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A level Economics > Graphs > Flashcards

Graphs Flashcards

1
Q

Graph for law of diminishing marginal utility

A

Marginal utility against consumption graph

Total utility and marginal utility curves

NB: for marginal utility curve, each point is plotted at -0.5 the actual value of the quantity

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2
Q

Total utility and Marginal utility graphs

A

Price against quantity

Total utility and marginal utility curves

NB: when TU peaks (max), MU is equal to zero

NB: gradient of total utility curve is the marginal utility curve

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3
Q

Basic indifference analysis graph

A

Good y against good x

Budget line and indifference curve

NB: Consumer equilibrium occurs where the indifference curve meets the budget line

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4
Q

Indifference curve map

A

Good y against good x

Multiple indifference curves, 2 budget lines and the consumption income line

NB: consumer equilibrium is where the indifference curve in tangential to the highest budget line

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5
Q

Nonoptimal indifference curve diagram

A

Good y against good x

Indifference curve and 2 budget lines

NB: the points on the higher budget line are not optimal as the consumer could be spending less to gain the same total utility

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6
Q

Indifference diagram for price changes with a normal good

A

Good y against good x

2 budget lines based on price changes, 1 dotted budget line drawn parallel to the second budget line, 2 indifference curves drawn in line with each other on the budget lines

Decrease in price: positive substitution and income effect

Increase in price: negative substitution and income effect

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7
Q

Indifference diagram for price changes with an inferior good

A

Good y against good x

2 budget lines based on price changes, 1 dotted budget line drawn parallel to the second budget line, 2 indifference curves drawn in line with each other on the budget lines

Decrease in price: positive substitution and negative income effect

Increase in price: negative substitution and positive income effect

NB: substitution effect is dominating

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8
Q

Giffen good diagrams

A

1

Price against quantity

Upwards sloping demand curve

NB: that is conspicuous consumption

Price against quantity

Demand curve

NB:
When price exceeds the consumers entire income the deamnd for the good begins to decline

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9
Q

Indifference diagram for price changes with a giffen good

A

Good y against good x

2 budget lines based on price changes, 1 dotted budget line drawn parallel to the second budget line, 2 indifference curves drawn in line with each other on the budget lines

Decrease in price: positive substitution and negative income effect

Increase in price: negative substitution and positive income effect

NB: income effect is dominating

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10
Q

Envelope curve examples (3)

A

1 (Good monopoly)
Cost per unit against quantity

LRAS (envelope) curve

NB: mark EOS and DOS (x-inefficiency
which is a lack of productive efficiency)
NB: o represents the optimal level of production, which is the lowest point of the curve

2
Cost per unit against output

LRAC curve

NB: A - B is a flat line, A is the minimum efficient scale and A - B is productively efficient

3 (Natural monopoly)
Cost per unit against output

LRAC curve

NB: this diagram represents EOS

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11
Q

Allocative efficiency

A

Price against quantity

MSC and MSB curve

NB: where MSC and MSB meet is the socially efficient quantity to produce

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12
Q

Positive and negative externalities from production and consumption

A

1
Positive externality from production

Price cost and benefit against quantity

MPC, MSC, MSB curves

NB: MPC > MSC
NB: Gap between MSC and MPC is MEB

2
Positive externality from consumption

Price cost and benefit against quantity

MSC, MPB, MSB curves

NB: MSB > MPB
NB: Gap between MSB and MPB is MEB

3
Negative externality from production

Price cost and benefit against quantity

MPC, MSC, MSB curves

NB: MSC > MPC
NB: Gap between MSC and MPC is MEC

4
Negative externality from consumption

Price cost and benefit against quantity

MSC, MPB, MSB curves

NB: MPB > MSB
NB: Gap between MSB and MPB is MEC

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13
Q

Regulation diagram

A

Regulation adds a cost to production

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14
Q

Extending property rights diagram

A

Price against quantity

Perfectly inelastic supply curves, dotted demand curve drawn parallel to original demand curve and a demand curve

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15
Q

SR production law diagrams (2)

