottage, go on an overseas trip every year, wear the latest fashion clothes and
so on, but very few people have enough money to afford all these products and services.
Most of us have limited resources (money), so we have to decide how to utilise the little
we do have to obtain the greatest satisfaction possible. The decision to obtain the greatest
possible benefit (or satisfaction) with the limited resources we have is known as the
economic principle.

1.3.1 Maslow’s hierarchy of needs

Since the business world is geared towards satisfying needs in the society, it is important
for management to know what those needs are. According to Maslow, all people have the
same basic needs, but not everybody strives to satisfy the same needs. In countries with
severe famine, for example, people will direct a great deal of their energy towards the
satisfaction of physiological needs such as hunger and thirst. However, according to
Maslow, once these needs are satisfied, people will strive to satisfy the next level of needs
(i.e. security needs) and so on.

Figure 1.3 shows the need classification by Maslow (a famous psychologist). Human
needs are classified in a hierarchy where the lowest, more basic needs must be satisfied
before the higher needs can receive attention. For example, for a hungry man whose first
basic need is to find food, all communication dealing with the satisfaction of his other
needs will fall on deaf ears. The hierarchy starts with the basic needs at the bottom and
the higher-level needs following the basic needs. The needs in Maslow’s hierarchy are
explained below:
• Physiological needs: These are the basic survival needs such as the need for food,
water clothing, shelter and sleep.
• Safety and security needs: These needs refer to our needs for protection from violence
and theft, health security, and financial security.

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• Social needs: Such needs comprise our need for love, community and belonging,
which in turn includes the need for friendship, family bonds and belonging to social
groups, intimacy, and relationships.
• Esteem needs: These needs are all ego-driven needs and refer to the need for
prestige, achievement, recognition and status.
• Self-actualisation or self-realisation needs: This need is at the top of the hierarchy and
relates to becoming more than what we are. It refers to our desire to reach our full
potential. According to Maslow, this need can only be met once all the other needs
have been satisfied.

5. Self-actualisation needs

4. Esteem needs – prestige, status

3. Social needs – love, friendship, acceptance

2. Safety and security needs

1. Physiological needs – hunger, thirst, sex

Figure 1.3: Maslow's hierarchy of needs (Maslow, 1954)

After reading the discussion above, complete the activity that follows.

Activity 1.1
This activity will take approximately 15 minutes to complete.
As the consumer, you are confronted with the situations below. Use Maslow’s
hierarchy of needs to classify each of the situations.
• Not having eaten lunch, you are quite hungry and thirsty.
• You are scared to sleep at night after a neighbour was murdered.

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• You are worried about your continuing relationship with your partner, as he/she
wants to move out of the flat that you share.
• Your boss has screamed at you at work in the presence of fellow workers.
• You want to enrol for further studies in the field of management in order to further
yourself in life.

Feedback:

Using Maslow’s hierarchy of needs, we can classify the above as follows:

• Being hungry is classified as a physiological need, which is the most basic need.
• Being too scared to sleep at night reflects a need for security, a right that is
guaranteed by the Constitution of the Republic of South Africa.
• Having problems with your partner reflects a social need for love and affection,
which seems to be negatively affected.
• Having had your boss shout at you in front of your fellow workers affects your self-
esteem negatively. Self-esteem is a very important part of the hierarchy of needs
and may adversely affect your productivity at work.
• Finally, having aspirations to further yourself in life through education is classified
as a self-actualisation need, which is the pinnacle of the hierarchy of needs.

1.3.2 Society’s scarce resources

We live in a world of scarcity because the amount of goods and services that people
would like to consume will always exceed the amount that can be produced. Scarcity
applies to everyone and every society in the world. Since scarcity is a relative concept,
there will always be wants which are not fully satisfied – even among the most affluent
societies of the world. This is because people’s wants are continually expanding and
changing. Once their basic human needs (e.g. food, water, clothing and shelter) have
been satisfied, there will be a growing desire for more luxurious articles like cars, fridges,
stoves and many of the goods regarded as essential in highly developed countries. One
must carefully distinguish between wants and needs. Wants are human desires for goods

8
and services which are unlimited. Needs are necessities which are essential for survival,
like food, water, shelter, and so forth.

Even if people are given limitless spending power, scarcity will still exist because time is
limited. Not even the wealthiest person in the world is free of the problem of scarcity
because no one has the time to enjoy all the travelling, holidaying, and art that he/she
would like to have. Time is a prime example of a limited resource.

