90198 Describe the market

1. 90198 Describe the market

2. 90198 The Market Q ONE (a) Describe what a market is. A place or situation where buyers and sellers meet to exchange goods and services. (b) Describe why the work that Steven and Rachel do on their bathroom is considered to be non-market. The work Steven and Rachel do is non-market because there is no payment involved for their time and skills/no exchange is taking place. This is DIY (Do it yourself)

3. 90198 The Market Q ONE (c) Explain why there is still a cost involved even when it is a non-market activity. There is an opportunity cost involved in DIY activities. For example the time that Steven and Rachel at working on their bathroom they could have been earning money in their jobs; or they could have spent the time doing a leisure activity.

4. 90198 The Market Q TWO (a) Describe the form of exchange which is taking place between Steven and Henare. Barter (b) Explain TWO disadvantages of this form of exchange. Barter requires a double coincidence of wants which means that when each person must have what the other person wants. There is not a common measure of value so it is difficult to price goods or services in terms of other goods or services.

5. 90198 The Market Q TWO (c) Describe TWO types of markets from which Steven and Rachel could purchase bathroom products. Retail store, Trademe, second hand goods from recycling depot, garage sale. (d) Identify the FOUR Functions of Money. Medium of exchange Standard of value Store of value Means of deferred payment

6. 90198 The Market Q TWO (e) Explain TWO of the Functions of Money Medium of exchange: enables goods and services to be traded without the need to establish a double coincidence of wants. Standard of value: enabling different goods and services to be valued in a common currency e.g dollars and cents. Store of value: money holds its value over time so people can hold some of their wealth in the form of money. Means of deferred payment: enables debts to be settled at a later date.

7. 90198 The Market Q THREE (a) Complete the diagram Offer and Acceptance Consideration Intention No duress

8. 90198 The Market Q THREE (b) Refer to the contract Steven and Rachel have made with Perfect Plumbing Ltd to explain TWO elements of a valid contract. Steven and Rachel accepted the offer by Perfect Plumbing Ltd to supply plumbing services. There was an intention to create a legal relationship. The consideration of $55 per hour was acceptable to Steven and Rachel and Perfect Plumbing Ltd so something of value was exchanged. Steven and Rachel and the manager from Perfect Plumbing Ltd were capable of making a contract – they were not drunk, bankrupt, insane, and they were old enough. There was no duress and consent was given by signing the document. The provision of plumbing services is a legal activity.

9. 90198 The Market Q THREE (c) Identify TWO guarantees the Consumer Guarantees Act 1993 provides for services. Services are carried out with reasonable skill and care and no damage is caused. They will provide what the consumer wants and that they are fit for the purpose. The job will be completed within a reasonable time. If the price has not been agreed to beforehand, buyers need only pay what is reasonable. (d) The shower mixer unit purchased from Plumbing Suppliers did not work properly once it was installed. Describe THREErights Steven and Rachel have. The mixer unit should be Repaired Replaced Or a refund provided.

10. 90198 The Market Q FOUR (a) Identify the type of competition indicated in the advertisement. Non-price competition (b) Identify TWO advantages and ONE disadvantage of this type of competition for producers. • Advantages of non-price competition for a supplier: • Increase the demand for the product/ • Increase in sales and profits • Increase in market share • without reducing the price of the product to compete. Disadvantages: Higher selling costs due to increased advertising.

11. 90198 The Market P S D D’ Q Q FIVE (a) (i) Equilibrium Price (ii) Equilibrium Quantity • $3000 • 15 spa baths (b) (i) Show the change that would occur if Spa Baths were no longer desirable in a bathroom. P1 Q1 (ii) Label the new equilibrium price (P1) and (Q1).

12. 90198 The Market Q FIVE (c) (i) As a result of the change there is now an excess . . . Supply (ii) Fully explain how the market will react in the situation identified in (c)(i), to restore equilibrium. • The decrease in demand will result in an excess of supply. • Producers will lower their prices and supply less. • As price decreases quantity demanded will increase. • Equilibrium will eventually be restored at a lower price.

13. 90198 The Market Price $ 5000 4000 3000 2000 1000 S’ P2 Q2 0 100 200 300 400 500 600 Quantity Q SIX (a) Show the effect of the $1000 subsidy on the market for solar water heating installation. Indicate the new equilibrium price (P2) and quantity (Q2) using dotted lines.

14. 90198 The Market Q SEVEN (b) Calculate the change in total revenue as a result of the subsidy. (Show your working) Revenue before the subsidy: $3000 x 300 = $900,000 Revenue after the subsidy: $3500 x 350 = $1,225,000 Therefore the change is $325,000 (c) State the total amount of subsidy paid by the government? $1000 x 350 = $350,000

15. 90198 The Market Q SEVEN bonus E

16. 90198 The Market Q SEVEN (d) Fully explain why the government provides a subsidy on the installation of solar water heating. • The government provides a subsidy to • decrease the costs of production and to reduce the price to consumers. • this is to encourage consumers to purchase more of the good. • in the case of the installation of solar water heating, the subsidy is to encourage more consumers to be less reliant on other forms of energy to heat water.

17. 90198 Describe the market