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(Micro) Economics / Paper 1 > The role of markets > Flashcards

The role of markets Flashcards

1
Q

Define a market

A

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

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2
Q

Define a market economy

A

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

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3
Q

Define a primary sector

A

The direct use of natural resources including extraction of basic materials and goods from land and sea.

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4
Q

Define a secondary sector

A

All activities in an economy concerned with either manufacturing or construction

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5
Q

Define a tertiary sector

A

All activities in an economy that involve the idea of service

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6
Q

Define a product market

A

Where final goods and services are offered to consumers, businesses and the public sector

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7
Q

Define a factor market

A

Where the services of tDehe factors of production are bought and sold

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8
Q

Define specialisation

A

The process by which individuals, firms, regions and countries concentrate on producing those products that they are best at doing

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9
Q

Define exchange

A

The giving up of something that an individual or firm has in return for something they wish to have, but do not possess

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10
Q

Define production of goods

A

Using raw materials or semi-finished goods to make a whole good.

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11
Q

Define production of services

A

The process of providing a service to a consumer

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12
Q

How does a market economy work?

A

Through the forces of demand and supply to determine how scarce resources are allocated

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13
Q

4 types of markets:

A
  • Physical
  • Shop
  • Auction
  • From home
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14
Q

How does a physical market operate?

A

Many stallholders either outside of undercover

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15
Q

How does a shopping market operate?

A

Interaction between shopkeeper/ assistant and customer

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16
Q

How does an auction operate?

A

Price is set by the buyers in competition with each other

17
Q

How does a from home market operate?

A

Through internet, phone, catalogue.

18
Q

Examples of jobs in the primary sector

A

Agriculture, fishing, farming, mining, oil/gas extraction

19
Q

Examples of jobs in the secondary sector

A

Manufacturing and construction

20
Q

Examples of jobs in the tertiary sector

A

Retailing, finance, media, health, government

21
Q

What is production of goods?

A

Involves using raw materials and/or semi finished goods to make a whole good (manufacturing)

22
Q

What is production of services?

A

The process of providing a service to a consumer

23
Q

What is the difference between a product market and a factor market?

A

The product market deals with goods and services whereas the factor market deals with the factors of production.

24
Q

What are the key ideas of a factor market?

A
  • involves the buying a selling of the services of the factors of production
  • the price of factors is decided by the interaction of supply and demand
  • demand for the factors depends on the demand for the good or service produced
  • households supply labour in return for wages/ salaries
25
Q

What are the key ideas of a product markets?

A
  • buying and selling of final goods and services
  • households, other firms and the public sector are the buyers
  • prices are determined by the intersection of supply and demand for the good or service
26
Q

Explain the interdependence of factor and product markets

A
  • In the factor market, households are the owners of the factors of production. They sell these to firms.
  • In the product market, households are the main buyers of goods and services while firms are the sellers of these goods and services.
27
Q

Benefits of specialisation for producers

A
  • increased output
  • increases productivity
  • increased quality
  • bigger market for each product means there should be more buyers for each producer
  • economies of scale: larger output enables these to be gained.
  • saves time and money
28
Q

Costs of specialisation for producers

A
  • Dis-economies of scale: as output increases, costs may eventually rise
  • If one part of the process fails then the whole production system may stop
  • May not be able to buy necessary scarce resources or components
  • Movement of workers: workers may become bored and leave or produce less
29
Q

Benefits of specialisation for workers

A
  • Increased skill so may earn more money
  • Workers are able to do what they are best at, allowing them to earn more
  • Increased job satisfaction: doing what they’re good at increases motivation and satisfaction
  • Increased standard of living by earning more
30
Q

Costs of specialisation for workers

A
  • Boredom: leading to less motivation
  • Deskilling: Workers are unable to do different jobs so are able to respond to changes
  • Unemployment and may be easier to replace workers with machines
31
Q

Benefits of specialisation for regions

A
  • A region makes best use of its resources
  • Creates jobs for residents near to home
  • Development of better infrastructure and supply industries.
32
Q

Costs of specialisation for regions

A
  • If demand falls then the industry may collapse.
  • If resources run out then those employed in the industry will become unemployed
  • Loss of advantage as another region becomes better at producing, leading to unemployment
33
Q

Benefits of specialisation for countries

A
  • Countries will specialise in what they do best, leading to greater efficiency and output
  • More jobs, the increased output may result in more investment and job creation
  • International trade of the surplus output and greater choice of products for its people
  • Increased choice, income, output and infrastructure gives a better standard of living
  • Government revenue increases leading to better schools, hospitals etc
34
Q

Costs of specialisation for countries

A
  • As specialisation changes, workers in the declining industry become unemployed.
  • Overspecialisation: if world demand changes, the economy may collapse.
  • Increased output leading to over-exploiting resources so unsustainable development.
  • Negative externalities can lead to serious environmental damage.
35
Q

How is there interdependence in a factor market?

A

Householders are the owners of the factors of production - they sell these to firms

36
Q

How is there interdependence in a product market?

A

Householders are the main buyers of goods and services

37
Q

What does specialisation allow producers to do?

A

Gain economies of scale

38
Q

What is specialisation by individuals within a workplace called?

A

Division of labour

39
Q

What does specialisation by countries lead to?

A

International trade with exports of the specialist products and imports of those of other counties

(Micro) Economics / Paper 1 (13 decks)

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