In the business world, there are four types of resources available to manufacture goods
or provide services. These resources are known as production factors and refer to all the
resources used for producing goods or services. Whether a certain item is a production
factor or an end product will depend on its use. For a truck manufacturing company, a
truck is not a production factor – it is the end product. However, for a transport company,
a truck is a production factor – without it, the company would not be able to provide the
basic service of transporting goods. Figure 1.4 below depicts the four production factors.

Figure 1.4: The production factors

The four production factors are discussed below:

• Human resources or labour refer to all intellectual, physical or other human

productive efforts. Labour therefore comprises not only manual labour, but includes
the services of those who follow a profession (e.g. doctor, lawyer, teacher, etc.).

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• Capital refers to the machinery, tools and buildings which humans use to produce
goods and services. This could include the entire range of durable equipment – from
hammers, saws and other simple tools, to machines and computers. Capital differs
according to the worker and the type of work being done. If we refer to capital, we
mean real capital (equipment) and not money. Money is not a resource that can be
used in production.

• Natural resources or land refer to the gifts of nature and include factors such as
climate, mineral resources, soil, metals, forests, water, and so forth, and all other
resources from nature that are at the disposal of humankind. Natural resources are
the raw materials in the production process.

• The entrepreneur (from the French word entreprendre which means to undertake)
combines natural resources, labour and capital in the production process in order to
make a profit. Without the vision of the entrepreneur, labour and other resources
would remain largely unrealised potential. The entrepreneur is also the innovator
who comes to the fore with new goods or new production techniques. That is why
the entrepreneur is at the same time the bearer of risk – the entrepreneur’s time,
effort, reputation and own funds (and those of others) are at stake should the
innovation or business venture fail. The entrepreneur is also responsible for taking
non-routine decisions in the management of the enterprise. Such a person normally
pursues profit in starting and running a business, and in the process also accepts
risk. An entrepreneur also makes the most of opportunities in the environment; in
fact, one of the traits of entrepreneurs is that they can foresee opportunities in a
dynamic business environment much quicker than other people. Lastly,
entrepreneurs also combine expertise and resources to provide products and
services.

Open the following link to watch the video about the production
factors.

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 Time: 6:10 minutes

[Link]

Activity 1.2

This activity will take approximately 10 minutes to complete.

Identify the factors of production from the following list:

• Coal
• Forklift
• Factory
• Oil
• Patrice Motsepe

Feedback:
We can classify the above as follows:
• Coal forms part of land or natural resources.
• A forklift is part of the capital which humans use to produce products and services.
• A factory is also part of the capital used to produce the products and services.
• Oil is part of land or natural resources.
• Patrice Motsepe is an entrepreneur.

As mentioned above, the resources of any community are scarce and can easily be
exceeded by its needs. Society is confronted with the fundamental economic problem of
how to ensure the highest possible satisfaction of needs with the limited, scarce resources
available. This is known as the economic principle. See figure 1.5, which illustrates the
limited resources and unlimited needs.

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 Maslow’s unlimited
needs Limited needs
• Physiological • Natural resources
needs • Human resources
• Safety needs • Capital
• Social needs •Entrepreneurship
• Esteem needs
• Self-actualization
needs

Satisfaction of society’s needs

Figure 1.5: The needs and resources of a society (Source: Author’s design)

From the preceding section it is evident that people have unlimited wants which they strive
to fulfil. The individual is continually confronted with choices – unlimited wants have to be
satisfied with limited means.

At any time an individual must decide which wants must be satisfied immediately and
which can be postponed or cannot be satisfied at all. One will have to be satisfied to have
less of one thing if one wants more of another. If, for example, one decides to buy a car,
one’s holiday (or something else), falls victim to this decision. If a ticket to a rugby/soccer
game costs the equivalent of ten loaves of bread, then the cost of attending the game is
equivalent to the ten loaves of bread that have to be sacrificed.

It is not only the individual who is forced to make choices due to scarcity – every
business/organisation has to decide between various alternatives. They have to decide
how many labourers or other inputs have to be employed in order to produce goods and
services (i.e. the output of the business/organisation).

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The government of a country has to decide how to spend money – on, say reconstruction
and development projects. It strives to provide houses, electricity, running water, free
health services and jobs to all needy citizens. But, because resources are limited, it will
have to decide what must be done first and what will have to be postponed until later.

Factors of production are scarce and when they are used for the production of a certain
good, it means that these factors cannot be used for the production of another good or
goods. A decision to produce more of one good also means that less of another good can
be produced.

