Chapter 04: The Market Economy
Explainer, notes, worksheet and data.
Explainer
What you must be able to do
- Explain and understand the role of consumers and what motivates them
- Explain and understand the role of producers and what motivates them
- State and explain the components of the supply function and the demand function
- Graphing the supply and demand curves
- Graphing and explaining how the market determines prices
- Graphing and explaining how the market deals with shortages and surpluses
Core ideas
This chapter is designed to test many different skills. You will use maths to calculate diminishing marginal utility and to show the equi-marginal principal of consumer behaviour. You will use critical thinking to understand the motivations of consumers/firms and how they can be guided towards desirable actions. The worksheet you attempt on completing this chapter is designed to draw out these skills and improve your understanding.
The underlying concepts of supply and demand are recurring themes thoughout the Leaving Cert Economics course. They appear in both micro and macro section of the course. So, a good understanding of the material in this chapter is essential.
Exam focus
Exam questions on this chapter can cover a wide array of material, and can pop up anywhere in the exam. There is a lot of theory in the lecture slides, but the graphs are very frequently examined too. Never forget to label graphs. Always use arrows to indicate the direction of prices/quantity/equilibrium.