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What is a market?
A place or process where buyers and sellers interact to exchange goods and services.
What is the main function of a market?
To allocate resources through the forces of supply and demand.
What is the price mechanism?
The way in which prices respond to changes in supply and demand to signal and allocate resources.
How does price act as a signal?
It tells producers what to produce based on changes in demand.
How does price act as an incentive?
It encourages producers to increase or reduce supply based on profit potential.
What is meant by resource allocation?
How resources are distributed among different uses and economic agents.
What is the role of consumers in resource allocation?
Their choices and spending influence what is produced.
What is the role of producers in resource allocation?
They decide how to use resources based on profitability.
What role does the government play in resource allocation?
It may intervene to correct market failures or provide public goods.
What are the three main economic sectors?
Primary, secondary, and tertiary.
What does the primary sector involve?
Extracting natural resources like farming, fishing, and mining.
What does the secondary sector involve?
Manufacturing and processing raw materials into finished goods.
What does the tertiary sector involve?
Providing services like retail, education, and healthcare.
Why do economies develop through different sectors over time?
Due to technological progress, changes in demand, and rising income levels.
What is specialisation?
Focusing on the production of a specific good or service to increase efficiency.
What are the advantages of specialisation for firms?
Higher productivity, better quality, and economies of scale.
What are the disadvantages of specialisation for firms?
Over-dependence on a limited range of products or markets.
What is the division of labour?
Splitting the production process into different tasks performed by different workers.
What are the benefits of division of labour?
Increased efficiency, faster production, and lower costs.
What are the drawbacks of division of labour?
Repetitive work, boredom, and lack of flexibility.
What is exchange?
Trading goods and services, often using money as a medium.
Why is exchange important in a specialised economy?
Because individuals and firms rely on others to provide goods and services they don't produce themselves.
What role does money play in exchange?
It acts as a medium of exchange, a unit of account, and a store of value.
What is a medium of exchange?
Something accepted as payment for goods and services.