Within a society, needs satisfaction occurs within a cycle, as can be seen in figure 1.6.
Study this cycle – it is very important. One of the elements within this cycle is the
economic system determined by the community. We will have a look at the main
economic systems in the next section.

If society is not satisfied

with its need satisfying-
system, another system
will be chosen

Society Economic system Entrepreneurs and their businesses

Must decide on their need satisfying Must achieve best need satisfaction which are the need-satisfying
system (economic system). with limited reources. Is subject to institutions in a market economy.
the economic principle.

• Economic motive • Market economy • Driving source is profit

• Maslow's unlimited needs • Socialism • Society's needs are satisfied or
• Limited resouces • Command economy not satisfied
(Communism)

Figure 1.6: The need-satisfaction cycle (Source: Author’s design)

1.4 THE MAIN ECONOMIC SYSTEMS

The world is divided into three basic economic systems: the free-market economy,
socialism and the command economy. Socialism is in the middle, between the two
extremes. Figure1.7 puts this position into perspective:

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 Free-market economy Socialism Command economy

Figure 1.7: The three economic systems (Source: Author’s design)

At the one end of the spectrum, we have the free-market economy, also referred to as
capitalism. This economic system is based on the principle that each individual in society
is free to choose his or her own economic activity. Private individuals mostly own the
society’s resources and they are free to utilise those resources in whatever way they wish.
Everyone is free to work where they prefer, providing whatever service they like or
manufacturing whatever they want to, and so on. There is freedom of association and the
right to strike. The profit motive is recognised and there is free competition.

At the other end of the spectrum, we have the command economy, also known as
communism. This system is based on the principle that the state (the government) owns
almost all of the country’s resources and that the state (in the form of government officials)
decides what products and services should be manufactured/provided, who should be
employed where, what each person should earn, and so on. Countries that have a
command economy are North Korea and Cuba.

In between these two systems is the system known as socialism. According to this
system, individuals may certainly own private property and choose their own form of
economic activity. The state, however, also owns many of the country’s resources and
plays a far greater economic role than in a free-market system. In South Africa, the state-
owned enterprises (SOE) such as SAA and Eskom are examples of the socialist
economic system that exists.

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Table 1.2: Economic systems

Source: Kenro’s Blog (2022)

Table 1.2 above provides a useful summary of the most important differences between
the three economic systems. It is important to note that no country in the world has an
economy that is a pure capitalist economy, or a communist economy, or a socialist
economy. The economic system of a country may range along a scale from pure
communism to pure capitalism, or vice versa.

Some countries therefore have a mixed economy. There are no clear boundaries in many
countries regarding the economic system that exists. In the United States of America
(USA), which is regarded as the purest example of a capitalist economic system, there
are also traces of socialism, while in Cuba, where communism exists, there are also
traces of capitalism. When an economy is a combination of private enterprise,
government ownership of resources and government planning of the economy, this is

15
called a mixed economy. In such economies, government sets minimum wage laws,
subsidies are given to businesses and expropriation of private property is allowed.

After reading this section, complete the activity that follows.

Activity 1.3

This activity will take approximately 15 minutes to complete.

Read the following scenario: When a giant private organisation such as Masterbond or
Saambou in South Africa or Enron in the USA goes bankrupt, critics of capitalism have
a handy stick to beat this economic system. In South Africa we often hear that the
solution to the country’s problems lies in socialism, that is, an economic system where
the rich are heavily taxed and where government intervention, ownership and control are at the
order of the day.

What is important to remember, however, is that the downfall of organisations such as Saambou
and Enron actually shows that capitalism is functioning very well. If an organisation is inefficient, it
will go bankrupt. However, if government intervenes to keep such organisations afloat, it will keep
inefficient companies going on for a longer period of time. On the other hand, state organisations
cannot fail, even if they perform badly, because they are supported by taxpayers’ money!

• How would you classify the South African economic system? Discuss.

• Would socialism be the answer to South Africa’s economic problems? Critically discuss.

Feedback:
Even though South Africa is often classified as a socialistic economic
system together with other developing nations such as Brazil and
developed nations such as France and the United Kingdom, very rarely do any of the
three economic systems in use occur in a pure form. Keeping this in mind, the most
appropriate description of the prevailing economic system in South Africa is a mixture
between the free-market system and the socialist system. In other words, it is moving

16
 towards a market-orientated economy, yet it has a high degree of government
participation and control within the economy.

