How markets work

Which of the following best describes the equilibrium price in a market?

Which of the following could lead to a reduction in the quantity supplied of a product?

A firm can reduce its average costs in the long run by making effective use of a large machine. This is an example of

Which of the following is an example of a variable cost?

In which jobs are earnings likely to be highest?

Which of the following is a reason for a firm having price elastic supply?

A 5% decrease in the price of newspapers leads to a 4% increase in the quantity demanded. What is the price elasticity of demand for newspapers?

Which of the following are most likely to be substitutes for each other?

Table 1 shows the quantities of wood supplied and demanded at various prices. **Table 1** | Price (£ per tonne) | Quantity demanded (tonnes) | Quantity supplied (tonnes) | |---|---|---| | 25 | 150 | 50 | | 50 | 125 | 75 | | 75 | 100 | 100 | | 100 | 75 | 125 | | 125 | 50 | 150 | What is the excess supply at a price of £100 per tonne?

State two different examples of the factor of production known as land.

Explain one reason why an individual consumer may have to make an economic choice.

Explain one benefit of specialisation for an individual worker.

Using Table 2, calculate the average fixed cost of making 15 surfboards. **Table 2** | Number of surfboards produced and sold | Total revenue (£) | Total cost (£) | |---|---|---| | 0 | 0 | 1500 | | 5 | 1000 | 2000 | | 10 | 2000 | 2500 | | 15 | 3000 | 3000 | | 20 | 4000 | 3500 |

Explain one business objective Paul might have.

Using Figure 1, analyse possible reasons for the differences in price elasticity of demand for the two products. **Figure 1 - Price elasticity of demand for two products** | | | |---|---| | Loaf of bread | -0.2 | | Car | -2.5 |

State two features of a non-competitive market.

Explain one possible disadvantage to a firm of increasing its scale of output.

Explain one key economic decision for a producer.

Using Figure 2, calculate Tharun's annual net pay. **Figure 2** | | | |---|---| | Gross pay (monthly) | £2500 | | National Insurance contributions (monthly) | £270 | | Income tax (monthly) | £350 |

Explain one reason why Tharun may earn more than a cleaner.

Draw and label the effects of an increase in the price of petrol cars on the market for petrol.

Using Figure 3 and Table 3, assess whether the advantages of a competitive market such as a local farmers' market outweigh the disadvantages for consumers. **Figure 3 - Hill Green Farmers' Market** Hill Green Farmers' Market is a local village market. Many farmers come to the market to sell a wide range of fruit, vegetables, meat and other food that they have produced locally. The Farmers' Market is well known in the region for selling high-quality, fresh food at competitive prices. It is easy for farmers to open a market stall and the set-up costs are low. In recent years, local farmers have struggled to recruit cheap labour for fruit picking and so costs of production for these farmers have begun to rise. Some customers have also complained that some market stalls have begun to look untidy. **Table 3 - Prices of selected products** | | Hill Green Farmers' Market | Supermarket | |---|---|---| | 500 g minced beef | £5.00 | £5.00 | | 12 eggs | £4.00 | £4.50 | | 1 litre of milk | £2.00 | £1.75 | | 1 kg carrots | £0.50 | £1.20 |

**Figure 1** Many economists believe that government spending should continue to be used to provide healthcare. This helps solve a potential market failure because healthcare generates positive externalities. Without government intervention, healthcare may not be provided in sufficient quantities. In the UK, the government provides healthcare mainly free of charge to all UK citizens. This is expensive, with over £100 billion spent by the government in 2019 on healthcare – which in 2020 and beyond will rise significantly due to the COVID-19 pandemic. Using Figure 1, analyse how the government might correct the market failure caused by healthcare not being provided in sufficient quantities.