Topic 2 - Resource Allocation Flashcards
(24 cards)
Define a Market
A place where consumers and producers meet to exchange goods and services, and then interact to establish a price.
Name the 2 types of markets
Factor markets
Product markets
Define a Factor Market
The market where factors of production are sold
Define a Product Market
The market where final goods and services are sold and bought
How are prices determined
By supply and demand to ensure the efficient allocation of resources
Name the 3 economic sectors
Primary
Secondary
Tertiary
Define the Primary Sector
Focuses on the extraction of raw materials such as coal, timber etc.
Define the Secondary Sector
Focuses on turning raw materials into finished products such as clothes and furniture. This includes capital and consumer goods and also energy production
Define the Tertiary Sector
Focuses on providing services
What’s the size of the Primary Sector
10%
What’s the size of the Secondary Sector
20%
What’s the size of the Tertiary Sector
70%
Define Specialisation
The process of concentrating on a specific number of tasks during the production of a good or service.
What is the purpose of specialisation
To increase efficiency
What is the division of labour
When workers specialise in doing particular jobs
How does division of labour occur
When workers concentrate on different parts of a production process of a good or service.
What is the purpose of the division of labour
To increase output and productivity
Benefits of specialisation for producers
- Firms can produce higher quality output at a lower cost due to faster and more skilled workers
- Training workers is easier as they only need to learn one task
- Allows further savings in time and costs
- Benefit from economies of scale
- Less waste is produced for certain producers
- Saves time as workers do not need to shift from one process to another
Costs of specialisation for producers
- Problems may arise if one area of the production line makes a mistake
- It is harder to cover staff as other workers are only trained in specific roles so no cover available
- Workers are less flexible and cannot adapt to situations
- Changes in taste and fashion may mean that specialised workers’ skills are redundant to the production of new products
- Danger of over production
Benefits of division of labour for workers
Costs of division of labour for workers
Define Exchange
When buyers and sellers come together in a market to negotiate prices
Benefits of exchange
Costs of exchange
