Application Flashcards
Basic economic problem
Water scarcity issues in India
Food scarcity worldwide
demand shifting right
- Spanish holidays in the UK has seen a significant increase in demand
- key commodities such as oil - a key determinant being rising incomes in China
- Low/no alcoholic drinks
Demand shifting left
- Student housing UK - costs of uni education rising rapidly, students want to save money by not living in student housing
- paper newspapers, due to online newspaper demand rising
- dining in - cheaper alternatives, deliveroo, just eat
supply shifting right
- india subsidies for gas, fuel, rice - subsidy makes them more affordable
- air travel - more firms entering the market increasing supply, driving down prices
supply shifting left
- fizzy drinks - sugar tax increases cost of production
- vanilla ice cream - prices going up, cost of production rises
- gas/electricity - weather issues increases prices
Price elasticity of demand - inelastic
- cigarettes, alcohol, sugar drinks, fast food - addictive goods
- public transport (necessity), iphone (rising demand), basic commodities (very few subsitutes available)
price elasticity of supply - inelastic
basic commodities (hard to store them, large production land), gas/electricity, housing, Heathrow/ Gatwick airport (very low spare capacity in these airports)
cross elasticity of demand - complements
Printers/ink
games consoles/games
cross elasticity of demand - subtitutes
fast food burgers, smartphones
income elasticity of demand - normal goods (income rises so demand increases)
restaurant dining, foreign holidays, designer clothing, theatre, home renovation
YED inferior goods (incomes rises so demand decreases)
fast food, public transport, staycations, own brand food
Negative externalities in production -
- Manufacturing of things like metals, chemicals which produces waste
- Driving cars - congestion, air pollution, noise pollution
- resource depletion/degradation
- deforestation
- loss of biodiversity
negative externalities in consumption
- cigarettes, alcoholic drinks, sugar, fat, chewing gum (litter), sun beds, red meat
Positive externalities in consumption
- Vaccinations, health care, education, public transport, exercise, school lunches
positive externalities in production
- in work training, childcare, R&D
Public Goods
- flood defences, roads, bridges, street lights, national parks, road signs, traffic lights, defence
common access resources
- seas, air, forests - provide resources for us (sea - minerals, air - oxygen, forests - timber)
indirect taxes - solve market failure
cigarette duty, alcohol duty, sugar tax, carbon tax, fuel duty
subsidies - solve market failure
electric cars, solar panels, public transport (bus and rail subsidies), in work training, adult training
regulations to solve market failure
- bans - smoking bans, bans on refilling soft drinks
- limits - age limits e.g. for alcohol, time limits
- compulsory regulations - forces negative advertising - cigarette packaging, calorie content on menus, traffic light systems, forced nutrition information on food packaging
- Quotas - caps on CO2 emissions, fishing quotas
- innovative regulations - deposit recycling scheme
state provision
NHS, state schools, various public goods
tradable pollution permits
Kyoto protocol - pollution permit scheme to reduce carbon emissions, in the EU there is the emissions trading scheme
Minimum prices to solve market failure
alcohol minimum pricing in Scotland recently implemented - 50p per unit of alcohol
Maximum prices to solve market failure
Rent control - New York, Berlin,
Energy price cap - launched by tories
maximum prices on basic foods in Venezuela