A

1
Total product of labour against quantity of labour

Total product of labour curve

NB: gradient increases exponentially, gradient decreases exponentially while still rising, gradient decreases exponentially

NB: increasing returns to a factor, diminishing returns to a factor, decreasing returns to a factor

2
MPʟ, APʟ against Qʟ

MPʟ and APʟ curves

NB: Gradient of TPʟ is MPʟ
NB: MPʟ cuts APʟ at the highest point of the APʟ

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16
Q

Short run costs diagrams (2)

A

1
Total cost against output

Total cost curve

NB: a line drawn tangentially from the origin to the lowest point of the TC curve is where MC is at its lowest

2
Marginal cost and average total cost against output

Marginal cost and average total cost curves

NB: MC curve cuts ATC curve at its lowest point

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17
Q

Short run fixed and variable costs

A

1
Costs against quantity

TC, TVC and TFC curves

2
Costs against quantity

AFC, ATC, AVC curves

3
Cost, price against quantity

MC, ATC, AVC curves

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18
Q

Break even and shut down point

A

Cost, price, revenue against quantity

MC, ATC, AVC, D = AR = MR = P, D2 curves

NB: Break even is where ATC crosses MC and where D = AR = MR = P is a tangent

NB: Shutdown is where AVC crosses MC and where D2 is a tangent

Above D = AR = MR = P is the profit zone

Below D2 is the shutdown zone

05/03

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19
Q

Short run average costs and long run average cost diagram

A

Cost (per unit) against quantity

LRAC and 5 SRAC curves

NB: beyond Q* there is diseconomies of scale and diminishing returns to scale

NB: prior to Q* there is economies of scale and increasing returns to scale

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20
Q

Perfect competition graphs (2)

A

1
Cost, revenue, price against quantity

TR and TC curves

NB: normal profits where TR = TC
NB: profit maximisation where TR is the highest over TC

2
Cost, revenue, price against quantity

D = AR = MR = P, MC and ATC curves

NB: Q* is physically below the profit maximisation point
NB: MC cuts ATC at its lowest point and this happens at Q*
NB: Normal profit is made as AR = ATC

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21
Q

Imperfect competition graphs

A

Cost, revenue, price against quantity

TR and TC curves

NB: profit maximisation where TR is the highest over TC

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22
Q

Internal EOS LR

A

Costs, revenue against output

Multiple LRAS curves

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23
Q

External EOS LR (2)

A

1 (External EOS)
Price against quantity

D₁, D₂, Ssʀ₁, Ssʀ₂, LR curves

NB: there is an increase in D and Ssʀ
NB: initially the price increases and profits are greater
NB: LR costs decrease

2 (External DOS)
D₁, D₂, Ssʀ₁, Ssʀ₂, LR curves

NB: there is an increase in D and Ssʀ
NB: LR costs increase

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24
Q

Basic diagrams for each market structure

A

Perfect competition: perfectly elastic demand curve

Monopolistic competition: elastic demand(AR) curve and elastic MR curve

Oligopoly: kinked demand (AR) curve and kinked MR curve where MR curve has dotted line under kink of demand (AR) curve

Monopoly: inelastic demand (AR) curve and elastic MR curve

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25
Q

Remaining market structure diagrams

A

Diagrams drawn for each market structure for subnormal, normal and supernormal profits

26
Q

“Bad” monopoly

A

Cost, revenue, price against quantity

Mc, D=AR and MR curves

NB: MC curve crosses y-axis
NB: show producer surplus, gain in producer surplus, loss in allocative efficiency and deadweight loss
NB: points at MC = MR and MC = AR
NB: there is an increase in price and decrease in quantity

27
Q

“Good” monopoly

A

1
Cost, revenue, price against quantity

D = AR and MR curves drawn from axis to axis, MCᴘᴄ and MCᴍ curves

NB: there is a decrease in price and increase in quantity

28
Q

Price discrimination (first degree, second degree, third degree)

A

First degree:
Cost, revenue, price against quantity

D = AR curve drawn from axis to axis

NB: Triangle above price is shaded to show CS

Second degree:
Cost, revenue, price against quantity

D = AR curve drawn from axis to axis

NB: two points are chosen to show prices for different quantities

Third degree (2 graphs drawn side by side):
Cost, revenue, price against quantity

