Case studies to Use (Micro) (EconPlusDaddy im gonna cum)

Question 1

A good case study for resource allocation/sustaintability/population growth/scarcity

Answer 1

India and other Saudi Arabian countries are running out of water so farmers have an opportunity cost of time by digging deep into ground to get water for their farming.

Question 2

Name a good that has a technological substitute that has replaced a good in a market

Answer 2

Newspapers have been replaced with social media due to the ease of substitutes such as the Daily Mail and The Telegraph have resorted to going dominantly online from now onwards.

Question 3

What has happened to student housing?

Answer 3

Student housing demand is decreasing since students are opting to go and live at home and commute to university to save money - especially in populous places like London and Birmingham
Demand shift D1 to D2 - also in Macro talk about interest rates affecting it

Question 4

Demand shifts outwards?

Answer 4

Higher demand for non alcaholic drinks
Higher demand for electric bikes as the government discourage fuel consumption with higher taxes and fuel prices

Question 5

The supply shifting outwards UK case study?

Answer 5

5% VAT tax cuts on the hospitality industry as of 2021 and Sunak’s eat out to help out recovery scheme has been huge in more restaurants setting up

Question 6

Supply shifting inwards across Europe?

Answer 6

Tomato’s in 2023 has shifted inwards which increased prices from p1 to p2.

Question 7

Inelastic demand in the UK?

Answer 7

BP and Shell in 2023 had record high profits despite prices rising
Lego had huge profits despite high prices in 2021 because of lockdown had more people using lego but also very high brand loyalty.

Question 8

Inelastic supply in the UK

Answer 8

UK housing has price inelastic supply and is given large production lags and tight planning permission regulation preventing quick increasing in supply to match demand.
Football tickets?

Question 9

An example of a substitute

Answer 9

Coca Cola and Pepsi

Question 10

Example of a normal good

Answer 10

Makeup in countries like india

Question 11

Inferior goods examples

Answer 11

Own brand foods

Question 12

Compliments

Answer 12

Popcorn and cinema tickets
Pasta and pasta sauce

Question 13

Example of an indirect tax

Answer 13

2018 french duel duty to raise revenue for climate change but there was mass protests due to the regressive nature - evalatution?
Other types would be cigarette duty and alcahol duty as well as sugar tax

Question 14

Subsidy example in a country

Answer 14

Uk and energy crisis subsidies with pressure groups like Don’t Pay UK
Hong Kong has even mix of private and public hospitals - hong kong government has long offered subsidies for private provision of children but these subsidies are now extended to include pensioners over the age of 50 set at 260 hong kong dollars

Question 15

Minimum price - price floor

Answer 15

Ivory coast and Ghana are responsible for 60% of global cocoa bean industry which represents a major export of both nations.
Price of cocoa beans directly affects income of producers hence why the governments impose minimjum price to protect farmers from world fall in price
2024: 1.62 dollar per kg is the rate for farmers - which can be bad since its not guaranteed minimum price so the government dont buy excess
BUT
there is a top up of 400 dollars for value sold above 1 ton which suggests that they may have good incomes
As it is inelastic - this works out since higher price does give them greater revenue anyways even when there is supply excess but if it was elastic this may not work as well.

Question 16

Max price

Answer 16

Venuzuela is a very interventionist economy where they limit the price of goods that are necessity like sanitary products
Has caused a lot of smuggling and black markets and queueing however
As prices are low, demand outstrips supply as many shops are left empty and not willing to sell at that price son leave the market meaning that there is a massive shortage and overall black markets are made to sell to those who are in need of some products for extortionatly higher prices.
Seen also in energy price caps in the UK - esp with Ukraine leading to energy shortages

Question 17

How much to alcaholics cost to the UK Economy

Answer 17

$21bn overall cost to the UK economy

Question 18

Positive externalities that help NHS?

Answer 18

Exercise - 100 pounds a year saved per person exercising

Question 19

Other benefits of positive externalites?

Answer 19

Education - more income and tax revenue collection
School Lunch - Greater productivty and school performance and earnings
Public transport - less congestion on roads and less air polution
Healthcare - social benefits

Question 20

Example of a de-merit good

Answer 20

Ciggies, gambling, red meats, chicken shop

Question 21

Overconsumption of common access resources?

Answer 21

In Malaysia, there is a lot of deforestation up to 15% of their forests are gone since 2000 since they produce a lot of palm oil.

Question 22

Indirect tax and market failures

Answer 22

UK sugar tax was introduced to combat rising obesity in the country which came into force in 2018 to battle childhood obesity.
18p per litre and 24p at higher amounts
50% of companies changed recipe to have less sugar in them than before.

Question 23

Subsidy and market failure:

Answer 23

Museums in the UK have been subsidied since 2001 to have free entry to consumers with the intention of boosting public visitor numbers.
Private and external benefits were provided and museums could be considered merit goods with visits increasing by 184%.

Question 24

Regulation and market failure in Beijing?

Answer 24

Road congestion was countered before the 2008 Olympics by only allowing certain number plate numbers on the road at certain days.
Only certain households by lottery could get a second car and overall emissions were reduced by 40%.

Question 25

State provision and market failure - The NHS

Answer 25

X inefficience and alck of profit incentive means the NHS costs a lot more than it is supposed to

Question 26

Who runs tradeable permit schemes

Answer 26

ETS (emissions trading scheme) is used largely in EU to reduce emissions as it has done by 20% since 2005

Question 27

Alcohol pricing in Scotland?

Answer 27

Minimum price strategy - this is where they have as of 2018 put a 50p limit on all alcahol per unit to reduce negative externalities which reduced consumption by 8%.

Inelastic demand meant it didn’t reduce much
Could be higher
Retailers are getting higher revenue - inequality?

