Topic Two (2.2): The Allocation of Resources

In this topic you will study the following:

  • What is a market system?
  • How markets allocate resources.
  • The difference between a market- and a mixed-economy.

Read Icon.png Reading

For this topic you will need to work through pages 24 to 27 in your course book.

Interact Icon.png Key Points

  • Please pay attention to how resources are allocated through the market mechanism, involving the concepts of demand and supply and how they set the equilibrium (“market”) price.
  • You will also learn about the concept of disequilibrium and how, through the pricing mechanism, markets can achieve a new equilibrium.
  • We will also see how governments influence decision-making and how their levels of involvement are different in different countries, including the idea of a mixed economy.

Link Icon.png Links

Now watch this video on supply and demand.

WATCH - The Economics Detective: Supply and Demand (YouTube) Links to an external site.