Exam

Question 1

what are the behavioural responses to minimum wage

Answer 1

employment effects (fall in employment),
price effects (increase in price offset positive income effect),
profit effects (profits flow to richer households)

Question 2

talk about the price effects (behavioural response to minimum wage)

Answer 2

increase in prices offset positive income effect,
depends which goods are likely to see an increase in prices, if min wage increases price of Starbucks (likely to be bought by rich households) then is progressive

Question 3

talk about profit effects (behavioural response to minimum wage)

Answer 3

reduce profits due to increased costs,

profits generally flow towards richer households

Question 4

what are the two types of equity

Answer 4

horizontal and vertical

Question 5

explain horizontal equity

Answer 5

people should be treated in the same way

Question 6

explain vertical equity

Answer 6

in relation to taxes etc, rich people should pay more

Question 7

how do you do a cba of a congestion charge

Answer 7

costs - people have to pay, costs of implementing and running, disutility to those who no longer drive,
benefits - reduced congestion for those who still drive, revenue from scheme (directly cancels out charge payments) improved air quality

Question 8

how do you value the reduced congestion (cba of congestion charge)

Answer 8

quantity of people still driving x shorter journey time, then use revealed preference or stated preference approach using relevant populations to find the monetary value