NB: one with elastic D=AR and MR and one with inelastic D=AR and MR
NB: lower prices for elastic PED and higher prices for inelastic PED

29
Q

Existence of small firms

A

Cost per unit against quantity

3 SRAC curves (small, med, large), LRAC curve

NB: this shows that a firm may quickly achieve EOS and remain small and be competitive

30
Q

Different MR curves for an oligopoly

A

Regular oligopoly diagram but with multiple MC curves for different firms who can all profit maximise and make supernormal profits

31
Q

Lorenz curve and Gini coefficient

A

Used to measure income inequality

Box with 45º line of absolute equality

The Gini coefficient is the area between the curve and the line of absolute equality

Generally below 0.5 is considered good or as an equal distribution

32
Q

Laffer curve

A

The laffer curve provides an argument against progressive taxes

Tax rates against tax revenue

33
Q

Wage determination graphs

A

2 graphs with wage against quantity of labour

different elasticities of demand and supply showing different resulting wages

34
Q

MRPʟ graph

A

Simple demand graph with wage against Qʟ where Dʟ = MRPʟ

35
Q

Individual labour supply curve

A

Wage against quantity of labour

Labour supply curve

NB: sub effect until turning point, after turning point is income effect

Up until W1, substitution effect is greater than income effect hence as the wage goes up so does the quantity of labour supplied

After W1, income effect is greater than substitution effect hence as the wage goes up the quantity of labour supplied decreases

Criticisms:
1. most workers do not get to choose the amount they work
2. typically workers are tied to a 40 hour week and contract

36
Q

Labour supply for firms (PC 2, IC 2)

A

Wage against qL for all

Sʟ, Dʟ curves

Equilibrium and profit maximisation at MRPʟ = MCʟ

37
Q

Economic rent and transfer earnings, together and each seperately

A

1
Wage against Qʟ

Sʟ and Dʟ curves

NB: economic rent is inside and transfer earnings is outside

Pure economic rent
2 Dʟ curves

Pure transfer earnings
perfectly elastic Sʟ curve

38
Q

Effect of NMW

A

Wage against Qʟ

Sʟ and Dʟ curves

(Effectively a minimum price above equilibrium diagram)

39
Q

Argument for a NMW

A

Effectively an increase in demand diagram with wage against Qʟ and a flatline NMW above the equilibrium wage

**MRPʟ may not increase if the extra income is spent on imports or savings, as well as if greater output is achieved by increasing production using capital

0five/0five

40
Q

Circular flow of income

A

Components:
1. Households and firms
2. Financial sector (savings , investment)
3. Govt. sector (taxation , govt spending)
4. Foreign sector (imports , exports)

First is a withdrawal or leakage, second is an export

At equilibrium W = J
If J > W then the economy grows
If W > J the economy shrinks

41
Q

Keynesian aggregate expenditure model with a withdrawals and investment graph below

A

Keynes diagram:

Aggregate expenditure (AE) against RNI

45º line
Consumption with government
Consumption without government
AE = C + I

Point plotted where C without govt meets the 45º line

Point plotted where AE meets the 45º line

W,S diagram:

W, J against RNI

start S at a negative figure of investment

Investment is a flatline

S crosses x-axis where C without govt meets the 45º line

I crosses S where AE meets the 45º line

30/05

42
Q

Trade/Business cycle graph

A

%∆ in real GDP against time

potential gdp curve with other curve

show boom, slow down, recession and recovery

43
Q

Full sector Keynesian 45º line model of AE

A

AE against RNI

E = Y at 45º, AE = C + I + G + X - M

Where AE > Y and AD > AS there is an inflationary gap

Where Y > AE and AS > AD there is an deflationary (recessionary) gap

Below W, J

I + G + X meets S + T + M at Ye, Ye is where AE meets E = Y (straight line)

S + T + M starts at C̄

06/06

44
Q

Keynesian counter cyclical policy graph

A

Regular Keynesian graph with AE1 and AE2, inc in AE starts of the multiplier/accelerator process which stimulates AD

