The role of markets

Question 1

Define a market

Answer 1

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

Question 2

Define a market economy

Answer 2

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

Question 3

Define a primary sector

Answer 3

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

Question 4

Define a secondary sector

Answer 4

All activities in an economy concerned with either manufacturing or construction

Question 5

Define a tertiary sector

Answer 5

All activities in an economy that involve the idea of service

Question 6

Define a product market

Answer 6

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

Question 7

Define a factor market

Answer 7

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

Question 8

Define specialisation

Answer 8

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

Question 9

Define exchange

Answer 9

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

Question 10

Define production of goods

Answer 10

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

Question 11

Define production of services

Answer 11

The process of providing a service to a consumer

Question 12

How does a market economy work?

Answer 12

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

Question 13

4 types of markets:

Answer 13

• Physical
• Shop
• Auction
• From home

Question 14

How does a physical market operate?

Answer 14

Many stallholders either outside of undercover

Question 15

How does a shopping market operate?

Answer 15

Interaction between shopkeeper/ assistant and customer

Question 16

How does an auction operate?

Answer 16

Price is set by the buyers in competition with each other

Question 17

How does a from home market operate?

Answer 17

Through internet, phone, catalogue.

Question 18

Examples of jobs in the primary sector

Answer 18

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

Question 19

Examples of jobs in the secondary sector

Answer 19

Manufacturing and construction

Question 20

Examples of jobs in the tertiary sector

Answer 20

Retailing, finance, media, health, government

Question 21

What is production of goods?

Answer 21

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

Question 22

What is production of services?

Answer 22

The process of providing a service to a consumer

Question 23

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

Answer 23

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

Question 24

What are the key ideas of a factor market?

Answer 24

• 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

Question 25

What are the key ideas of a product markets?

Answer 25

- 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

Question 26

Explain the interdependence of factor and product markets

Answer 26

- 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.

Question 27

Benefits of specialisation for producers

Answer 27

- 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

Question 28

Costs of specialisation for producers

Answer 28

- 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

Question 29

Benefits of specialisation for workers

Answer 29

- 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

Question 30

Costs of specialisation for workers

Answer 30

- 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

Question 31

Benefits of specialisation for regions

Answer 31

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

Question 32

Costs of specialisation for regions

Answer 32

- 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

Question 33

Benefits of specialisation for countries

Answer 33

- 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

Question 34

Costs of specialisation for countries

Answer 34

- 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.

Question 35

How is there interdependence in a factor market?

Answer 35

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

Question 36

How is there interdependence in a product market?

Answer 36

Householders are the main buyers of goods and services

Question 37

What does specialisation allow producers to do?

Answer 37

Gain economies of scale

Question 38

What is specialisation by individuals within a workplace called?

Answer 38

Division of labour

Question 39

What does specialisation by countries lead to?

Answer 39

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