Economics Chapter 2 the Allocation of resources 5-14

ECONOMICS IGCSE CIE CHAPTER/ SECTION 2 The Allocation of Resources

What is the definition of a market?

A place where buyers and sellers can engage in trade

What do markets do?

Help allocate resources through supply and demand

Answers the 3 economic problems

What is the Market System?

-Sometimes called the Price mechanism

-establishes market equilibrium

What is market equilibrium?

The price where supply and demand are equal

DRAW MARKET EQUILIBRIUM GRAPH

Like this

What is Economic Demand?

The quantity of goods that consumers are willing and able to buy over a period of time

What is the relationship between price and demand?

The higher the price the lower the demand.

The opposite is also true

What is the law of demand?

The quantity of demand rise as prices falls and vice versa

Why is the law of demand true?

-As the price falls people can afford to buy more of the product

-As prices falls more people could afford it

What are the determinants of Demand?

Habits, fashions, and taste

Income

Supplements and complements

Advertising

Government policies

Economy

Others

• Weather

• Demographics of population

DRAW the DEMAND GRAPH

What are the two types of movement and how do they happen?

-Contraction and Extension

• Changes in Price

-Shifts

• Changes from HISAGE Factors

What are individual and market demand?

Individual—Demand of a certain demographic

Market Demand-Demand of entire market