the role of markets (2.1) Flashcards
what is a market
a way of bringing together buyers and sellers to buy and sell goods and services
what is a market economy
an economy in which scarce resources are allocated by the market forces of supply and demand
what is the primary sector
the direct use of natural resources, such as the extraction of basic materials and goods from land and sea
what is the secondary sector
all activities in an economy that are concerned with either manufacturing or construction
what is the tertiary sector
all activities in a an economy that involve the idea of a service
what is a factor market
market in which the services of the factors of production are bought and sold
what is a product market
market in which final goods or services are offered to consumers, businesses and the public sector
4 main factors of factor market
- refers to buying and selling of SERVICES of factors of production
- the demand for the factors is derived demand
- price is determined by interaction of demand and supply
- households can supply labour in return for wages or salaries
3 main factors of product market
- refers to buying and selling of final goods and services
- households, firms and the public sector are the buyers
- price is determined by the interaction of supply and demand
what is exchange
the giving up of something that the individuals or firm has, in return for something they wish to have but do not yet possess
what is specialisation
the process by which individuals, firms, regions and whole economies concentrate on producing those products that they re best at producing
SPECIALISATION- benefits for producers
- higher output
- higher productivity: workers who specialisation become highly skilled in one area , increasing productivity
- higher quality:firms can buy parts from specialists
- economies of scale
- time saving
SPECIALISATION-costs for producers
- costs may rise: as output increases supply of the resources needed may decrease
- dependency: production depends on all parts working eg. if a machine breaks everything has to stop
- movement of workers: workers may get bored of doing the same thing and leave
SPECIALISATION- benefits for workers
- increased skill: leads to higher earnings
- natural strengths: workers can do what they are best at not what they are bad at
- increased job satisfaction
- increased standard of living due to higher earnings
SPECIALISATION- costs for workers
- boredom
- deskilling: become unskilled in other things, only skilled in one specific thing therefore less able to respond to changes in demand
- unemployment: if there is a fall in demand for a products workers may find it hard to find other jobs because they are specialised in one specific thing
