The+allocation+of+resources

=4.2 The allocation of resources: How the market works; market failure=

=An Introduction= media type="file" key="Economic systems.swf" width="269" height="269"

= T he Market Mechanism - an introduction =

 The market is anyplace where sellers and buyers meet, for example, a shop, the internet or a traditional market. It is possible to divide the market into local, national and international markets. A local market would be a High Street where the businesses are competing for the customers that live in the local area. A national market is one where businesses compete for customers from all over the UK, for example, Alton Towers attracts customers from all over the UK. An international market is one where the business competes with businesses all over the world to sell to customers in many countries, for example, Microsoft sell their goods all over the world competing with other software businesses. In a competitive market, market forces set the price of goods and services. Customers will spend their money on goods and services that they want and feel are good value. When customers buy a product, we say, they are casting a vote. If the business receives lots of votes, in other words there is high demand for its products, it can raise its price. If a business does not receive many votes it will have to lower its prices if it wants to increase sales. Market forces are the actions of customers that help to determine the price and quantity of goods sold.

Further notes on the market mechanism Market Failure 

End of Unit worksheet 