This can be used when in a recession

45
Q

Keynesian trade cycle belief diagram

A

%∆ in real GDP against time

potential gdp curve with recession line

show inc and dec in taxation and govt spending

46
Q

Keynesian disequilibrium to equilibrium

A

S, I against RNI

Invest line, saving line

Explanation:

moving from Y1 to Ye, deflationary situation where more is supplied than demanded, signals firms to produce less for RNI to fall

moving from Y2 to Ye, inflationary situation where more is demanded than supplied, signals the need for an increase in RNI as stocks will be run down

47
Q

Inflationary and deflationary gaps

A

Price level against real gdp

AS and 2 AD curves

Inflationary gap Ye > Yf, keynesian solution decrease G and increase T

Deflationary gap Yf > Ye, keynesian solution increase G and decrease T

48
Q

Inc in AS and AD

A

Price level against real gdp

Inc in AD
In in AS, LRAS with swivel

show effects

49
Q

Keynesian vs monetarist extreme

A

PL against real gdp for both

Keynes has box like LRAS and inc in AD from Ye to Yf

Monetarist has perfectly inelastic LRAS and at Yf inc in AD leads to inflation only

50
Q

Phillips Curve

A

∆ in money wages (inflation) against unemployment

LRAC for natural monopoly shaped curve

Suggests there is an inverse relation between unemployment and inflation, supports keynesian view, can not be explained when there is stagflation

51
Q

Expectations augmented phillips curve

A

∆ in money wages (inflation) against unemployment

Vertical LRPC

3 SRPC one crossing x-axis at NRU

Inc in govt spending to reduce unemployment in short run, to do this they could also lower wages which increases inflationary expectations and inflation rises, if they do this again the cycle repeats and inflation continues to rise

Monetarist view is that any attempt to lower unemployment using demand management policies will increase inflation without any growth

52
Q

Keynesian liquidity preference theory (3, 1)

A

r against Qm for all 3

1 - vertical Md, precautionary demand
2 - LRAC shaped Md, speculative motive
3 - combining both graphs to form q* and r*

Equilibrium:

r against Qm

LRAC shaped Md curve, but it flattens out

4 vertical Ms curves showing decreasing int rates

53
Q

Loanable fund theory

A

r against Qm

Dm and 2 Sm curves, Sm dec

Int rates are the cost of borrowing and the return on savings

This theory implies that monetary policy is predictable

54
Q

Employment vacancies curve

A

Vacancies against unemployment

LRAC shaped U/V curve and 45º line where u = v

Show recession, boom and NRU

At the NRU the economy is at full employment and the only types of u are NRU

55
Q

Real wage unemployment

A

w/p against Ql

regular Ls that becomes vertical, and Ld curve

Show excess labour supply and unemployment

56
Q

Voluntary unemployment

A

w against Ql

Ld and Ls curve that becomes vertical

show q* to qf and w*

q* to qf are voluntarily u because wages are not high enough for them to work

57
Q

Cyclical unemployment (2)

A


w/p against qL

_ against time

recession and boom with straight line

kinked LD and dotted regular Ld as well as kinked LS curve showing u

58
Q

Available for jobs - labour force model

A

w/p against qL

AJ line above Lf line and Ld line

Lf > AJ represents frictional and structural unemployment

59
Q

J-curve adjustment for depreciation

A

NZD dec 10%, current a/c against time

At lowest point, or stationary point the ML condition is met

two/07

60
Q

Managed float

A

Currency/other currency against quantity of numerator currency

S numerator currency, D numerator currency

Wavy lines to indicate upper and lower limit of float

Sell currency, or dec r to dec currency

Buy currency, or inc r to inc currency

61
Q

Harrod-domar growth model

A

consumer goods against capital goods

essentially a PPC curve

savings are necessary to grow, saving funds investment, to save a nation must refrain from current consumption

Criticism:
funding may come from inward FDI, but profits may leave the LEDC
poor people can’t save and there is no guarantee that the savings will be used for investment

A level Economics (3 decks)

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