2.1 - The Role of Markets

• A market refers to a setting in which buyers and sellers interact to exchange goods, services, or resources.
• Primary sector refers to raw materials (wood, fish, ore)
• Secondary sector refers to manufactured goods (cake, car, clothes)
• Tertiary sector refers to services (banking, teaching)
• Goods are tangible (physical) products, whereas services are intangible (non-physical) products.
• A factor market refers to a market where the services of the factors of production are sold.
• A product market refers to a market where goods and services are sold as final products.
• Exchange refers to giving up something you have in return for something that you want.
• Specialisation refers to the process of countries, firms, and individuals focusing on producing what they're best at.
• Costs and benefits of specialisation:

  • (+) Much more efficient
  • (+) Cheaper
  • (-) Workers can get bored (decreased motivation)
• Costs and benefits of exchange:

  • (+) Can obtain things which you do not yet have
  • (-) Have to possibly give up items of value