ECH401 - Microeconomics Honours Assignment

Assignment Task

The South African government introduced COVID-19 Social Relief of Distress Grant (SRD Grant) IN 2020, which amounted to R350 per person. The SRD Grant is meant for South African Citizens, Refugees, Asylum Seekers and Special Permit Holders who are between the ages of 18 and 60 years, who have insufficient means, who do not receive social grants on behalf of herself/ himself or who are not contributing to or eligible for UIF payment, and have no financial support from any other source. The grant amount has been the same, since.

There has been calls to increase it, as reported in GroundUp (2023) “… the R350 Covid-19 Social Relief of Distress (SRD) grant should be increased to a minimum of R413, in line with inflation, according to the Institute for Economic Justice (IEJ) and the Socio-Economic Rights Institute of South Africa (SERI)”. Ground up cited  IEJ and SERI:

R350 is widely regarded as baseless, and is not tied to any objective or scientific measure of need. Since the grant was introduced in 2020, high inflation has eroded its value substantially in real terms. The value of the grant should be raised immediately to at least R413 to account for inflation since 2020, and a plan put in place to increase it progressively until it reaches the current food poverty line.

As an Economist produce a report guided by the following:

1. Identify possible basket of goods and services that recipients of the grant could consume (important to have a mix of goods and services) based on the R350

2. Do a retrospective review and compute the total expenditure of this Basket in April 2020

3. Assess the cost of this basket in subsequent years- 2021, 2022, and 2022 using April as the target month

4. Which product in the basket has been the greatest driver of price changes, discuss

5. If recipients are to purchase the same amount of goods in the basket as of April 2020; what adjustment is needed to the grant? Clearly articulate the approach(es) used to determine this figure; justifying in relation to commonly tracked economic indicators

6. If the government can identify a certain level of utility as welfare maximizing per individual recipient; and they desire to ensure that individuals maintain that level of utility. What adjustment is needed on the grant to maintain April 2020 level of utility? Is this approach different from the one used under 5 above, discuss. If different, which one must be used in determining value of adjusting grant.

7. Identify the key good or service in the basket and derive its compensated and uncompensated demand functions of a particular consumer.

8. Based on the derived demand functions, what is the overall welfare outcome for the individual? How can government use these functions in decision making- what is your recommendation? Does government need to provide such grants? Discuss.

This ECH401 - Economics has been solved by our PhD Experts at My Uni Paper.