4. Explain, with the aid of an example, each of the following terms: - Derived Demand - Transfer Earnings - Supply Price - Economic Rent - Leaving Cert Economics - Question 4 - 2014

Transfer earnings are the minimum payments required to keep a factor of production in its current use. For instance, if a worker could earn a higher salary in another job, their transfer earnings would be the wage they currently receive. The difference between what they could earn and what they actually earn is known as economic rent.

Supply price is the price required to induce a firm to supply a good or service. It is influenced by the costs of production. For example, if the cost of materials for a shoe factory increases, the supply price of shoes will likely increase as well, as the factory will require higher prices to cover these costs.

Economic rent is the payment to a factor of production that exceeds the minimum amount needed to bring that factor into use. For example, if a piece of agricultural land is being rented for significantly more than its opportunity cost, the extra earning is considered economic rent.

1. Immobility: Land cannot be moved from one location to another, which limits where certain economic activities can occur.
2. Heterogeneity: Each parcel of land is unique in terms of its characteristics such as location, fertility, and accessibility, resulting in differing values and potential uses.

1. Availability of a skilled workforce: Firms attract qualified labor to ensure operational efficiency, making locations with a skilled workforce preferable.
2. Proximity to market / raw materials: Being close to consumers and suppliers reduces transportation costs and can improve delivery speed.
3. Government incentives: Grants and different forms of governmental support can attract firms to certain areas, aiding their decision on operations.

1. Property market collapse: The housing bubble burst, leading to a drastic reduction in property values as speculative investments declined.
2. Banking crisis: Financial institutions faced crises, resulting in tighter credit and increased mortgage costs for buyers.
3. Economic recession: The wider economic downturn produced decreased disposable incomes and lower consumer confidence, leading to lower demand for housing.

Households facing mortgage arrears may encounter increased financial stress, leading to reduced consumption spending. This can result in a lower quality of life, as families may need to cut back on essentials due to the inability to meet mortgage payments.

The banking sector can experience increased default rates, leading to a decline in overall profitability. This can force banks to tighten lending criteria further, making it more challenging for new borrowers to access credit.

The Irish Government could see reduced tax revenue due to falling property values and increased unemployment rates. This might necessitate higher taxpayer burdens to cover lost revenues, potentially leading to austerity measures.