types of markets

Question 1

agriculture/farming
- how are demand and supply affected?
- how can they stabilize prices?

Answer 1

supply and demand are affected by the weather and climate in unpredictable ways so the price varies.
attempts to stabilize prices can be made by storing produce, but since crops are perishable goods this is hard in the long term. In the short term, this may work as they store goods in good years to sell in bad years.

Question 2

commodities
- what are the two types of commodities?

Answer 2

soft: grown (coffee, sugar, wool, rice)
hard: mined or extracted (crude oil, natural gas, silver)
the market is volatile due to constant changes in price
- OPEC fixes the price of oil to suit them, interfering with the free workings of the price mechanism to influence price

Question 3

housing

Answer 3

essential in any economy
consist of: owner-occupier, private rental, and public rental

Question 4

foreign exchange

Answer 4

• influenced by levels of imports, exports, speculation, and tourism

Question 5

stock market

Answer 5

• for buying and selling shares in businesses (ownership)
• IPO (international public offering) is the first time shares can be sold to the public and all the money from the sales returns to the business
• demand and supply dictate the price of future sales of the shares which is influenced by profit levels and dividend payments
  e.g. if you can predict a company will be successful, buy shares now so you can sell shares for more expensive when the company is more successful

Question 6

entry of firms (if demand shifts in)

Answer 6

quantity and price increases which attracts new firms to the market, increasing supply, bringing prices back down, and increasing competition which makes it hard for firms to be successful in the long term

Question 7

exit of firms (if demand shifts out)

Answer 7

quantity and price decreases which causes firms to leave the market, causing supply to decrease and price to increase again