Resource allocation

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24 Terms

1
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What is a market?

A place or process where buyers and sellers interact to exchange goods and services.

2
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What is the main function of a market?

To allocate resources through the forces of supply and demand.

3
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What is the price mechanism?

The way in which prices respond to changes in supply and demand to signal and allocate resources.

4
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How does price act as a signal?

It tells producers what to produce based on changes in demand.

5
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How does price act as an incentive?

It encourages producers to increase or reduce supply based on profit potential.

6
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What is meant by resource allocation?

How resources are distributed among different uses and economic agents.

7
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What is the role of consumers in resource allocation?

Their choices and spending influence what is produced.

8
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What is the role of producers in resource allocation?

They decide how to use resources based on profitability.

9
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What role does the government play in resource allocation?

It may intervene to correct market failures or provide public goods.

10
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What are the three main economic sectors?

Primary, secondary, and tertiary.

11
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What does the primary sector involve?

Extracting natural resources like farming, fishing, and mining.

12
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What does the secondary sector involve?

Manufacturing and processing raw materials into finished goods.

13
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What does the tertiary sector involve?

Providing services like retail, education, and healthcare.

14
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Why do economies develop through different sectors over time?

Due to technological progress, changes in demand, and rising income levels.

15
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What is specialisation?

Focusing on the production of a specific good or service to increase efficiency.

16
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What are the advantages of specialisation for firms?

Higher productivity, better quality, and economies of scale.

17
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What are the disadvantages of specialisation for firms?

Over-dependence on a limited range of products or markets.

18
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What is the division of labour?

Splitting the production process into different tasks performed by different workers.

19
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What are the benefits of division of labour?

Increased efficiency, faster production, and lower costs.

20
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What are the drawbacks of division of labour?

Repetitive work, boredom, and lack of flexibility.

21
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What is exchange?

Trading goods and services, often using money as a medium.

22
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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.

23
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What role does money play in exchange?

It acts as a medium of exchange, a unit of account, and a store of value.

24
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What is a medium of exchange?

Something accepted as payment for goods and services.