1.4 external

Question 1

Market

Answer 1

Any place or situation where buyers and sellers interact to exchange good or services

Question 2

Price determinants

Answer 2

can be set by the seller, government, bids, tender, auction or negotiation

Question 3

how can buyers and sellers communicate?

Answer 3

Fax, phone, face-to-face, email, letter.

Question 4

What does mutually reliant mean?

Answer 4

interdependent

Question 5

qualities and characteristics of money.

Answer 5

convenient, easy-to-carry, long lasting, able to be used a number of times, divisible, acceptable, limited in supply- valuable, be recognizable

Question 6

money functions

Answer 6

acts as a medium of exchange, standard of value or unit of account, means of deferred payment, store of value.

Question 7

Non-market activity

Answer 7

exchanges that take place without the aid of money e.g. green dollar exchange

Question 8

market demand

Answer 8

The horizontal summation of all individual demand curves and schedules at each price

Question 9

market supply

Answer 9

The horizontal summation of all individual supply curves and schedules at each price

Question 10

determinants of pe and qe

Answer 10

the interaction of the forces of demand and supply

Question 11

when does shortage occur?

Answer 11

at any price below the equilibrium

Question 12

At the equilibrium what happens?

Answer 12

the market will clear no shortage or surplus will occur.

Question 13

when does surplus occur?

Answer 13

at any price above the equilibrium.

Question 14

market reaction to shortage?

Answer 14

consumers bid up price. price increases, Quantity supplied Increases and Quantity demanded decreases

Question 15

what is a price control?

Answer 15

imposed by the government so that price cannot automatically return to the equilibrium as it would in a free market as laws and regulations prohibit it.

Question 16

what is a minimum price control?

Answer 16

when the price is not allowed to fall below a certain point. Set above the equilibrium.

Question 17

what does a minimum price control result in?

Answer 17

excess supply, must stock pile. Used to protect producers from unreasonably low prices for their output.

Question 18

What is a maximum price control?

Answer 18

Set below the equilibrium. Prevents price rising above this limit.

Question 19

What does a maximum price control result in?

Answer 19

Creates a shortage and possible black market . Price could be on ration cards or 1st come 1st serve basis.

Question 20

What is a subsidy?

Answer 20

A payment made by the government to keep costs of production down.

Question 21

advantages of a subsidy…

Answer 21

no shortage as is with maximum price.

Question 22

disadvantages of a subsidy…

Answer 22

very expensive for government to maintain.

Question 23

What is an indirect tax?

Answer 23

A tax collected by a 3rd party and passed on to the government. Leads to decrease in supply.

Question 24

advantages of an indirect tax

Answer 24

Raises government revenue and decreases the equilibrium quantity

Question 25

what will happen to the domestic prices with exports?

Answer 25

it will rise because supply to the local market decreases.

Question 26

When will people export goods?

Answer 26

When they receive a higher price

Question 27

Quantity exported is…

Answer 27

the gap between QD and QS

Question 28

What do imports do to the domestic price?

Answer 28

Increase domestic supply so price decreases