○ ways in which the immobility of factors of production might lead to the misallocation of resources

Question 1

Occupation Immobility

Answer 1

• when there are barriers to the mobility of FoP between different sectors of the economy
• leads to these factors remaining unemployed/ used inefficiently –> misallocation of resources –> market failure
• some units of capital are specific to the industry they have been designed for –> printing press/nuclear power station
• leads to a waste of scarce resources –> market failure

Question 2

Geographical Immobility

Answer 2

• barriers restricting people from moving from one area to another to find work
• family/social ties
• cultural/language barriers
• high cost of renting property