Question 28

GOVERNMENT FAILURE ; Common Agricultural Policy

Answer 28

EU agricultural policy has meant large sums of money are paid to farmers to leave land aside to avoid excess supply. This is a waste of resources showing large cost of policy and serious unintended consequences - before the EU government proceeded with this action huge amounts of excess butter and milk were bought up and stockpiled or destroyed representing another large government failure. Eu Common fisheries policy is a system where overfishing results in major unintended consequences as dead fish are thrown back as fisherman exceed their recommended amount without realising
UK Policy: 1.5bn home insulation was abandoned in 2021 given excessive bureaucracy and poor access to consumers who face large delays in recieving confirmation due to rushed design - major failure of Co2 emissions from heating homes.

Question 29

Economies of scale

Answer 29

Energy companies have gained technical economies of scale as they have huge advantages in purchasing energy well before price rises and in advance leading to lower costs they can provide which drive smaller firms out of the market.

Question 30

PROFIT MAXX

Answer 30

Pharmaceuticals have profit maximisation as they develop drugs and huge research and development that this involves. To come up with a new drug is lucrative and can be patented giving the firm lots of power in the market so high profits give more research money to have a differentiated good only they sell such as 2bn cost in developing new drugs

Question 31

Profit satisficing

Answer 31

Walmart in 2018 gave bonuses to workers in response to corporation tax cuts instead of profit maxinmising

Question 32

Revenue maxing

Answer 32

Twtiter until 2018 had satisfied shareholders with revenue focus to gain market share and justify the buisnesses success to shareholders - changed under Elon Musk to make profits and incease dividends share

Question 33

Sales Maxxing

Answer 33

Spotify and Netflix have been increaing monthly memberships recently to a profit maximising point which has been as a result of success and establishment that they gained in sales maximisation.

Question 34

2 examples of perfect competition

Answer 34

Tuk Tuk in india - there is barriers to entry but same good sold and l=same numbers of buyers and sellers with homogenous services

Forex is very competitive - Perfect information with low barriers to entry.

Question 35

Competitive markets

Answer 35

1990s - deregulation across the UK has meant airlines havec become competitive. EasyJet and RyanAir were successful as low cost airlines and this has meant many airlines are much cheaper now due to competitiion.

Question 36

Google and Monopoly power

Answer 36

Global market share of 92% where ECC found them advertising google products to consumers even when they werent interested in them - anti-competitive practise?

Question 37

First degree discrimination

Answer 37

1996 - Victorias Secret had sent catalogues with clothes to people with different houses depending on their consumer surpluses

Question 38

Monopolistically competitive markets

Answer 38

Restuarants - there is some large ones but you can set up anywhere

Question 39

Price fixing Cartel

Answer 39

2007 - BA and Virgin had colluded to fix airways prices using fuel prise rises to justify it but virgin broke the agreement and disclosed the collusion and BA had a huge fine
OPEN - OPEC they openly collude such as Saudi and Iran to set oil price based on their economies

Question 40

Tacit collusion

Answer 40

Big 6 energy control 94% of the market and rarely price competete but instead will price lead and other companies follow where Ofgem needs to regulate this.

Question 41

Airlines market is contestable?

Answer 41

Deregulation in the 90s made it contestable as lower barriers to entry have meant that more airlines like Norweigan and EasyJet entered - especially as airlines go boom and bust all the time.
Norweigan are in financial trouble - argueably they cannot sustain due to size of other airlines and high concetraiton

Question 42

Price Caping (important)

Answer 42

UK Energy Cap: OfGem regulator cap was not enough so the government interfered to price cap at 4000 pounds a year for energy revently
Fixed tariff deals number has fallen since then
You can also use this as evaluation for:
Price caps unintended consequences for firms
Asymetric information? People shouldnt be demanding less fixed tarriff deals

Water companies need profit to reinvest into new infrastructure of water and therefore high profits are found a middle way with price capping

Question 43

Monopoly power performance targets

Answer 43

Train companies have regulation if they are late - must pay compensation for delays of 30 mins or more - but firms often game the system such as increasing journey time so they have less chance of getting fined

Question 44

Mergers monopoly regulation

Answer 44

2018 Asda and Sainsburys had a proposed merger which would have given combined market share of 30% - competing with tesco. They propsosed lower prices for consumers but CMA still blocked it

Question 45

Regulatory capture

Answer 45

Ofwat have turned blind eyes to water dumping and wastage and enter quite late Thames Water - people who work with Ofwat have shares in Thames water

Question 46

Royal Mail privatisation

Answer 46

Regulated privatisation of the daily mail since 2013 has given a profit incentive to the highly inefficient and slow business that has lead to greater function of the buisness that generated 2bn in pounds to the government now… This is still price regulated however there were complaints about worker conditions.
This example IS AMAZING
Successful privatisation with dynamic efficiency used and competitiion motive
Cost cutting measures had made 11,000 people lose their jobs

Question 47

Nationalisation - UK Railways

Answer 47

Uk was privatised in early 1990s due to lack of usage and quality concerns - also taxpayer money drag.
Intention was making more efficient with competition driving reductions in fares and increased riutes and passenger numbers.

In the end , train companies have bidded to use the train tracks that are nationalised - competitive tethering

BUT
4bn in subsidy is paid to keep them afloat
OFten trains are still unreliable even though they shouldn’t be. Lack of profit incentive in certain train routes and therefore allocatively inefficient

Question 48

What percentage of the UK relies on the nhs

Answer 48

88%

Question 49

What is trade union density as of 2022 from the 70s

Answer 49

50% in the 1970s compared to 22% in 2022.

Question 50

What is the minimum wage as of 2024

Answer 50

11.44