2.2 The Role of Markets in Allocating Resources (Cambridge (CIE) IGCSE Economics)

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  • Define the term market system.

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  • Define the term market system.

    A market system is an economic system where demand and supply (the price mechanism) determine what to produce, how to produce it, and for whom the goods and services are produced.

  • What is a mixed economy?

    A mixed economy is an economic system where demand, supply, and the government determine what to produce, how to produce it, and for whom the goods and services are produced.

  • Define the term planned economy.

    A planned economy is an economic system where the government determines what to produce, how to produce it, and for whom the goods and services are produced.

  • What does the term price mechanism mean?

    The price mechanism is the interaction of demand and supply in a free market. It determines prices and allocates scarce resources.

  • Define the term market equilibrium.

    Market equilibrium is the situation where demand equals supply, and the price at this point is called the market clearing price.

  • What is disequilibrium?

    Disequilibrium occurs whenever there is excess demand or supply in a market.

  • True or False?

    A pure market system has no government intervention.

    True.

    In a pure market system, there is no government intervention in the form of taxes or government spending.

  • Define the term opportunity cost.

    Opportunity cost is the loss of the next best alternative when making a decision.

  • What does the term goods mean?

    Goods are physical objects that can be touched (tangible), e.g. a mobile phone.

  • Define the term services.

    Services are activities that one person performs for another (intangible), e.g. a manicure or car wash.