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Role of Markets

Topics Covered in Unit 2. The role of markets and money

2.1 The role of markets

  • explain what is meant by a market
  • explain the features of the primary, secondary and tertiary sectors, including the difference between the production of products and services
  • explain the difference between factor and product markets, including their interdependence
  • evaluate the costs and benefits of specialisation and exchange in markets including for producers, workers, regions and countries

2.2 Demand

  • explain what is meant by demand
  • draw and explain a demand curve using data, including individual and market demand
  • draw shifts of, and movements along, the demand curve
  • analyse the causes and consequences for consumers and producers, of shifts of, and movements along, the demand curve
  • explain price elasticity of demand
  • draw demand curves of different elasticity
  • evaluate the importance of price elasticity of demand for consumers and producers

2.3 Supply

  • explain what is meant by supply
  • draw and explain a supply curve using data, including individual and market supply
  • draw shifts of, and movements along, the supply curve
  • analyse the causes and consequences for consumers and producers, of shifts of, and movements along, the supply curve
  • explain price elasticity of supply
  • draw supply curves of different elasticity
  • evaluate the importance of price elasticity of supply for consumers and producers

2.4 Price

  • explain price as a reflection of worth and its role in determining an efficient distribution of resources
  • explain what is meant by equilibrium price and quantity
  • draw and analyse the interaction of demand and supply
  • explain the role of markets in the determination of price and the allocation of resources
  • analyse how the market forces of demand and supply affect equilibrium price and quantity

2.5 Competition

  • explain competition between producers in a market economy, including the reasons why producers compete
  • analyse how competition affects price
  • evaluate the economic impact of competition on producers and consumers
  • explain the meaning of monopoly and oligopoly and how they differ from competitive markets

2.6 Production

  • explain the role of producers, including individuals, firms and the government 
  • evaluate the importance of production and productivity for the economy
  • calculate and explain total cost, average cost, total revenue, average revenue, profit and loss
  • evaluate the importance of cost, revenue, profit and loss for producers, including how costs and revenues affect profit and supply
  • explain what is meant by economies of scale

2.7 The labour market

  • explain the role and operation of the labour market, including the interaction between workers and employers
  • analyse the determination of wages through supply and demand, including factors affecting the supply and demand of labour
  • explain and calculate gross and net pay, including deductions through income tax, national insurance and pension contributions

2.8 The role of money and financial markets

  • explain the role of money as a medium of exchange
  • explain the role of the financial sector for the economy, including financial institutions such as banks, building societies and insurance companies
  • evaluate the importance of the financial sector for consumers, producers and government
  • analyse how different interest rates affect the levels of saving, borrowing and investment
  • calculate the effect on savings and borrowings of changes in the rate of interest

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