2.9 Market economic system

Advances in technology have changed how trees (wood) are cut down, transported and used in the manufacture of furniture, such as tables. Wood is in inelastic supply. Wood can be supplied in all economic systems. However, public goods are not supplied in a market economic system.

b) Explain why public goods would not be supplied in a market economic system. [4]

Australia experienced a drought in 2018 which caused its agricultural output to fall. Australia's secondary and tertiary sectors performed better in 2018 than its primary sector. All three sectors were affected by the measures taken by the central bank to avoid deflation. Some firms benefited from these measures and increased their output.

a) Identify two industries, other than agriculture, that operate in the primary sector. [2]

b) Explain two possible disadvantages to an economy of a fall in agricultural output. [4]

The use of supply-side policy measures, including deregulation, is moving China closer to a market economic system. Some supply-side policy measures, such as education and subsidies, can also increase a country's economic growth rate. China joined the World Trade Organisation in 2001 and has since removed some quotas on imports and reduced some import tariffs. These measures may influence the size of its current account surplus.

b) Explain two benefits consumers may gain from a market economic system. [4]