2.1 The role of markets

Question 1

Market

Answer 1

A way of bringing together buyers and sellers to buy and sell goods and services

Question 2

Market economy

Answer 2

An economy in which scarce resources are allocated by the market forces of supply and demand

Question 3

Examples of Markets (4)

Answer 3

• Physical market
• A shop
• Auction
• Internet

Question 4

Primary sector

Answer 4

The direct use of natural uses, such as the extraction of basic materials and goods from land and sea

Question 5

Secondary Sector

Answer 5

All activities in an economy that are connected to either manufacturing or construction

Question 6

What is manufacturing

Answer 6

• 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

Question 7

Construction

Answer 7

The process of constructing a building or infrastructure

Question 8

Tertiary sector

Answer 8

All activities in an economy that involve the idea of a service

Question 9

Examples of tertiary sector (3)

Answer 9

Accountants, transport, entertainment

Question 10

Trends of sectors in the last 100 years and current UK %

Answer 10

Shift from primary and secondary to more tertiary. Percent of sectors to GDP UK
Tertiary- 78%
Secondary- 12%
Primary- 10%

Question 11

Factor market

Answer 11

Market where the services of the factors of production are bought and sold

Question 12

Product maarket

Answer 12

Market in which final goods and services are offered to consumers, businesses and the public

Question 13

How are households involved in the product and factor market

Answer 13

They provide labour to firms in exchange for wages
They consume goods and services that are produced

Question 14

Key points about the factor market (4)

Answer 14

• 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

Question 15

Key points about the product market (3)

Answer 15

• 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

Question 16

Specialisation

Answer 16

When individuals, firms, regions or whole economies focus on producting the those products that they are best at producing

Question 17

Exchange

Answer 17

The giving up of something that the individual has in return for something that they wish to have but do not possess

Question 18

Costs of specialisation for producers
Include a stat
(3)

Answer 18

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.

Question 19

Benefits of specialisation for producers (4)

Answer 19

• 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

Question 20

Costs of specialisation for Workers (3)

Answer 20

• 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

Question 21

Benefits of specialisation for Workers (4)

Answer 21

• 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

Question 22

Costs of specialisation for Regions (3)

Answer 22

• 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

Question 23

Benefits of specialisation for Regions (3)

Answer 23

• 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

Question 24

Costs of specialisation for cointries (4)

Answer 24

• 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

Question 25

Benefits of specialisation for countries
(5)

Answer 25

• 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