Year 12 Microeconomics 1. Explain two causes of a price change 2. Explain the functions of the price mechanism to correct excess demand 3. Explain the functions of the price mechanism to correct excess supply 4. Explain complete market failure 5. Explain the effects of postive externalities in consumption 6.

One impact of trade agreements is lower prices. Trade agreements mean that countries can trade freely without protectionist measures such as tariffs. A tariff is a tax on imports and the diagram shows the effects of removing tariffs on the economy. The diagram shows a regular demand and supply curve

One benefit of free trade is that it enables countries to specialise. Specialisation can lead to an increase in world output. Free trade is the act of trading without protecionist barriers. Comparative advantage is when a country produces the good or service with the lowest opportunity cost. Comparative advantage theory