2.1.1 Markets and Sectors

Question 1

market

Answer 1

Question 2

market economy

Answer 2

An economy in which scarce resources are allocated by the market forces of supply and demand. (there are no pure market economies)

Question 3

primary sector

Answer 3

Question 4

secondary sector

Answer 4

Question 5

tertiary sector

Answer 5

The tertiary sector refers to all activities in the economy in which a service is provided. Services are provided not only to other firms, but also to individual consumers and the government. Services involve a wide range of different activities, including transport, retailing, entertainment, tourism and finance. Retailing, a part of the tertiary sector, provides a direct service to consumers

One way in which the tertiary sector differs from the secondary sector is that services are based on people dealing with other people directly, whereas the secondary sector is concerned with the production of actual goods. Cars, for example, can be physically touched (tangible), but car insurance cannot (intangible).

In the past 100 years most economies have seen a significant shift from the primary and secondary sectors to the tertiary sector. In the UK, the tertiary sector is both the largest sector in terms of employment and contribution to the size of the economy (GDP or gross domestic product, see Chapter 3.1) and also the fastest-growing sector. In 2015 the primary sector contributed about 12% of GDP, the secondary 10% and the tertiary 78%.

Question 6

factor market

Answer 6

● it refers to the buying and selling of the services!! of factors of
production
● the demand for the factors is a derived demand
● the price of factors is determined by the interaction of demand
and supply
● households supply labour to fi rms in return for wages/salaries

There are, therefore,
markets for each factor of production: labour markets, the
market for raw materials (land), the capital market, and the
enterprise, or entrepreneurial, market. The fi rm then uses all of
these to make goods or to provide services

Question 7

product market

Answer 7

● it refers to the buying and selling of fi nal goods and services
● households, other fi rms and the public sector are the buyers
● the price of the product is determined by the interaction of
demand and supply of a product (see Chapter 2.6)

Examples of product markets are: food from supermarkets,
spare car parts for a garage, and stationery supplies for an office.
Effective product markets ensure that consumers benefit from
lower prices and a wider choice of goods and services by increasing
competition and encouraging the entry of new companies with new
products or brands. They also encourage all firms to innovate and
create new goods or services (see Chapter 2.5).

Question 8

interdependence of factor and product markets

Answer 8

households involved in both markets: supply labour to firms, which in turn pay them wages and salaries. then in the product market they consume the g&s that are produced

firms buy resources in return for making payments to the FoPs - interaction between rproduct and factor markets involves derived demand (where demand for a product or FOP is not dmenaded for itself but is depended on the demand for the product it helps to produce

so both markets are interdependent (they support each other)