Some members of the government alliance consider socialism to be the best

alternative economic system. They state that only in a socialist South Africa will
problems of unemployment, lack of housing and other needs of society be solved. The
opinion is that without the planned, rational, equitable and sustainable use of South
Africa's resources the survival of all the people of South Africa is at risk.

In this section we looked at the three main economic systems, which include the free-
market economy, the command economy and socialism. In the next section we will look
at the need-satisfying institutions of the free market economy.

1.5 THE NEED-SATISFYING INSTITUTIONS OF THE MARKET ECONOMY

The functioning of the South African economy is affected by need-satisfying institutions
such as business organisations, government institutions and non-profit-seeking
institutions.

Business organisations are also referred to as profit-seeking businesses since their aim
is to conduct their business in such a way that it will lead to a profit for the owners. These
organisations can be sole proprietorships, partnerships, closed corporations or
companies. Most of these business organisations are privately owned – but remember
that the state also owns business organisations. These are called public corporations
(e.g. Transnet) and they function just like any other kind of business organisation.

There are also government organisations or state-owned enterprises (SOEs) that do not
operate on a profit-seeking basis. They are usually referred to as government
departments. The Department of Public Works and the South African Police Service are
examples of government departments that do not operate on a profit-seeking basis. They
provide a service to society and they obtain their funds from Treasury. In other words, the
people in the society pay for these services by means of taxes.

17
Not all non-profit-seeking organisations are state owned. There are also privately owned
organisations that do not strive to make a profit. Most of them seek to obtain just sufficient
income to cover their costs. Sports clubs, welfare organisations and religious
organisations usually fall into this category.

After reading the discussion above, complete the activity that follows.

Activity 1.4

This activity will take approximately 10 minutes to complete.

How would you classify the following organisations in the South African economy?
• Telkom
• The Treatment Action Campaign organisation (TAC)
• Pirates soccer club

Feedback:

The telecommunications organisation, Telkom, was owned by the state.

Then Telkom was privatised and its shares are now traded on the Johannesburg Stock
Exchange. However, the South African government still holds shares in the
organisation.

The Treatment Action Campaign (TAC) is a non-profit private organisation that

campaigns for the rights of South Africans suffering from HIV/AIDS. It is described as
a non-governmental organisation (NGO).

Pirates is a private profit-seeking organisation owned by private businesspeople.

1.6 THE NATURE OF BUSINESS MANAGEMENT

In the study of business management, it must first be stressed that there is a difference
between economics and business economics or, as it is called nowadays, business
management. The main difference between Economics as a subject and Business

18
Management as a subject is that the former studies the “management of the national
economy” and the latter studies the “management of a need-satisfying institution”.
Economics is a study of the broader area of economic problems in the community,
whereas Business Management focuses on the problems of individual organisations in
the same community. Business Management as a subject entails the study of how to
manage a business as productively as possible. This ties in with the economic principle,
which states that the business must strive to attain the highest income with the lowest
cost, with the difference between the income and cost being the profit. Note that the
economic principle applies as much to non-profit-seeking businesses as it does to profit-
seeking businesses. The difference is that any form of profit is ploughed back into the
community for which the non-profit- seeking organisation is working.

The business organisation performs a number of activities, such as researching markets

to find out whether there is a need for the product of the business; acquiring and
processing raw materials in the manufacturing process; and appointing people to operate
the machinery in the manufacturing process. Capital must be obtained and the income
generated must be managed, while creditors must be paid and workers remunerated.
These are just a few of the activities being performed in a business organisation.
Furthermore, these activities must be coordinated and managed. This is the reason why
activities are grouped into functional areas to ensure proper coordination and
management. The functional areas are described in table 1.3.

Table 1.3: Functional areas and their descriptions

Functional area Description

Human resources Manages all the staffing requirements and is responsible for
management organising the management structures.
Marketing management Responsible for establishing the need-satisfying products
and services and making them available to customers.
Purchasing and supply Responsible for all the purchasing and distribution logistics
management required by the organisation.
Operations Responsible for transforming the organisation’s resources

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 management into the final goods and services that are sold to customers
Financial management Focuses on the monetary requirements for running the
organisation.
Information Responsible for maintaining, implementing and controlling
management technology in the organisation.

General management is at the centre of the organisation and deals with the planning,
implementation and control of activities (management functions) that are needed to run
the business. These management functions will be dealt with in considerably greater
detail in the rest of this study guide.

Activity 1.5

This activity will take approximately 15 minutes to complete.

