2.1 The role of markets Flashcards
Market
A way of bringing together buyers and sellers to buy and sell goods and services
Market economy
An economy in which scarce resources are allocated by the market forces of supply and demand
Examples of Markets (4)
- Physical market
- A shop
- Auction
- Internet
Primary sector
The direct use of natural uses, such as the extraction of basic materials and goods from land and sea
Secondary Sector
All activities in an economy that are connected to either manufacturing or construction
What is manufacturing
- The direst use of raw materials from the primary sector- refining petrol to make oil
- Indirect use of materials such as making components for a car
Construction
The process of constructing a building or infrastructure
Tertiary sector
All activities in an economy that involve the idea of a service
Examples of tertiary sector (3)
Accountants, transport, entertainment
Trends of sectors in the last 100 years and current UK %
Shift from primary and secondary to more tertiary. Percent of sectors to GDP UK
Tertiary- 78%
Secondary- 12%
Primary- 10%
Factor market
Market where the services of the factors of production are bought and sold
Product maarket
Market in which final goods and services are offered to consumers, businesses and the public
How are households involved in the product and factor market
They provide labour to firms in exchange for wages
They consume goods and services that are produced
Key points about the factor market (4)
- Refers to the buying and selling of the services of the factors of production
- The demand for factors is a derived demand
- The price is determined by the interactions of supply and demand
- Households supply labour to firms in return for wages
Key points about the product market (3)
- Refers to the buying and selling of final goods and services
- Households, other firms and public sector are the buyers
- The price of the product is determined by the interaction of demand and supply
Specialisation
When individuals, firms, regions or whole economies focus on producting the those products that they are best at producing
Exchange
The giving up of something that the individual has in return for something that they wish to have but do not possess
Costs of specialisation for producers
Include a stat
(3)
Costs:
- Costs can increase because resources can be in short supply
- Failure of exchange- if scarce resources are unavailible, supply can decrease
- Movement of workers- Workers can become bored and leave- labour turnover- 1/8 people leave jobs in the UK. Then more money has to be spent on training workers.
Benefits of specialisation for producers (4)
- Higher output- Total production of goods and services will increase
- Higher productivity- Workerswho specialise become skilled and increases output per worker which decreases costs because firms wont have to employ as many workers for same amount of output
- Economies of scale
- Time saving- Takes time to stop producing one product and start another
Costs of specialisation for Workers (3)
- Boredom- doing the same thing over and over again
- Deskilling- Workers lose skills to do other things
- Unemployment- If there is a fall in demand of things that they are producing, workers will find it hard to find other jobs becuase they don’t have the necessary skills/ experience
Benefits of specialisation for Workers (4)
- Increased skill- In their line of work, workers are more knowledgeable
- Natural strengths- Workers are able to do what they are best at and don’t have to do what they’re bad at which allows them to earn more money
- Increased job satisfaction- As they are doing what they are good at
- Increases standard of living- By earning more money, workers can buy more goodsto satisfy their wants and needs
Costs of specialisation for Regions (3)
- Risk of fall of demand, leading to a waste in resources. This could be triggered by a change in fashion/ taste
- Resource exhaustion- If raw materials are unavailible, those employed in those sectors will become unemployed e.g Port Tablot
- Loss of advantage- another region or country may become bettter at producing the good leading to unemployment
Benefits of specialisation for Regions (3)
- Efficient use of resources- Could specialise in a particular industry due to availibility of resources so its easier to use resources more efficiently
- Creates jobs for residents- easier because it’s near their homes aswell
- Infrastructure development- A region that specialises will develop infrastructure to support industry which will lead to further development of infrastructure
Costs of specialisation for cointries (4)
- Unemployment- Workers may not be able to find new jobs as they lack skills
- Over dependence- Countries can over specialise and if demand changes for their product their economies may collapse
- Over exploitation of resources- may use resources in a non sustainable way which means that they will not be able to keep their development going in the future#
- Negative externalities- environmental damage
Benefits of specialisation for countries
(5)
- Economies of scale
- More jobs- people can pay more tax
- International trade- It will have a surplus of specialist products so there’s greater international trade
- Improved standard of living
- Government revenue- Increased output, income, trade which leads to more tax which leads to better infrastructure
