Markets Flashcards
What is a Market?
A market is a place where buyers and sellers come together to exchange goods and services for a price.
What is the PRICE MECHANISM?
The Price Mechanism is the way in which prices are set in a FREE MARKET ECONOMY.
It relies on the forces of DEMAND and SUPPLY to allocate resources.
Explain how scarce resources are allocated by the price mechanism
What is EQUILIBRIUM?
Diagram 1 - Basic Equilibrium
Diagram 2 - Increase in Demand
Diagram 3 - Increase in Supply
Diagram 4 - Reduction in Demand
Diagram 5 - Reduction in Supply
Diagram 6 - Reduction in Supply AND Reduction in Demand
Diagram 7 - Reduction in Demand AND Increase in Supply
Diagram 8 - Government Intervention (Tax or Subsidies)
Diagram 9 - Government Intervention (Maximum Price)
Describe how “competition from Chinese copycats” could affect the market for clothing made in Scotland.
Draw a diagram to show the effect on the market for Spanish olive oil of the reduced availability of sunflower oil, along with the abnormally dry weather in Spain.
Draw a diagram to show the effect on the market for unhealthy food as a result of the introduction of a ‘fat tax’, combined with increased ‘restrictions on advertising unhealthy food’.
A ‘pay cap’ or maximum price is a form of market intervention.
Draw a market diagram to show the effect on a market of setting a maximum price.
Explain one possible effect on employment of the government decision to lift the pay cap.
Draw a diagram to show the effects on the market for labour of “weakening investment” by industry combined with “discouraged” workers.
Draw a diagram to show a possible effect of the falling price of oil on the market for labour in Scotland.
Draw a diagram to show the effect of a “tax cut for firms”, combined with rising disposable incomes, on the market for UK exports.