The following information was provided by the Governor of the South African Reserve
Bank:

• The unemployment rate in South Africa is too high. Consumers are warned to
use credit with caution, because there is a strong case for increasing the
interest rate by 2%.
• The labour laws of the country are very restrictive and are hampering economic growth.

1. Which of these statements have to do with the broad South African economy and society in
general?

2. What are the implications of these statements for South African businesses?

Feedback:
All of these statements have implications for the broad South African
economy and society in general. However, there are also implications for
business organisations, in that businesses such as retailers must be careful about

20
 granting credit to consumers because an increase of 2% in the interest rate will have
a negative impact on the disposable income of consumers. This could therefore
adversely affect the turnover of these organisations. As such, this statement must be
carefully considered by the financial function of the business, which deals with the
granting of credit. The reference to the labour laws is also important for each and every
business in South Africa that is currently very hesitant about employing more workers
because of labour laws that are perceived to be restrictive.

1.7 SUMMARY
You now have basic insight into the business world, economic systems, institutions of the
free market and the nature of business management. In the next lesson you will study
entrepreneurship in business.

SELF-ASSESSMENT QUESTIONS

This activity will take approximately 15 minutes to complete.

QUESTION 1
Which one of the following statements is correct about Maslow’s hierarchy of needs?
1 Maslow’s needs hierarchy starts with the higher-level needs at the bottom.
2 Social needs refer to our need for financial security.
3 Esteem needs refer to our desire to reach our full potential.
4 Self-actualisation needs are at the top of the hierarchy.

QUESTION 2
Society is confronted with the fundamental economic problem of how to ensure the
highest possible satisfaction of needs with the limited, scarce resources available. This is
known as …
1 the entrepreneurship principle.
2 the economic principle.

21
3 the marketing principle.
4 the production principle.

QUESTION 3

Which of the following statements are correct? An entrepreneur is someone who … .

a. pursues profit.
b. accepts risk.
c. makes the most of opportunities in the environment.
d. combines expertise and resources to produce products and services.
1 ab
2 cd
3 bcd
4 abcd

QUESTION 4
Which of the following attributes are characteristics of a free-market economy as an economic
system?
a. private ownership of production factors
b. free competition
c. profit motive recognised
d. limited right to strike in state enterprises
1 ab
2 ac
3 abc
4 abcd

QUESTION 5
Which one of the following statements is incorrect?
1 All non-profit seeking organisations are state owned.
2 Welfare organisations are non-profit-seeking organisations.

22
3 Society pays for the services of the South African Police Services by means of
taxes.
4 A closed corporation is a type of business organisation.

THE ANSWERS TO THE SELF-ASSESSMENT QUESTIONS

Question 1
Option 4 is correct. Self-actualisation needs are at the top of Maslow’s hierarchy of needs.
Maslow’s needs hierarchy starts with the lower-level needs at the bottom and ends with
the higher-order need of self-actualisation. See section 1.3.1.

Question 2
Option 2 is the correct answer. The economic principle refers to how to ensure the highest
possible satisfaction of needs with limited, scarce resources available. See section 1.3.2.

Question 3
All four of the statements are correct regarding the characteristics of an entrepreneur.
Such a person normally pursues profit in starting and running a business, and in the
process also accepts risk. An entrepreneur also makes the most of opportunities in the
environment; in fact, one of the traits of entrepreneurs is that they can foresee
opportunities in a dynamic business environment much quicker than other people. Lastly,
entrepreneurs also combine expertise and resources to provide products and services.
The correct answer is therefore option 4 (a b c d). See section 1.3.2.

Question 4
In a free-market economy the economy is characterised by private ownership and free
competition, and the profit motive is recognised. There is also freedom of association and
the right to strike. So, statements a, b and c are correct, and d is incorrect. The right
answer is therefore option 3 (a b c). See section 1.4.

23
Question 5
The only incorrect answer is option 1. Not all non-profit seeking organisations are state
owned. All the other statements are correct. See section 1.5.

Make sure you have mastered the key concepts that were listed at the start of the lesson
by making brief notes so that the meaning of each term is clear.

Before proceeding to the next lesson, take some time to reflect on what you have
learned in lesson 1. Make sure you have achieved all the outcomes listed at the start of
this lesson.

1.8 REFERENCES

Kenro’s Blog. 2022. Economic systems: A comparison. Available from:

<[Link]
comparison/> [Accessed 6 March 2023].

Maslow, A. 1954. Motivation and personality. Manhattan, NY: Harper & Row.

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