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VICEconomicsQuick questions
Unit 3: Australia's economic prosperity
Quick questions on The market mechanism, demand, supply and equilibrium (VCE Economics Unit 3)
15short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is perfect competition assumptions?Show answer
The competitive market model assumes:
What is the law of demand?Show answer
The law of demand states that, holding other factors constant, the quantity demanded of a good rises when its price falls (and vice versa). The demand curve slopes downward because of:
What is demand shift factors?Show answer
Demand shifts (rather than moves along) when one of the non-price determinants changes:
What is the law of supply?Show answer
The law of supply states that, holding other factors constant, the quantity supplied rises when the price rises. The supply curve slopes upward because of:
What is supply shift factors?Show answer
Supply shifts (rather than moves along) when:
What is market equilibrium?Show answer
Equilibrium is the price and quantity where demand equals supply. At any other price:
What is movements along vs shifts?Show answer
The single most-tested distinction in VCE Economics.
What is worked example?Show answer
The post-COVID rental crunch is a textbook demand-supply case.
What is the role of the price mechanism?Show answer
Prices coordinate decentralised production and consumption decisions:
What is market failure?Show answer
The competitive model produces efficient outcomes only when its assumptions hold. When they break down, market failure occurs:
What is initial position?Show answer
Equilibrium at lower median rent, normal vacancy rates around 3 percent.
What is demand shift right?Show answer
Causes: - Net overseas migration of 500,000 in 2023-24 (ABS), the highest in modern records. - Return of international students post-COVID. - Smaller household sizes (more renters per dwelling stock).
What is supply: largely fixed in short run?Show answer
Causes: - Construction approvals delayed by labour shortages. - Build-to-rent investment held back by planning rules. - Some investors exited the rental market in response to rising interest rates.
What is new equilibrium?Show answer
Higher rents (CoreLogic median asking rent up 8 to 10 percent year-on-year), lower vacancy rates (below 1 percent in Sydney and Melbourne), and equilibrium quantity slightly higher.
What is policy responses?Show answer
- Federal Housing Accord targets 1.2 million new homes by 2029. - State-based stamp duty reforms (NSW first home buyer choice). - Migration program review (the 2024 cut to international student commencements).